Members of six African banks reportedly met yesterday to discuss the next
steps in their ongoing effort to connect aspects of the South African banking
system via a private version of the ethereum blockchain, according to sources.
Present at the event
was CIO of Barclays Africa's corporate and investment banking division,
Andrew Baker, who said that while the unnamed banks are still in the early
phases of the "most pure collaborative process" he’s ever
participated in, the effort has been propelled by a surprising technology –
instant messaging.
After some early internal work within Barclays subsidiary, Absa, including
logging archived payments on a blockchain and writing simple ethereum-based smart contracts, Baker created a WhatsApp group and invited a few of his peers at competing
banks.
By giving those bank
representatives administrative access to the blockchain group, he said the team
of would-be competitors quickly grew to 50 members from six of South Africa’s
largest banks.
From there, he said
the group has invited an unnamed regulator and a payments service provider, and
as of last Friday, the group had successfully networked together on the
ethereum blockchain.
But it all comes back
to instant messaging:
"The biggest
contribution we made was to start a WhatsApp group. That is it. The whole
thing, the genesis of it is instant messaging."
Internal tests first
But
before growing its network, Absa set out to learn as much as it could
about how its own internal processes worked – or didn't work – with the
ethereum blockchain.
With the help of former Barclays vice president Simon
Taylor, Baker said the bank built smart contracts designed to send
emails based on events that occurred in various RSS feeds and ran BigChainDB in
an Amazon EC2 cloud service to archive past payments.
The BigChainDB
integration was designed to help the bank be compliant with requirements to
make its payments data "tamper-proof", he said.
Absa then
experimented with exporting its payments data into BigChainDB in the JSON
format before settling on an an XML version. As part of the test, Baker said
the bank showed that it could also query the data after it was uploaded to the
blockchain.
Also before engaging with other banks, members of Absa built their own
do-it-yourself ethereum mining rigs using wine boxes and PVC pipes as part of
an internal competition to see who could generate the highest hashrate. To
check the code for bugs, another team member established abug bounty program in GitHub.
"Then we started
to realize there wasn’t much more we could do internally," said Baker,
adding:
"The key word is
distributed. You don’t need to be distributed if you’re looking at your own
systems."
Building connections
What he found after
sending out the initial WhatApp invites was that the banks across South Africa
were all engaged in similar experiments, and that they, too, were looking to
bring their work to a larger scale.
The resulting synergy
led to a working environment unlike anything Baker said he's experienced before.
"My background is
I come from a markets business doing high-frequency trading," he said,
adding:
"My view on the
world is compete, compete, compete. So when we started this you start to think
people are going to run their own agenda. It didn’t happen."
Instead of competing,
Baker said members of the WhatsApp group with more efficient processes would
give advice with an "all ships rise" mentality. As such, the
network wouldn't just be geographically distributed, but comprised of varying
parts of the banking industry and hosted in diverse services.
While Absa hosts its
ethereum nodes in an EC2 virtual server, another bank uses Microsoft's Azure,
another uses its own internal data center, and the regulator,
Baker said, hosts its node from an Africa-based data center.
"We wanted to
really experience a distributed, multi-geography, multi-database,
ethereum-based service," Baker said.
Absa is now
"fully integrated" with the ethereum blockchain, he says, and most of
the other banks are, too, meaning that when they start running smart
contacts, they will be able to begin transacting in real-world assets.
Though much of the
operational overhead is being built into the blockchain, for now, the
transactions themselves will be settled using traditional technology and
"matched" on the ethereum blockchain.
But how to use the network?
Early contenders for
the first smart contracts to run on the South African ethereum banking network
are syndicated loans and securities loans, which are currently run as
over-the-counter operations. This means that banks need to liaise directly with
one another much more frequently than they would with a blockchain, something
Baker thinks they can end.
"We think we can
operationalize [the loans] on a distributed ledger," he said. After
successfully connecting the banks to each other via a private version of the
ethereum blockchain, Baker said the group set about deciding how to build the
MVPs of their smart contracts.
On Monday, the banks
met to determine which of them can provide people with which skills for an
upcoming week-long event to determine how to use this network now that it
exists.
A seventh bank is
expect to join the group soon, but despite the growing number of
participants, Baker indicated the group still has a roll-up-your-sleeves type
attitude.
Baker concluded:
"What’s going to
happen next is we’re going to set up a workshop in Capetown for a week and
bring everyone down. There’s a couple of projects that are up for grabs."
Absa image via
Shutterstock; Africa image via Shutterstock
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