Canton Pilot Demo - Real world asset tokenization with connectivity and control

Captions as YouTube publishes them, usually machine-generated, so names such as Daml and Canton can be misheard.

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   good morning good evening good afternoon everybody thank you for joining us today and welcome to today's webinar real world asset tokenization with connectivity and control I'm bensing Gerald I'm director of product marketing here at digital asset and today you're going to see synchronized Finance in action and we're going to unpack what that really means with my esteemed guests today we have Bernard ellner

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   Who's chief product officer here at digital ass hey hey Bernard thank you for joining us and Gail Schneider who's director of financial engineering at digital asset as well so over the course of the next hour we're really excited to be able to share with you a live demonstration of the Canton Network where gayor is going to show some of the connected use cases that were tested with the industry in one of the most comprehensive pilots and tests of blockchain technology to date

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   um this pilot was called the cancel Network pilot uh and this took place last year in December then following that we're going to have a piece with Bernard where we're really going to delve into some of the nuances of some of the technology um and some of the considerations that we're really seeing um in the regulated Capital markets um with our clients and Regulators when it comes to tokenized traditional assets and examine some of

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   the claims that have been made really across the industry hopefully doing a bit of myth busting along the way as we do um I'm sure there'll be lots of questions coming in from you guys we have a really um big audience today so really excited to to get your questions coming in do drop those through the questions T here on the on the interface and we'll try and pick those up as we go along so in case you missed it um what

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   is the Canton Network and what was the Canon Network pilot well just a bit of History to start with you know back in uh May last year digital asset along with 29 other Market participants actually launched the The Canton network with a common goal and belief really um and this was that we needed a different blockchain network to really unlock the full value of blockchain Technology and tokenization for traditional finance and

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   in regulated Capital markets now we've seen that you know public blockchain has really shown us the power of interoperability and defi Innovation and loads of really cool things but we've also seen that that's come with some unacceptable tradeoffs around things like privacy and control which we'll really dig into today and then on the private blockchain side you know these um networks have really targeted privacy and permissioning but they've created new digital islands for tokenized assets

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   in the process and really connecting across these islands so far has meant resorting to some of the same risky kinds of Integrations that really blockchain was designed to eliminate in the first place so the pilot really set out with that goal in mind to demonstrate that now you know with the Canon Network it is possible to deliver both the connectivity and the control the financial markets need without

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   having to make these trade-offs around uh threshold regulatory issues so over the course of the pilot 45 instit utions took part over a six week period executing hundreds of transactions and importantly this is across 22 independently operated Canon blockchains and the net new innovation behind all this which I need to just tea up because you might hear a reference in the session today is really the decentralized interoperability service

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   that's being made available for the canel network called the global synchronizer and this was used to execute these Atomic transactions across all these various sub networks um which you can see on the screen here now the result of that really um is that for the first time in history participants were able to transact atomically across permission blockchains without these compromises that I've mentioned without these compromises around control and

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    privacy so as you can see here participants in the pilot really reflected a cross-section of the industry including for example 15 asset managers 13 Banks leading Global custodians and exchanges and this really helped to create a network that represents every side of the market and when gor goes into the demo and explains the use cases you'll really see why this multi-sided ecosystem is is really so important to the success of the pilot

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    and to proving out those mutual benefits that um we see for the sell side the buy side and everyone really in between now also during the pilot we ran a bunch of surveys we interviewed participants throughout and I just wanted to highlight a couple of things before we we head into the demo now when we asked the 155 partici ipants the individuals that took part whether they believe that the experience they got

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    through the pilot had really demonstrated this kind of High Fidelity Atomic interoperability across blockchains 90% of those participants agreed that it had so it's not just us saying it on this webinar today that this is really you know what we got back from the participants in the in the in the pilot itself there are also a number of key findings that um all are surfaced in the in the report um so please take some time to read that if you haven't

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    but there's just a few I wanted to highlight before we dig into today um because I think they kind of tea up some of the things we talk about in the presentation now I think firstly you know while there's a lot of experimentation in the industry today around interoperability I think the driver for many of the participants and this is some of the feedback we had to really take part in the Pilot in the first place was because they saw a lot of the activity on the Canon Network today so for example the one and a half

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    trillion dollars um a month that goes through the broader DLR Network for um in in repay transactions um the 75% of the indicated loan Market which is enabled by ver on uh on blockchain as well and also the global tokenization platforms that U major Banks bring into Market um Banks like Goldman Sachs for example and they really saw the potential from these use cases um the you know the potential of really connecting these use cases and what can

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    really be done when you think about mobilizing connecting the digital assets the cash and the collateral across these networks and secondly and this is really important I think you know actually during the pilot process in December there was an announcement by the bis Basel committee which highlighted that there was incoming um application of punitive risk raitings to crypto assets that do not meet the requirements around

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    controll and privacy um which some of which we'll talk about today and this really brought into Focus for participants the the costs and the exposures the institutions will face if they don't carefully consider the technology that they choose for tokenizing traditional assets and then finally what we saw that um you know while blockchains and and tokenization benefits have really been

