New blockchain launched for institutions, backed by Microsoft, Goldman Sachs

On Tuesday, Digital Asset unveiled a major project to reshape the digital asset landscape. After leveraging blockchain technology to reshape FinTech, the company announced the launch of the Canton Network.

Aimed at institutional players, the privacy-enabled network is the first interoperable blockchain to connect financial markets frictionlessly. Canton is a “network of networks” of decentralized applications to serve financial institutions for asset tokenization, governance, payments, clearing, settlement, custody and asset lifecycle management.

Canton’s list of network participants is a who’s who of finance and technology, and includes industry leaders: Goldman Sachs, Moody’s, S&P Global, Deloitte, BNP Paribas, Cboe Global Markets, Paxos and Microsoft, to name a few.

How will the Canton Network work?

While many crypto investors take it for granted that blockchains must be decentralized, public and transparent, Digital Asset sees these features as flawed. At least, when it comes to the targeted clientele, transparency must be carefully managed.

For this reason, the Canton Network is about scaling, data control and privacy. In this way, the blockchain trilemma is solved by focusing less on decentralization and more on security and scalability.

For example, the more nodes the network has, transactions must pass through a greater number of obstacles, resulting in greater costs. While this increases decentralization and security, it decreases performance. All Canton Network participants will be approved and comply with strict security and regulatory requirements to counter this.

To this end, the Digital Asset team developed Canton’s smart contract programming language, Daml. Thanks to the Daml financial toolkit, institutions have clear tools for the full-spectrum management of digital assets.

In this light, Canton Network is poised to render legacy settlement systems obsolete, as their ineffectiveness was demonstrated during the GameStop card squeeze. If the canton list of participants is expanded, institutions will have real-time information on asset flows, removing trade delays and speeding up transactions.

Despite being a private blockchain, regulators could still access all transactions across the blockchain’s immutable ledger.

Likewise, businesses can use Canton to automate payments thanks to smart contracts, reducing mistakes and payment errors. Combined with invasive AI systems, it is not difficult to see that many HR and accounting departments may become obsolete.

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What does it mean for the Crypto Space?

As the saying goes, a tide lifts all boats. Given the caliber of Canton Network participants, financial tokenization is a certainty. In a ripple effect, Canton’s blockchain interoperability will accelerate the distribution and trading of digital assets.

In particular, tokenized real-world assets (RWA), as Cboe Executive Vice President Cathy Clay indicated.

“At Cboe, we believe the tokenization of real-world assets can offer an unprecedented opportunity to create new market infrastructure and drive efficiencies in the trading of products worldwide.”

However, it is worth noting that already highly regulated financial institutions will have a head start on various crypto companies and DeFi protocols. This added layer of legitimacy is likely to spur greater audience participation. In turn, digital assets elsewhere will also benefit, with one blockchain network leading to another.

Who is behind Canton?

Headquartered in New York in 2014, Digital Asset was founded by Don Wilson, Eric Saraniecki, Shaul Kfir, Sunil Hirani and Yuval Rooz. Since its inception, Digital Asset has received $307.2 million to build distributed ledger technology (DLT) infrastructure and enterprise tools.

The latest funding round, in May 2022, was led by Japan-based SBI Group, a financial company in banking, securities and asset management. Past leads were no less impressive, including JP Morgan, IBM, Goldman Sachs, Eldridge, Salesforce and Samsung.

Do you think Canton Network will jeopardize more enterprise-oriented crypto trading/VC networks? Let us know in the comments below.

About the author

Tim Fries is the co-founder of The Tokenist. He has a B. Sc. in mechanical engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate in the investment team at RW Baird’s US Private Equity division and is also a co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.