Competition builds for blockchain-based software solution

Author: John Crabb | Published: 14 Mar 2017
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The Enterprise Ethereum Alliance (EEA) helps define enterprise-grade software capable of handling the most complex, highly demanding applications at the speed of business. But it has conceded that it needs to overcome multiple obstacles to find its place in the capital markets.  

Made up of banking, tech, energy and media outlets, including JPMorgan, Microsoft, Thomson Reuters and Accenture, the EEA was formed to foster the development of Swiss-built, decentralised blockchain platform Ethereum. By working together members will help the platform move towards a shared goal of creating industry standard smart contract software, which could speed up the industry by automating certain aspects in the back office. 

Emmanuel Aidoo, Credit Suisse

Ethereum is among a small handful of custom-built blockchain operators already offering smart contract support that are currently vying for position in a nascent market, with alternatives including Symbiont, R3 and Hyperledger. Each is looking to become definitive choice in a market that is seen by many as the future of capital markets.

“We can have a system that works much more simply and efficiently and allows only those people who actually do trust each other to do things,” said Lewis Cohen, partner at Hogan Lovells in New York. “With that, we could also have many of the benefits of both the bitcoin network and the Ethereum network, but in a private setting”.        

  • The Enterprise Ethereum Alliance is a group of companies that have pledged to work together to develop Swiss built decentralised platform Ethereum;
  • Ethereum is a custom built blockchain operator offering smart contract development tools to be used in the automation of financial markets.;
  • The alliance is looking to answer the three main issues that Ethereum faces in its current release; privacy, scalability and security;
  • Alternatives, such as Symbiont, R3 and Hyperledger, co-operate in the field and each is looking to become the industry standard in a competitive market.

Among the early adopters of smart contract technology in capital markets - and of Ethereum also - is Credit Suisse. Emmanuel Aidoo, head of the distributed ledger and blockchain effort at the bank, said that the EEA is founded on the original premise of public blockchain.

“One of my main drivers is that it helps us to bridge what will be a necessary component of blockchain, which is bridging private and public,” he said. “We are keen to see how EEA can help establish a link between public and permissioned ledgers in a way that is still compliant with bank regulations.”

However, Aidoo conceded that there would likely not be one blockchain across the entire capital markets.

In fact, among others it considers Credit Suisse is also utilising Symbiont, a permissioned issuance and trading platform, and the pair, alongside the platform and market intelligence company Ipreo, are heading a project to renovate outdated processing procedures in the multi-billion dollar global syndicated loans market, which will launch in the coming weeks.

Caitlin Long, chairman and president of Symbiont, said that smart contract technology built on custom blockchain is simply the latest installment of a 30-year trend towards the automation of financial services. “Within twenty years financial services will be just software, and it's smart contracts more so than distributed ledgers, because smart contracts automate work flow,” she said.

Symbiont is also in the process of applying its Smart Securities platform to other projects. “We have developed a new product in capital markets that has never been digitised before, because the technology didn't exist to be able to make it tradeable”, said Long. “Because this technology came along, it is now a tradeable asset”.  

One of the ambitions that the EEA has on its road map is to try and help solve interoperability, which will allow the rise of specific blockchains simultaneously.

"We have developed a new product in capital markets that has never been digitised before, because the technology didn't exist to be able to make it tradeable"

An IFLR article published last July by Hogan Lovells outlined three innovations offered by blockchain that could transform capital markets. The article also posed several questions that would need to be addressed if the technology were to be successfully realised; how to combine the language of law to the computer code in a way that is recognised and enforceable in court, and how to develop software that has the capability to deviate from its course to adapt to negotiation.

The EEA has so far made no claim to have solved these problems, or the many others that have been brought to the surface in the infancy of smart contract innovation, but it does bring together parties that believe they have the resources and brainpower to do so.

Although increasingly something of a contest, Cohen insists that it doesn’t matter which of the technologies wins in the end. “It is not so much which particular protocol winds up becoming the more successful story,” he said. “It's more that people believe this whole kind of crazy thing - smart contracts running on shared ledgers - really makes sense, and is really the right the thing”.

“We need to commit to it, and we need to see where we can go with it.”

See also:

Blockchain's three capital markets innovations explained

Fed: blockchain is transformative

The force that disrupts finance