In the world of financial markets, there’s an old saying (from 1984) attributed to former Citicorp CEO and chairman Walter Wriston: “Information about money has become almost as important as money itself.” 

More than 30 years later, that sentiment has surely become a truism, especially in an age of fast, global communications, flash crashes, big data analytics and digital currencies. It’s a market that Thomson Reuters knows well.

From a technology perspective, Thomson Reuters has amassed a good deal of expertise in building capabilities that will likely be of utility as blockchains move from proofs-of-concept (POCs) to pilots and beyond. As examples, some 50,000 developers make use of the company’s application programming interfaces, it currently stores more than 60,000 terabytes of data and its network handled a record 79 billion messages during a 24-hour period following the so-called Brexit vote in 2016.

It’s important, then, that Thomson Reuters is making early moves into investigating blockchain technology, how it might be useful to the financial markets and what role it could play.
Here’s what the company has done to date:

Investments
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Thomson Reuters has so far invested in three blockchain startups. The first investment in November 2015 was in Hijro, which operates in the trade finance space. Then, in October 2016, it co-led a round in Funderbeam, which is building a funding platform for pre-IPO companies.

A couple of months later, the company invested in Axoni, a financial markets blockchain platform vendor with which it had previously worked on a blockchain POC in the equity swaps area (it also worked with TradeBlock, a sister company of Axoni on cryptocurrency analytics for its Eikon service).

Consortia Membership

As with some other large companies, Thomson Reuters is working with more than one of the significant blockchain consortia. It joined the Linux Foundation’s Hyperledger Project in March 2016 and then became a member of R3’s financial markets consortia in August. Earlier this year it became a founding member of the Enterprise Ethereum Alliance, having already released one offering and hosted two hackathons in the Ethereum space.

Product Development
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First showcased by Thomson Reuters in September 2016, BlockOne ID for Ethereum is an identity-mapping service for the blockchain, allowing digital identities to be mapped onto Ethereum addresses. While the POC supports digital IDs such as Facebook, Twitter and Google IDs, a likely product path would be to support the professional know-your-customer services that the company already offers.

Last month, the company rolled out BlockOne IQ, an oracle service to deliver data to smart contracts. The service initially supports Ethereum and R3’s Corda, although future support for other platforms is likely.

With BlockOne IQ, smart contracts developers use client libraries to tap into a wealth of hosted Thomson Reuters data, including cryptographically-signed current securities, prices, foreign exchange rates, corporate actions, cryptocurrency rates and financial benchmarks.

Company executives stress that the BlockOne services are beta offerings designed for POCs and that no decision has yet been made to productize them and charge for them. But if they prove useful and popular (and you can expect both of those things to happen), other services will be introduced.

With blockchain technology’s promise in the financial markets, it’s a natural technology for Thomson Reuters to leverage and the impact will likely be an important one.

​I pretty much agree with the blockchain adoption timeline presented by R3’s Tim Grant at a recent conference (see the photo below). Indeed, the theme for this year’s Blockchain for Wall Street education day is focused on the transition from blockchain proof-of-concepts to pilots. At the event – on November 14th – we will be presenting awards related to the Blockchain Reality in Financial Markets Challenge, which we kicked off this month. The focus of that challenge is on real pilot projects.

Moving from PoCs to pilots means more than just improving the UX or adding some functionality. Pilots will need to run in enterprise IT environments and they will need to integrate with existing systems and databases. In essence, while they might be limited in scope, pilots are as real as the systems that they will sit alongside in corporate datacenters. For this reason, I prefer to refer to them as “production pilots.”
 
Public cloud services can ease the deployment burden for PoCs – and even for some production systems – but many applications will be deployed and managed in house and so lots of consideration needs to be given to so-called DevOps issues, which includes understanding container technology, such as Docker and Kubernetes.

​On April 20, 2017, we were very proud to launch our inaugural “WSBA Innovation Spotlight”, sponsored by our friends at Capco. An exclusive, invite-only evening for senior executives from WSBA member firms, the event was designed to allow our members to engage in the deep, relevant conversation needed within financial markets to drive blockchain adoption and to really begin to answer the important questions that the industry needs answered. Questions that are now becoming about more than use cases or proofs of concept. Questions about things like governance & risk. Interoperability and integration. Reinvention and evolution.  And ultimately, as I mentioned in my opening comments for the evening, it is about a re-examining of “how we do what we do” as an industry, that will allow financial markets to evolve in a blockchain future. 

Our keynote address was by Ms. Joyce Shen, global director of emerging technology partnerships & investment for Thomson Reuters. She gave a wonderfully insightful commentary about the importance of innovation across financial markets, including innovation powered by the emergence of blockchain technology, machine learning, artificial intelligence and more.

By Pete Harris, Principal, Lighthouse Partners, Inc. and WSBA Perspectives Blog Curator

In my last post, I gave an overview of some high profile open source blockchain platforms that are currently available or emerging.

But not everyone wants to go open source. So this time, I'll look at proprietary choices from ...

​Axoni - Axoni’s offering AxCore has been tested in several proof-of-concepts, including for processing of foreign exchange, equity swaps, corporate bond reference data and credit default swaps. In the CDS marketplace, Axoni is now working on a production rollout for the Depository Trust & Clearing Corp. (DTCC). As a result of the DTCC deal, Axoni is expected to open source its platform, or at least a version of it.