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    most apparent of the sell side to date is really the buy side now and um a lot of the use cases uh you'll see today um have unlocked a lot of potential for the buy side these are the guys that came to us saying we see opportunities today so opportunities to access new markets uh to benefit from broader liquidity to launch new products or to utilize assets as collateral um or for rra Securities

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    financing so lots to unpack there quite a long intro but just with that Bernard i' like to come to you first um I've mentioned a lot of buzzwords in that intro and it's hard to get the right level but I think it's really important to to set the scene um privacy control interoperability can you explain a little bit about what these what these really mean in the context of the pilot before we go into the demo yeah thank

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    you Ben um so gor next after this slide is going to show really Hands-On the the essentially sort of a single single actor demo here of the uh of the CTO Network Pilots that were run with industry industry stakeholders last year now because this is a sort of a much simplified and much bridged version I I want to tee that up by really um really drawing your focus to why this mattered the the core properties that

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    demonstrated here uh and are working together to actually unlock the value of uh blockchain for regulated Finance in particular and whenever whenever talking about sort of value uh value of blockchain and regulated Finance we always need to approach this from two sides right what I usually call the enterprise requirements What's blocking adoption and then really the value drivers on blockchain that we need to

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    preserve so starting in a way with the with the usual sort of breaking pedals um uh Ben already alluded to um quite a lot of regulatory activity at the moment trying to clarify um the boundaries between traditional Financial assets and crypto assets and they usually revolve around uh independent controls the ability of the asset issuers the custodians Etc to actually fulfill their fiduciary and and Regulatory

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    responsibilities paraphrasing here the the Basel Comm comm's sc60 paper this is usually about access controls control over stability meaning so if you can continue processing control over finality meaning you can actually make sure that transactions eventually become sort of really the book and the usual sort of uh anti-money laundering and counterterrorism regulations there's

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    also all sorts of other things but these are sort of the the sorts of examples what what geog is about to demonstrate is multiple applications interacting with each other and the the important thing to bear in mind during that demo is that each of those applications is running on its own independent subnet of the cter network meaning the operator of those application really does have those independent controls um these are controls that are usually sort of associated with private permissioned

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    blockchains where you then lose some of the interoperability we'll come to that later um so this is really really crucial to understand that that's the setup here now Ben already said if you can't demonstrate that degree of control uh sort of the the The Regulators are suggesting that the risk rates will go up significantly up to essentially uh the the full value of the asset the

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    second thing that's being demonstrated here and I I need to put the demonstrated in quotes because that's not really visible but is absolutely present is real privacy blockchain privacy it's always a big topic and there's really two types of privacy at play here some of the applications that you'll see a tokenization applications so basically issuance registry transfers um where there is strong privacy in the sense that investors in those assets don't see each other's

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    Holdings and transfers um so um confidentiality really of uh of you know the financial records the other very important type of privacy that's being demonstrated here is privacy between these applications part of the workflow that we'll see is multiple assets being issued in different Registries and then interacting with each other essentially through trades and and settlements and part of the property that you want there is of course that the different applications which are

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    already sort of independent via their controls also stay independent in terms of their privacy right so we don't want a payment provider to get details about security movements during a DVP or vice versa so we really have these two types of privacy within a single application between investors and the cross applications and without this property you are effectively restricted to types of crypto assets where radical transparency is allowable uh which

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    doesn't doesn't cover most Financial assets today so these two are sort of the the requirements uh for financial assets the third one which is sort of the core of what we're about to see is the is the composability the interoperability between these applications that gets maintained right the ability to have these independent assets on the independent subnets with full privacy and still being able to execute Atomic smart contract calls

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    across these applications is really what drives Network effects in blockchains right if you if the sort of regulatory requirements like independent controls and privacy lead you to build private permissioned blockchains which can no longer interact with other assets and other services via the smart contracts you are effectively just creating new bigger silos right so that is sort of the key thing that's being demonstrated here is that whilst sort of those regulatory requirements are fulfilled we still get that full full

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    Fidelity smart contract composability so bear these three things in mind as you watch the demo and I'm sure will will refer back to them as you present so over to gerok yeah thanks Berard so um before I go into the actual applications and show you part of the workflow that we did I I want to uh ground the discussion a bit uh in the the business context that we were uh using in as part of the pilot uh and to talk a little bit about why that's relevant for for for actual

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    businesses so um you know the industry has been tokenizing assets for quite a while now uh and uh we've built certain functionality on top um but essentially uh in in many cases we've only just arrived uh at uh at the layer of capabilities uh that traditional assets represent us right if I tokenize an asset and I'm able to to trade it I mean able to distribute it I'm able to use it

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    as collateral let's say in a repo transaction that's all things that I can do today right so so really to answer the question you know why why do we actually tokenize the asset it it really comes in this upper layer or where where the true differentiating business value comes from uh from tokenization so uh essentially tokenization gives the assets certain capabilities like the ability to perform immediate 247

