Goldman, Deutsche Börse, 30 firms join Canton Network for institutional blockchain interoperability – Ledger Insights

Today, Digital Asset, known for its DAML smart contract language, unveiled plans for the Canton Network, a network of blockchain networks that enable interoperability for financial institutions. 30 organizations will join the network from July, including major Digital Asset clients such as BNP Paribas, Deutsche Börse Group, Goldman Sachs and Equilend.

While there is a belief that the future of institutional finance revolves around blockchain and tokenization, many of the efforts to date have created new blockchains. And an important advantage of a distributed ledger was precisely to address silos. Interoperability is the answer to unlocking the tantalizing potential of composition and page mobility.

Public blockchains have shown the way, especially on these two points, although Digital Asset has no plans to integrate with them. “They’ve created the absolute North Star of what’s possible,” said Digital Asset’s Eric Saraniecki.

“I would never say they are not good or bad. They are just not fit for purpose for regulated financial institutions.”

He compared public blockchains to Napster. While Napster laid the groundwork for digital music, it was risky to use. The IP-licensed and user-friendly Apple iTunes put digital music on the map.

“On a public blockchain, you have to use the same set of validators. You have to compete for bandwidth on the network. All your data is completely transparent. It’s a complete non-starter for a regulatory compliant institution,” Saraniecki added.

DAML applications and the Canton Network are privacy-preserving by design. At the same time, an application developer can choose to make their app fully accessible to the public.

What’s new with Canton Network

DAML applications already support interoperability, so Canton Network needs a little explanation.

While previous versions of DAML did not use a specific blockchain, applications built with DAML 2 use the Canton blockchain. So this new network of networks is a network of canton blockchains.

DAML is known for its support of various blockchain technologies. Therefore, applications can optionally use other enterprise blockchains to improve some of the trust properties, but the core data is stored on Canton. And Canton blockchains can already interoperate with other Canton blockchains, although some work is involved.

The idea of ​​the Canton Network is to create a neutral third-party zone that is easy to connect to for interoperability. It lowers the interoperability barrier.

R3 launched the Corda Network years ago for dApps using DLT, so the concept is not new, but the approach has some differences.

There are two critical aspects that blockchains aim to achieve. One is to timestamp the order of transactions, which is crucial when trading is involved! The second is to verify the validity of transactions. While the Corda Network targets both, the Canton Network focuses on timestamping or sequencing, which helps preserve privacy and improve scalability.

Saraniecki gave an analogy with the postal system, where you have a mailbox and a sorting facility. Each Canton application has its own sorting facility. Applications that want to connect to each other can run a shared sorting facility for connected transactions.

Instead of creating a shared sorting facility, these applications can use the Canton Network, which provides a decentralized sorting facility infrastructure, an independent way to order transactions. But it is not a validator, so it does not see the content of the transactions which helps preserve privacy. Instead, transactions are sent to the destination app, which verifies whether or not it makes sense.

The absence of shared validators helps with scalability. Assuming applications have independent workflows, they may have an additional network to scale.

Different approaches to blockchain interoperability

There are many approaches to blockchain interoperability, none of which have gained much traction so far, and each with advantages and disadvantages. Therefore, the Canton Network is timely.

In Japan, DataChain is working with MUFG using Cosmos technology to enable MUFG’s Progmat Coin platform to be used for settlement across DLTs with different technologies, and Hyperledger has its Cacti interoperability protocol. These are both based on blockchain technology.

Ownera’s finP2P avoids blockchain and provides a conventional routing system between different blockchain applications. The big downside is that you have a startup as a trusted middleman, and some see that as a setback to current approaches. A major advantage, however, is that it is completely agnostic to the blockchain technology involved.

In contrast, both Corda and Canton Networks target applications that use their technologies.

Whatever the approach, there is no doubt that a network of networks is the future of institutional finance. The sooner we get there, the sooner the financial benefits will be seen.

Full list of Canton Network participants

3Homes, ASX, BNP Paribas, Broadridge, Capgemini, Cboe Global Markets, Cumberland, Deloitte, Deutsche Börse Group, Digital Asset, DRW, Eleox, EquiLend, FinClear, Gambyl, Goldman Sachs, IntellectEU, Liberty City Ventures, Microsoft, Moody’s, Paxos , Right Pedal LendOS, S&P Global, SBI Digital Asset Holdings, The Digital Dollar Project, Umbrage, Versana, VERT Capital, Xpansiv and Zinnia.