FinTech Connects… with Richard Gendal Brown, Chief Technology Officer, R3
R3 is an enterprise blockchain software firm working with a global ecosystem of more than 300 participants across multiple industries from both the private and public sectors to develop on Corda, its open-source blockchain platform, and Corda Enterprise, a commercial version of Corda for enterprise usage.
I spoke to their Chief Technology Officer, Richard Gendal Brown to get his take on the blockchain market, business uses and R3’s open source blockchain platform, Corda.
How exactly do you envisage blockchain bringing increased efficiencies at market level?
If you look at what the IT industry has achieved over the last 50 or 60 years, it is all about optimisation by taking previously manual processes and automating them. This enables formerly impossible or unaffordable things to happen and it’s all about improving firms.
You saw that through the first computer revolution, then ERP, CRM and integration. It’s all about improving the efficiency of individual firms. But, if you take stock of what’s been achieved it almost feels like the industry has reached the end of that road. Whereas if you were to look at the markets in which firms operate, they still look very similar to how they looked 50 or 60 years ago. The markets themselves with one or two exceptions, have not been transformed.
For example, take syndicated lending. The banks in that market have installed software that’s made them very efficient. But, the communications process at the level of the market is archaic.
One of the things that particularly inspired us at R3 about platforms like Bitcoin and Ethereum is that they operate at the level of entire markets. Whoever owns and trades Bitcoin and Ether use the same platform and that’s how the entire market is able to transact.
So a lesson we drew from that was what if you could do the same things with normal markets? What if you could apply those same principles to bring a level of commonality and consistency, just as IT did for individual businesses? It doesn’t just reduce cost, but alongside this brings a quality of data and new opportunities.
So, long story short, this is about doing to the markets what IT did for firms.
What are some real world, business use cases?
Most consumers think of insurance as pretty efficient. It can be done online via a comparison website. But in the corporate world, where complicated risks need to be placed, to get all the property in a company’s portfolio insured they have to go through a broker, underwriter, reinsurance and all the rest. It’s like a business negotiation that has to be carried out in getting corporate insurance.
It’s inherently decentralised, there is no-one in charge of the market. So you get the situation where the component parts are very efficient themselves, but the communication between them is very inefficient. What we do now see is that insurers are coming together to create inter-firm workflow and inter-firm blockchain solutions to massively improve the efficiency of the process.
How realistic is it to ask entire markets to change the way that they operate, given they have been doing so in a certain way for such a long time?
Collectively as an industry we have begun to realise what works. You could argue that the answer is obvious, that incentives matter. All the successful companies that we’ve seen are one where we’ve managed to crack the nut of making it a win win scenario for everyone involved. The incumbents, the service providers, the consumers, everybody benefits and everybody shares in the efficiency and the opportunities that are created.
It's that old adage, lots of things change, but the rules of economics always stay the same.
How close do you think we are to achieving the kind of market-wide optimisation that blockchain can promise?
We are pretty close. We’ve already seen small scale deployment. 2020 is the real year of production at scale. So if we were to have this conversation next year I’d be talking about the efficiency that has been delivered and we might even be at the point where there is a secondary market on the horizon.
You can almost measure it by the amount of paper that is being carried around in people’s arms east of Bishopsgate.
So, if Corda can be considered ‘middleware’ for markets, does that mean it can be applied to every industry?
One of the most serendipitous moments of my career was when I realised that a platform we had designed for a very narrow set of use cases in the financial market was highly general purpose. It was actually the insurance industry that told us this. They were almost banging on our door asking why we were only talking about Corda in the context of banking, when the underlying data model is perfect for modeling an insurance policy.
So that made us wake up and realise that we were sitting on something that was far more general. Since we started talking about that and helping people understand it we’ve had multiple industries; banking, insurance, healthcare, oil and gas, take up the solution. You name an industry and there are people building solutions on Corda.
We realised that for Corda to be truly successful, it had to be on an open platform and it had to be accessible for all. We couldn’t do everything at R3, we had to create space for entire ecosystems and software developers to come to the fore using their knowledge of their own verticals.