Infrastructure Experts Want Blockchain Tech Standardized

Distributed ledger technology has brought the bold promise of decentralized databases, between and within financial institutions. But standardization efforts are required if this promises is to be realized, according to experts at Sibos 2016.

At Sibos 2015, blockchain technology felt like something of an outlier. But only a year later, and rebranded as distributed ledger technology (DLT) it is practically establishment, with entire panels devoted to it and representation from communities such as Hyperledger and R3. This year's event in Geneva saw industry players ranging from banks to DLT service providers to intermediaries such as Swift discussing the need to develop standards for interoperability and future optionality in the technology.

Peter Randall, CEO of payments infrastructure SETL, told delegates that standardization efforts are crucial because banks will have multiple ledgers, not "one great big pan-galactic blockchain."

"There are going to be many different chains and those chains will need to talk to each other," he said. "Many banks will have many chains within them. Most of the time they will just be doing the little bit of business that they are supposed to be processing, but every now and again they will need to talk to each other."

Randall was skeptical that broad industry engagement is the way to achieve these standards: "What really scares me is the idea that you could have a multitude of financial institutions with a multitude of different jurisdictional issues and a multitude of different takes and perspectives. Effectively, you would end up with something that looks like the lowest common denominator."

Other Sibos delegates emphasized the importance of open source. Chris Church, chief business development officer of Digital Asset Holdings, said the company has acquired a modelling language for building applications in distributed ledgers and is very focused on the Hyperledger Project, an open-source community that aims to build a cross-industry open standard for distributed ledgers.

"It's our intent to take this modelling language and use the Hyperledger to open-source that technology," said Church. "That is really important for promoting distributed ledger and getting the growth in the industry that it requires. Open source is an important part of our strategy, and it's how this technology will grow. Those that embrace open source will be the winners in this race."

Hyperledger executive director Brian Behlendorf told Inside Reference Data that the point of having standards is to have options. Ending a business relationship with a vendor should not mean completely replacing a system, he said. "Ultimately, it should be about driving networked effects in the adoption of the technology so that it gets more valuable as more people use it."

Hyperledger is building software aimed at becoming standard for DLT users, said Behlendorf. "We are focused, heads down, on shipping code that implements a DLT, a smart contract," he said. "Sometimes those may touch on existing standards, like ISO 20022. You could easily put that on a Hyperledger platform. But other times we are inventing new standards as we go. At a certain point, we will likely say that an interface (for example) is pretty stable, and we will now promote it to the standards bodies."

Talk about standardizing DLT is premature, Behlendorf believes. "So far we haven't done this because we are still pretty young and we don't have the experience with these APIs to know whether they are any good or not," he said. "There have been a lot of questions about whether we should start standardizing blockchain systems. And to some degree it's too early for that because there is still so much evolution happening at low levels of the platform. We run the risk of rewarding one project over another before we really know which ones are successful."