Cordite: Fueling Digital Asset Creation for Financial Institutions
Jun 29, 2018
What is The R3 Consortium?
R3 is a blockchain software consortium that is developing distributed ledger technology for businesses to use. R3’s consortium consists of over 200 other firms working together on its operating system, Corda. Corda manages, records, and executes businesses’ contracts and financial agreements. Corda was launched in November 2016, and the consortium features notable firms such as Barclays, BBVA, Credit Suisse, Amazon, UBS and many others.
Cordite is an open-source platform designed specifically for the banking industry. Cordite was not created by R3, but the Corda community saw a need for Cordite. The application is one of R3’s many “CorDapps”, and will create digital representations of assets traded and held by banks. The digital representation will facilitate the token creation representing these assets, similar to Ethereum’s ERC20 platform. The main difference is that Cordite will mainly cater to financial institutions. Cordite plans to track assets on both ends of a transaction – for example, cash and securities transactions will be showcased on the same ledger for both parties to view. Due to the regulatory environment surrounding banks and their assets, Cordite was designed to be extremely regulation-friendly.
Cordite has three main capabilities:
- Distributed General Ledger (DGL): a database/ledger that records transactions, but is not controlled by one singular person. Everyone involved has a secure, immutable, and accurate copy of the contract/record on the blockchain
- Decentralized Autonomous Organization (DAO): an organization where all decisions are made from either a previously written computer-coded set of rules, or a vote by all token holders. This eliminates the possibility of a single-person making harmful decisions for everyone
- Metering: the method used for processing fees using tokens and DAOs
Cordite intends to help large financial institutions use tokens as a method of connecting their treasury department, or process their money transactions from one place/person to another around the world without having to make foreign exchange conversions. Cordite’s technology of tokenization within enterprises plans to help further integrate blockchain into their businesses.
The main contributor and leader of the Cordite Community is the Royal Bank of Scotland (RBS), one of the world’s 30 largest financial institutions. Richard Crook, the head of emerging technology at RBS sees tokenization as the solution to making the economics of distributed ledgers possible for businesses. Crook believes that tokens can provide a way for allocating fees to participants in an ever-growing industry of enterprise blockchains. In a recent interview with CoinDesk, Crook explained, “As we move to the next level of building distributed apps in the enterprise space, there is going to be a need for tokens and units of value on these ledgers.” He further elaborated, “If I am building an invoice platform for trade finance, when the invoice goes one way, I need a digital asset that you and I agree is worth something coming back.”. With that being said, it seems as if Cordite is looking to become the distributed ledger and blockchain enterprise solution for financial institutions. With its roots coming from R3’s consortium of 200+ institutions, the sky is the limit for Cordite.
Cordite is still currently being developed, but its development has come at a difficult time for R3. It has been reported by blockchain media sources that R3 has limited financing as the platform may be low on cash. R3 missed its most recent revenue target in April of this year by 13%. However, R3 hopes to finish calendar year 2018 only 10% below its revenue target. Despite the launch of a paid version of Corda for enterprises, and a large interest by developers, R3 is burning cash money every month and it appears the consortium may need further financing. It has been reported that R3 is watching their cash balance very closely, and is determined to get back on track. Given its current outlook, Corda will most likely need to hit targets and be more careful with how it operates its business operations if Cordite is going to succeed. Not all news recently has been negative: just this week, blockchain insurance solutions startup B3i Services AG reported its intention to construct its own application using R3’s Corda platform. The B3i Services startup offers its blockchain solutions to increase efficiency, growth, and quality for all insurance participants, and is backed by Allianz and Liberty Mutual.
Technology like Cordite can certainly excite individuals who have been following the latest developments in the blockchain space. If the technology can be successfully implemented and rolled out to the whole R3 consortium, it would be one of the first mass adoption of blockchain technology by regulated organizations. Even further, the Cordite technology could encourage the digital creation of assets that are used by other financial institutions worldwide. The possibilities could be endless if Cordite’s technology is implemented.