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    settlement like the programmability of the asset But ultimately those capabilities need to translate into business value right so there's a couple of examples here like we might arrive at a a tzero issuance uh for certain types of assets we might open up new distribution channels uh maybe increase the liquidity uh through fractionalization uh we we can work on automating the life cycling uh but

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    really where uh I think a large part of the value is uh when it comes to uh collateral movement and management of margins uh because that's where really love of the velocity of assets uh uh is there uh and uh and one of the Prime use cases for for for assets uh especially in their tokenized form and then of course the the atomicity of settlement comes into play uh when we want to

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    remove settlement risks so uh we wanted to to kind of prime uh both business scenarios in the context of collateral and margin management um and really uh show how through the interconnect between different uh blockchains running different applications we can make those uh processes more efficient uh and ideally uh therefore either unlock capital or reduce risk that is present in the process if you think about how collateral and margin works today we're

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    in in this this daily margin regime cycle uh where essentially on a daily basis we calculate exposures uh we ask people to post collateral people post that collateral it takes a good amount of time for that collateral to arrive uh at which point we we repeat that and and we simply cannot do any better than than doing this on a daily basis because of the operational uh burden and and simply

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    the the latency that's involved in moving assets around so if we now look at these uh capabilities that the organization brings to the asset uh the idea is really uh can we do better than that and can we arrive at something that is more real time more intraday that essentially shortens the the the risk Horizon that we have to look at when it comes to trading activity and and margin

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    uh and therefore that has real potential to unlock Capital to to increase risk limits uh to to decrease Capital requirements uh and therefore just uh removes a lot of risk out of the equation and and therefore also opens up the opportunity for for increased revenues for the parties involved so that was really on a high level the uh the business context that we put these these two scenarios in now let me talk a little bit about the the setup of of the actual pilot applications so in total we

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    we developed and deployed six different applications as Bernard mentioned on six entirely Sovereign uh blockchain networks so each of these boxes that you see on this slide essentially represents uh its own uh independent blockchain that operates uh with with user noes connected to it uh and operates that specific uh application providing that service into the network now the the business workflows that we uh walked through as part of the pilot

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    really were now interacting with these different applications and and executing workflows that span multiple of these applications uh in particular the two scenarios revolved around um the usage of tokenized money market funds uh to uh post them as collateral um uh on a margin call uh and the second one is really uh the usage of an intraday repo facility to uh finance a margin call in real time so if you're holding bonds uh and and you need to post cash you can

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    enter into this intraday transaction to finance a margin call for the duration that uh that you need to so in terms of uh the applications that were involved in each of them essentially both parts of the workflow start uh with the margin app uh the exchange or a prime broker might be issuing a margin call through that application the investor receives that Margin Call and then is faced to provide collateral uh for that and in

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    the first uh scenario they they're holding cash but they would rather like to be invested in in an interest baring instrument and therefore they go into the trading app to to actually purchase request the purchase of a money market fund the fund issuer would get the the corresponding units of the fund uh issued in the fund registry and would then allocate them to the DVP transaction that was agreed to in in the trading app so then upon settlement uh of of that uh transaction the investor

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    would have received the money market fund the fund issuer would have received the cash so now the investor can pledge the the tokenized money market fund to to satisfy that Margin Call and I'm going to show you uh part of that workflow in in just a minute the second transaction again involved starting out with a uh with another Margin Call that that the investor receives through the

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    margin app uh but in this scenario the investor holds essentially bonds but they are required to post cash so in order to finance that margin Cod they would go into the financing app and agree with the counterparty the repo dealer in this case um a reverse repo transaction where they post the Bond as a collateral and receive cash uh in return so it's again the DVP transaction or essentially a near leg and a farle DVP that is agreed as part of this repo and then we enter into the the the

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    settlement of the near where the investor uh sends essentially the bond to the to the repo dealer and in return receives the cash that they would then use to again uh satisfy the Margin Call uh that they have received now uh in in those two scenarios there are uh uh two particular points where we we execute this this cross application transactions one is in uh the first business scenario the purch of the money

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    market fund so the transaction to settle the cash LA versus the fund unit transfer atomically as per the trade that was agreed in the trading app is an atomic transaction that updates these three involved applications simultaneously and in a guaranteed fashion so we're removing any sort of risk that uh one leg of the transaction might fail for whatever reason the other goes through and we end up in a

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    situation where we have to rectify uh and reconcile the different systems really the the the protocol guarantees us that uh both of these things will happen or none of them at all and then in a similar way in the in the second scenario here uh the near leg settlement of the repo trade again is done in an atomic DVP session meaning we exchange Bond versus cash uh without uh having

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    any settlement risk between the parties in between um and that just allows for a for a much more frictionless uh movement of the assets uh and subsequent usage thereof so in terms of uh what I want to show today uh as part of this demo I'm start sharing my screen here um I've pre-initialized the uh workflow in that I've already issued a margin call from The Exchange to the investor and we can look at that in the margin app so now we're looking