By Ron Quaranta, Chairman, Wall Street Blockchain Alliance (WSBA)

​Recently, the Board of Directors of WSBA in collaboration with our members and Working Group chairs, was privileged to provide a response to the Financial Industry Regulatory Authority (FINRA) report on Distributed Ledger Technology: Implications of Blockchain for the Securities Industry, issued in January of 2017. The FINRA report focused on the use and implications of Distributed Ledger Technology (DLT) in the securities industry and sought comments by industry participants on any challenges associated with said use. The WSBA was proud to be one of the first organizations to respond to FINRA.
 
As many of you know, FINRA regulates all securities firms doing business in the United States and is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. An important mandate to be sure, and thus FINRA’s report and outreach represented in our minds an important step in the rapid evolution of DLT and blockchain technology in global financial markets.
 
The WSBA response highlighted some important themes, which I thought I’d briefly summarize below:

• WSBA agrees with the thrust of FINRA’s Report that ongoing industry “dialogue” regarding Blockchain and DLT is essential. Our organization stands ready to share members’ collective views concerning DLT with FINRA, both now and in the future.
  
  
• We believe DLT could go far to aid financial services and financial technology firms in ongoing efforts to enhance operational efficiencies in the interest of client and investor protection. WSBA is uniquely positioned to bring technology experts and non-tech senior executives together, and welcomes the opportunity to coordinate our broad activities with FINRA’s recommended comprehensive “governance” assessment of DLT.
  
  
• There is still a deep need for further industry knowledge regarding DLT, both from a technical as well as business strategy perspective. Collaborative discussions regarding governance as well as standards and practices are key, and with this in mind the WSBA has launched both an educational training track for members, as well as a specific governance/standard & practices working group.
  
  
• WSBA has offered the use of its trade group resources to FINRA in connection with assessing the impact of various DLT technology products on FINRA rules.
  
  
• A proposed WSBA Regulatory Initiative (which recently held a successful initial meeting with technology, risk and investment advisor professionals) is being designed to open up a meaningful exchange of ideas with FINRA as well as other Federal and State agencies.

 
In conclusion, we strongly believe that our efforts concerning blockchain and DLT are important to FINRA and other interested regulatory organizations. The WSBA truly looks forward to collaborating with industry and regulators so that we can all realize the long term benefits of this innovative and disruptive technology. As we’ve so often noted, the WSBA stands as a neutral, unbiased steward of education and cooperation between Wall Street firms and our mission is to guide and promote comprehensive adoption of distributed ledger technology across financial markets. We deeply believe that the FINRA outreach to industry and activities that will follow are key to this adoption, and WSBA is very proud to be part of it.
 
The full WSBA response is posted here on the publicly available FINRA website, as well as here on the WSBA website. 

When it comes to choosing a blockchain/distributed ledger platform to build on, the number of choices seems to be growing all the time.

Even if one restricts the choice to just open source platforms - which are probably a good way to go for those at the experimentation stage - the options are increasing, and include:

* Hyperledger Fabric - the most popular of Hyperledger's blockchain projects, with backing from IBM and several others. Indeed, Fabric underpins IBM's proprietary offering. V1 is in alpha test.
* Hyperledger Sawtooth Lake - Spearheaded by Intel and already used for a couple of PoC applications, Sawtooth Lake incorporates an alternative consensus algorithm called Proof of Elapsed Time (PoET), which "targets large distributed validator populations with minimal resource consumption."
* Hyperledger Iroha - A project headed by Colu and a number of Japanese vendors, with an emphasis on mobile application development.
* Chain Chain Core - A developer version of the blockchain code that Chain has built for projects with Nasdaq and Visa is available as open source.
* R3 Corda - Don't call it a blockchain, because it's a distributed ledger! R3 has open sourced the platform that it created specifically for financial service use, and is currently working to have the open source governance handled by Hyperledger.
* Quorum - J.P. Morgan's spin on Ethereum, which can work in either public or private blockchain configurations, and with improved scalability and security.
* Enterprise Ethereum - Very much a work in progress, with underpinnings in the public Ethereum blockchain but also likely to incorporate elements of Quorum.

To the above, expect to add Axoni's AxCore, which will be open sourced (probably via Hyperledger) at some point in the future, as per it's deal with the Depository Trust & Clearing Corp.

Have I missed any? Let me know!

Of course, you may have already decided that a proprietary platform is a better bet for your project. In which case, products from a dozen or more companies, including IBM, should be on your list. We'll look at proprietary options in my next post.

Most people I know use the terms blockchain and distributed ledger interchangably. It’s just easier to say blockchain … hence the WSBA is not the WSDLA.

​But there is a difference. Blockchains are one way to implement distributed ledgers but not all distributed ledgers are based on blockchains, and perhaps this distinction has not received much investigation and explanation. The devil is in the technical detail, but at a high level there is this quick guide on the correct terms to use.

These matters might get a bit more focus now as a result of a recent spat over some news articles that related to R3. One article carried the headline “R3 turns its back on blockchain?” and was driven by an R3 presentation that noted it did not actually use a blockchain in its Corda platform. That came as a surprise to many, and the news articles (as well as a rebuttal from R3’s PR company) stirred up a fair amount of frothy discussion on the interweb.

As far as I can tell, R3 has never actually said that Corda is blockchain-based. Way back in September 2015, when Corda was still being conceived, R3 techie Tim Swanson pointed towards its underlying technology in a blog post that stated “It also bears mentioning that the root layer may or may not even be a chain of hashed blocks.”

Then, when Corda was introduced in April 2016, a lengthy blog post written by R3 top techie Richard Brown discussed how Corda is similar in some ways to a blockchain, but it doesn’t tick all the boxes. Indeed, another buried quote stated: “we are not building a blockchain.”

​R3’s position re. its technology aside, more clarity on blockchain versus distributed ledger technology is probably needed — and we’ll see what the WSBA can do to help with that.