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    at this uh uh Violet um app there what we can see is that um in this case we've used the prime broker as the counterparty has issued a margin call to the investor to the tune of 990,000 uh US Dollars uh that they have to provide as collateral uh and uh in the first scenario the investor does have some cash which they could decide to post but as I mentioned they have a preference of course to be invested in in an interesting interest bearing instrument uh and therefore they they go out and

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    purchase uh a money market fund now uh as part of this scenario I've already uh set up and agreed the trade that uh we are doing as part of that purchase which is the investor is the buyer purchasing uh a million units of that money market fund from the fund issuer at the price of uh one US dollar uh and they pay a million dollars for that now this trade has already been instructed meaning that settlement instructions for both the payment leg as

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    well as the delivery leg have been created and essentially those settlement instructions uh go uh into the fund registry and the cash registry respectively for the assets to be to be allocated and ultimately delivered so we're going to walk through that process of of actually allocating the asset and observe what happens with that uh and then ultimately trick the the settlement of of this trade to see the Assets Now I'm going to take a look here

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    into the cash registry now from the perspective of the investor uh and we can see uh we have a a million dollars in Holdings here uh as you can see we don't see any any other Holdings uh in this scenario so it it kind of shows but doesn't prove I guess the the Privacy aspects um that that uh that the system uh provides us so the investor will never be able to and in fact never gets hold of data that doesn't pertain to themselves now what we can also see in

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    the settlement tab here is that we have a settlement instructions with uh us the investor as the sender and the fund issuer as the receiver to the tune of $1 million and what we're doing in this step is really uh taking the million dollar that we hold and allocating it to this particular payment instruction which locks up that cash for the purpose of settlement so that in the end when everything is ready when we do that cross application Atomic transaction we

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    can guarantee that the asset is actually there uh and we haven't uh spent it otherwise so I'm going to do that now and then verify that uh our our Holdings have actually been locked so we see now uh there has been a plch on that particular instruction going back into the Holdings tab we now see that there is zero available uh because we have locked up the full amount uh for the purpose of

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    settlement of this DVP now similarly I'm going to switch the view now uh to that of the fund issu so that's the fund issu being connected again to the to the cash registry application or blockchain and interacting with that app through their uh their node we can see they currently don't hold any cash but they're the recipient in that payment uh instruction so all they need to do is approve that they're uh they're uh okay to receive that cash and there thereby we have uh

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    gathered both authorizations from both sides both counterparties to be able to settle the the the cash lag of the transaction now uh we're going to have to do the same on the on the fund uh side so I'm going to now uh give you the view into this fund registry here first from the investor side uh we currently don't hold any units uh because we're we're purchasing them so we're on the receiving end again um uh so we will approve the settlement instruction to uh

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    to give our okay to receive the fund units and finally uh to switch the view from the fund issuers side here we have already uh issued a million dollar uh a million uh units uh of the fund to be delivered to the investor so all we need to do now is allocate uh that holding to the instructions similar to how the investor have allocated their cash in the previous step so once we do that we see it's been

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    pledged uh the approval to take delivery has been granted uh we can see that uh our fund Holdings on the fund issuer side have been locked up for settlement so now we're actually uh ready to settle uh and just before I do that uh I'm going to go back to the margin app and show you just from the investor point of view they now uh have locked up that cash in the trade so it's not available anymore as a collateral and once we settle the trade we would expect now the money market fund to to show up

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    here so that we can actually uh pledge it and similarly what we would uh expect to see in the cash registry is that ultimately the fund issuer ends up with uh a million dollar which they currently don't have as well as the investor receiving uh the the million uh fund units that they have agreed to trade so in this trading app where we have originally um uh agree to the trade uh we can essentially now check whether that trade

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    is ready to settle and it is we see two instructions have been fully approved and allocated with the respective assets so now we can actually go ahead and perform that settlement now again what happens here the magic of this demo is sort of mostly behind the scenes because what we're doing is essentially now sending a transaction into the network that will update each of these

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    applications uh of these independent applications simultaneously and atomically um while preserving you know the Privacy capabilities of each application and what that means in the context of this uh Atomic DVP is simply that from the perspective of the cash registry uh operator for example let's say that could be a central bank or a commercial bank or a stable coin provider they will only see that the cash has changed hands so they they see

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    the cash movement the one part of the transaction but they will not see the context meaning the DVP in which that cash movement has happened nor will they see the other side of the trade so the movement of the funds and that's really a a critical property that uh we do want to retain on a distributed Ledger is that the economic activity is really only visible to the parties that uh that are concerned with the particular part of the transaction but we still want to guarantee the overall atomicity of um of

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    the trade so now that we have U pressed the settlement button we can uh confirm that the trade has moved into settled status uh can verify in the cash registry from the perspective of the fund issuer that we have indeed received uh a million dollar uh for uh for the units and on the investor side uh we see that we now hold a million units of that fund now again switching the context into the margin application so the the

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    the reason why we've purchased that Mone fund is really to to post it as collateral we can now see it shows up as the available collateral for the investor uh the million units uh we apply a haircut of 1% so it it's the equivalent of $999,000 margin which which is coincidential uh the exact amount that we were being called for so you can see here that uh using let's say a a realtime money market fund facility or in the second scenario um the the the usage of an

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    intraday Reaper facility really gives you uh a laser sharp tool to continuously manage your liquidity continuously manage your collateral uh at a at a at a Precision that is simply not possible uh using using current rails so I'll conclude with uh performing the the final step here which is pledging of the collateral uh and what that does is essentially it locks it up to uh to for the benefit of the Prime broker so that the prime can always be guaranteed that uh that that M

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    market fund cannot be transferred away and in case of default they would be able to uh to take ownership to perfect title on that collateral as well so now we can see we're we're we're again flat at 100% collateralization level uh and therefore things are in order and from here on we would go uh into a subsequent margin cycle uh where we could for example use the intraday repo to uh to finance the margin call but for the in the interest of time I will I'll will keep it to this um but uh of course

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    always happy to uh show the extensive demo if if uh if there are interested parties uh in a one-on one setting all right and with that I will hand it over back to uh Bernard thank you very much G always love watching this demo um now I'm going to pick up a little bit sort of where I left off before the demo um you know to just remind you what I was talking about there so we've we've not seen 22 independent apps here but I

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    think we saw six or seven at least right uh which each run on their individual um sort of essentially private permission subnets where they have full control uh in the sense that we talked about earlier we didn't really see that but the um the apps did have real privacy uh meaning transaction data Holdings data were very much shared on a need to know BAS only and we saw very very much so the composability between these apps

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    now not just over the last half year but especially over the last half year since we ran this demo one of the most common questions that I've been asked is and how is this different from all the other networks and of course you know that that question always hurts a little bit because I think what we're demonstrating here is so extraordinary um but I completely understand where that question is coming

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    from and really where that question is coming from is I think that there is a lot of a lot of hyperbole uh in in the market um and to to illustrate that here I've pulled a few quotes from sort of the sort of big public chain networks of marketing and and documentation to just illustrate um to what extent everybody is superficially sort of suggesting they can do this right so again remember the three properties that are really at play here are

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    simultaneous independent controls privacy and atomic smart contract composability right so here a few statements from from other chains Avalanche says you know Enterprise can control all layers of the platform including privacy and permissioning clearly ticking two of those three boxes they talk about interoperability and composability taking that third box polygon similarly talks about Atomic composability across

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    aggregated chains by which they mean ZK rollups and similar without sacrificing sovereignty by which they mean that independent control they also talk about privacy preserving daps ticking that privacy box we've got you know the the sort of probably oldest player in the in the private Enterprise Network space Basu talking about Enterprise features including privacy tick for that and permissioning which is us usually translated into some degree of independent controls and of course

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    ethereum is the innovator in smart contract composability right the network that really showed the power of defi salana similarly has started going into the private chain space pitching again those independent controls so superficially everybody is conveying the idea that they are fit for regulated Financial Enterprises can can effectively do what we've demonstrated here so I think it's important to to peel those layers back a little bit um

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    and you have to you have to essentially just take this as my opinion right so um I it's it's impossible for me to make definitive statements what anyone else is doing but what I believe is behind the statements is sort of what what I'm presenting here so the first one is the statements about permissioning sovereignty independent controls and I think they are absolutely legit legitimate claims everybody can offer independent controls and sovereignty it's very easy to provide because

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    everybody has the ability to spin up a fully permissioned private chain in which case the operator has complete control over everything uh and that is the model of course of traditional uh Enterprise blockchain systems like Hy Basu so I've actually taken one of their open source pictures here where they just demonstrate this is all about being able to let some people in and not let let our others in but I think overall

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    over the last 10 years fully permissioned private Enterprise blockchain has gotten a bit of a bad rep for good reasons because the end result of doing this of just building a really tightly controlled private blockchain uh is a new form of Silo one throws a lot of the value to the end user away right so users I think often get very little benefit um from such completely locked down um networks the next one is privacy and

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    first of all I hope everybody uh in this space knows you know privacy is a well understood problem and it is well understood um that this is one of the primary problems to solve I've pulled a nice quote here from a recent um sort of report uh sort of uh that city did with a few other partners uh on Avalanche where they you know clearly State yes all these digital networks are transparent by Design um so how do people try to solve this so the traditional approach again I'm starting

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    here sort of historically with Basu uh is to try to essentially segregate the blockchain off there in Basu these things are called privacy groups and fabric they were called channels and the idea is basically that you just chop up your blockchain into sort of smaller swim Lanes um that isolate data from each other the the problem there is that these groups are ultimately just smaller

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    private blockchains they are still internally transparent so when I deploy an erc20 token into one of these privacy groups everybody in that privacy group sees the entire state of that erc20 and where still they don't talk to each other I can't actually do an atomic smart contract call between these groups so they are they are really not uh not a not a privacy feature of the type we talked about earlier where we can Ensure both privacy between investors and privacy between the

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    apps the second approach that um that is out there is to effectively just uh just delegate privacy features to the end user to the developer right so uh Avalanche has run several Pilots now uh with privacy features but they're all based effectively on the ability to slot in your own smart contract virtual machine into these blockchain layers just like has been possible with systems like tender Min now Comet bft historically and you can of course do

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    all sorts with that you encrypt transaction pads off Ledger you just send encrypted messages through the blockchain and interpret them offchain and so on but ultimately this just means build your own blockchain protocol with privacy right there's no inbuilt smart contract with any degree of privacy there and as you know somebody that's been working on the problem of building a blockchain system with privacy for the

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    best part of a decade now this is not a problem that any application developer is going to solve by themselves right smart contracts with real privacy are a you know a really really complex problem so I think delegating that to the to the end user just saying we have privacy because you can do it yourself um is is stretching stretching sort of capabilities a little bit and the third one I think the most common stance is to Bank on future research

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    right and this is actually where where polygon's privacy claims are coming from I've used the quote here again from City it's all about progress in research on zero knowledge proofs and fully homomorphic encryption and I love I love that sort of stuff I think that research is fantastic but general purpose smart contract privacy using zero knowledge proofs and homomorphic encryption have been a

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    research topic again for the best part of a decade and my own personal judgment is they will remain so for the time being right um I think um just waiting waiting and hoping that they'll come sort of come through um then we we need to sit our hands on our hands for quite a while and then the last one composability again everybody that has a notion of subnet rollup side chain talks about interoperability and composability

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    so you know just sort of grabbing a few examples here Avalanche last year launched the Avalanche warp messaging uh which they describe as um sort of enabling the implementation of arbitrary communication protocols polygon recently announced the future AG layer where they talk about cross-chain composability through a synchronous cross chain calls now these statements are very promising but if one actually looks said what they mean and it's fairly explicit in the

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    warp messaging is these tools enable developers to move a piece of data like a message from one side chain to another from one subnet to another with certain authentic authenticity guarantees which is nice but for those here that have been in it for for decades the ability to send an authenticated message from one computer system to another is not not an innovation it is not a breakthrough right we've been able to do that between financial institutions

87. 41:32

    between any sorts of apps since the Advent of the internet so my my stance there is if it was even close to easy to build realtime interoperable or composable financial systems using messaging as a primitive we would have solved that problem within the last 30 years right it's that simple we wouldn't need blockchain if messaging was enough because we've had really good messaging

88. 42:01

    systems like Swift for decades and to my knowledge right now Canton is the only chain system that can actually do atomic smart contract calls across private subnet so it's the only system that can combine the independent controls with the composability so to go back to the original question I get asked is how is this different could others do this this is sort of the picture I've got in my head I believe

89. 42:33

    legitimately that everybody can deliver independent controls because everybody is able to spin up a fairly isolated private permissioned blockchain when it comes to privacy I don't think anyone else right now has a decent story about real privacy amongst investors and between applications there's one carve out there credit recredit is due um r3's quar I think similarly to Canton has been designed from the ground up to offer transaction

90. 43:04

    level privacy so um they are the one exception that I think can actually do this pretty well and then there's the last property which is really the value driver of networks the thing that makes defi tick um and I think will make future Financial systems tick which is that Atomic composability and there I have not seen anything comparable to what we've seen in that demo G was showing

91. 43:29

    right I think everybody could mock this up right it's easy to actually show the same uis the same demo that gor showed where behind the scenes you just have messages and sort of remote procedure crawls using those messages which will have the same effect in the UI but under the hood if you're just using messaging you're reintroducing partial settlement risk you're removing that atomicity you end up having to reconcile between different blockchain systems again and

92. 43:57

    you really throw away a lot of the value that fundamentally drives blockchain adoption right so this is why I think the CTO Network pilot was so extraordinary in what it demonstrated and why I think it it really matters uh how it's a complete GameChanger for regulated Finance thanks than I think that brings me more or less to the end so back over to you Ben yeah thank you and I just wanted to highlight you know I think

93. 44:25

    you're absolutely right it's easy to show uis of um a distributed system and and forget what's underneath the hood and I think you know it's worth noting that that was a a fully stood up infrastructure running on the global synchronization infrastructure of the Canon network with the nodes distributed and everything you saw there was based on the infrastructure that was used in the pilot you know and we'd be happy to to to run through that with anyone in more detail where you can actually get

94. 44:49

    your hands on that software as well um you know uh so do get in touch via this this link here um if you'd like to to assume one of those roles or play one of the roles of the application operators um we can we can certainly discuss that with you and really dig in a little bit more we had you know limited time today to really do I think the the the the expanse of all the things we did in the pilot to really do that justice so um I

95. 45:12

    think we we tried to to cover a lot of ground and it was um it was always really great to see um to see that in action so thanks for the demo go um but yeah as I say the I think the um we have a few questions I'll go into those but uh do get in touch if you'd like to to really get your hands on some of the software or if you'd like to unpack some of the stuff Berard just talked about I think there's again there's a lot of these nuances um you know

96. 45:38

    they is probably worth sometimes talking about these in more detail so we're very open to doing that um as a team so I absolutely do request a more technical Deep dive on on how some of this stuff works we've glossed over some of the more technical details of you know how the the synchronization Works we're can to touch on that with some of questions now and the other thing we're kind of seeing post-pilot as well is actually now a lot of interest in in running

97. 46:03

    additional working groups um you know to really collaborate around particular use cases um so again we're open to to having those discussions with you as well so yeah good to get in touch um let's take some questions for the time that we've got um I'm going to read actually a couple that we've got here I think one that just touches on how Canton is different and alludes to some of the points you made Bernard is you know one of the questions here is how do individual

98. 46:27

    parties or nodes validate transactions without full visibility of all ledgers I'm assuming transactions need to be traced all the way back from the beginning for this to be fully validated I think this kind of the way things are validated in the network is is very much a unique property of the canel network so maybe Bernard if you've got a go a good way to to tackle that one uh Berard you want to take it or should I yeah sure I'm I'm happy to take it uh you know answering that question in full

99. 47:04

    uh would probably end up using the rest of the Q&A time if not more uh but the the short answer is that the The Canton protocol really the consensus protocol uh Works quite differently to other blockchains right in in other blockchains the the validation of all transactions is effectively delegated to the miners to sort of network infrastructure providers that see everything validate everything um and then you as an end user essentially need to get hold of the whole blockchain again to as you suggest validate from

100. 47:36

     the beginning to see what's correct in duml and Canton the the basic idea is that every smart contract um has very explicit roles assigned to it essentially roles of um sort of who who ensures security of that particular part of the network um and and uh some of those roles take you know essentially take um sort of the the responsibility of securing smart contracts so we essentially mirror um fairly traditional

101. 48:10

     um sort of responsibilities and hierarchies where for example you know a you know custodians are responsible for keeping the books of their customers uh or asset issuers and registers are partially responsible for uh um for keeping um you know the the registry intact So within within each of the applications that gor was showing for example each registry application um there are there are entities that see most of that application right just like

102. 48:45

     in the real world your bank account is visible to your bank and it's those um those entities that uh have the fiduciary responsibility that also Ensure a lot of the smart contract security gor do you have anything a different spin on that or something to add uh yeah maybe maybe to put it so the way my mental model about uh this uh this is really that essentially we're splitting up an overall transaction into the individual subp parts and people will only validate the subp parts that

103. 49:18

     they are concerned with right so in in the example that that I've shown uh the the the operator of the cash register application will only need to validate that the movement of cash is is is correct and is a valid part of the transaction they don't need to be even aware of that there is an overall transaction of course you need someone that is aware of the overall transaction which is the counterparties in the trade right so the fund issue and investor and those two will validate the overall

104. 49:48

     transaction so it's it's a matter of uh subdividing the transaction into sort of stakeholder groups where then uh only the stakeholder groups for a particular subpart would would have to validate good a a difficult one to answer in a couple minutes but thanks for for taking that one on um we have a question in from um someone looking at this from a regulatory perspective um is

105. 50:13

     Canton similar to Swift was part one of the question and and will it interact does it interact with other networks it's the second part of the question and that's actually come in a couple of times um let's take that first piece how is Canon similar to Swift where it facilitates secure messaging instructions but does not hold assets I think the answer is is no because it's about not about messaging but Bernard

106. 50:35

     maybe tackle that first piece um yeah I think I think that's very very sort of important to note here right uh Swift Swift has been very successful in making sort of messaging as a tool for a truly sort of decentralized application fairly successful but it it Swift has the fundamental problems of all message-based systems which is that all Swift members ultimately keep you know

107. 51:00

     their own their own books and records and independent it systems and essentially have to rely on the fact that they all apply these Swift messages consistently which you know they mostly do but they still need to reconcile and and do error handling the real um innovation of blockchain not just DL and Canon but of blockchain is that rather than just doing the messaging you really treat the blockchain system as a common

108. 51:23

     golden source of truth right where you no longer just send messages and apply them independently to your systems but you have a common way of translating essentially the instructions the messages inter Interstate uh so that you have a consistent consistent book at all times and Canton is like that as well right so it's not a messaging system it's a blockchain system where the smart

109. 51:48

     contract state is replicated across participants um in terms of coexisting uh with other networks of course we coexist with other networks and interoperability with other networks uh is no different to interoperability between those other networks right to to get any sort of interoperability uh between say ethereum and Solana I think the original question was between Basu and Solana but I'm just going to use Pub net ethereum here you need to build a bridge either as an

110. 52:21

     individual party uh or a decentralized bridge like Wormhole um and those bridges unless they are yourself um generally present new counterparties right I think both my stance as well as most Regulators stances would be that the the asset that you hold in Solana right that is the output of a bridge like Wormhole is not the same asset as the one that went into the bridge on the ethereum side because you have a new intermediary um in the form of the world

111. 52:54

     wormhole validators and um yeah I expect that interoperability between the CTO Network and other public networks will very similarly um involve multiv venue assets you know like the stable coins um and both first and third party Bridges actually that that idea of different different assets is it leads on to another question that's com in um actually from from bis which is um is is good because it relates to the question around payments so how is canon Network

112. 53:26

     different from the regulated liability Network and again I think there's a there's a catch in that question who wants to take that one well I can probably give it a give it a go uh so uh in essence the regulated liability network is is a concept that uh that has uh kind of matching counterparts in in the C technology I would say so in in the in the regulat liability network uh we talk about partitions right which

113. 53:55

     which are kind of the independent control boundaries of a particular firm so there might be a central bank partition that is controlled by the Central Bank there might be a Commercial Bank partition controlled by the respective Commercial Bank and that Maps quite well into into Canton in a sense that one of these applications that if seen could be considered that's a partition that's under control of that entity and then similarly in in the in

114. 54:19

     in rln you have then this concept of um of a of an of an orchestrator and FMI that or rates the simultaneous update across many of these partitions be that for a crossb FX use case or or or a DVP use case um and and that is very similar to what we have seen in in the Canton Network so I would say uh Canton is a technology that lends itself very nicely to the concept of Ren and and has kind of a fairly direct mapping of those Concepts present in the Rand onto our

115. 54:53

     technology and we have been working of course in the in the in the first phase of uh of RN with uh with the involved Banks also to uh to show that yeah yeah um fantastic okay um we've touched on inoperative there was another point of the another part of a question here which was is it open for developers to build on so where are we today in terms of making this um something that people can use to build on I'm going to take two questions at once so there's the kind of General openness for developers to build on Canton um and

116. 55:26

     there's another part which is about the applications themselves you know can people get access to the applications that we've seen today or what's our plan for making that kind of code available both fantastic questions um so the the specific the specific counter Network sort of pilot apps that were shown here are currently not open- sourced um I I think will'll make them uh available sort of in steps we're

117. 55:57

     first of all doing all sorts more specialized sort of follow-up activities uh with industry stakeholder groups um and I expect that sort of slow slowly but surely we'll we'll open them up more broadly and effectively the same is true for the for the for the global synchronizer itself as well duml and Canton are absolutely open for developers right duml and Canton are open course so you can download Open Source DL and Canton and start building um that includes the um the versions of

118. 56:28

     DL 3 that are flowing uh into the into the global synchronizer um the global synchronizer right now is still invite only and will open up in phases over the next year uh but we are absolutely inviting uh people you know to build on it um so if you have a um you know if you want to get involved first of all in one of the industry um sort of groups that that's sort of building out essentially these counter Network pilot use cases or have other ideas what you would like to use this technology for um yeah definitely

119. 57:03

     definitely possibility fantastic thank you um I think we have time maybe just for for one more um there's so many questions we'll come back to any that we've missed um It's actually an interesting one here about D Finance so for people that aren't aware we have you know part of the the stack is Dam Finance where we have you know liaries for financial services um to to tokenizing um a tokenization framework essentially for financial services one of the questions

120. 57:35

     is are you planning on creating building blocks for other Industries um and uh for example D Healthcare as well as D Finance yeah very good question and and and certainly we are uh planning to provide more building blocks uh uh especially building on top of D Finance right d is a very versatile toolkit uh that you can use to build Financial use cases and and and even very complex ones uh in the context of the the network powered by the the global synchronizer

121. 58:08

     the global Network we're starting to think more in terms of what kind of basic utilities do you need in the network and we're thinking about uh providing essentially those utilities for other parties then to to to play their respective role in in the network so an example for that is uh running an asset registry or a cash registry as you've seen in the demo today that seems like a very core

122. 58:33

     functionality that you would would expect just to be there so an issue can just come along and and use that utility instead of having to build their own application so that is a direction that we're actively exploring another example is the the example around let's say identity and credentials right the ability to record on chain either who a specific party is like what's the legal

123. 58:56

     entity behind it or whether a party has been kyc these type of credentials are incredibly valuable in a the context of a distributed network uh because you can use them in the context of very different applications so that's another case where we think you know it should be functionality like this should be just available in the network and therefore we we're thinking about providing that utility to the

124. 59:20

     network great thank you great answer we are we are at time there's a couple of things we'll have to follow up on post call today um never enough time on these webinars um we have so much to cover um today so really appreciate your time everyone and thank you all for joining um around around the the globe I think a really engaging session we' love to unpack this in more detail with anyone that's interested so please do get in touch um and we can answer your

125. 59:46

     questions offline as well but I just want to take a minute to say thank you very much to to gorg for doing a live demo it's always a risk so thank you for that um it was great and thanks Bernard for your for your insights and um yeah we hope to to carry on engaging with the community and and bring in bring in um synchronize Finance to life thank you thank you