Blockchain and smart contracts will be the basis of an ideal future IT infrastructure for capital markets, as Digital Asset’s chief technology officer explains to Joy Macknight. 

Shaul Kfir

Shaul Kfir

Blockchain, or distributed ledger technology (DLT), and smart contracts are going to revolutionise agility in many areas of the banking industry, including capital markets, according to Shaul Kfir, co-founder and chief technology officer at DLT start-up Digital Asset. “And this will happen without having to give up any of the robustness or security that financial institutions expect,” he says.

DLT can help fix existing IT inefficiencies, as well as lay the foundations for an ideal future technology infrastructure. Mr Kfir uses the example of clearing and settlement, which is a complex series of transactions that involve dozens – sometimes hundreds – of entities that need to record part of a trade lifecycle. A central counterparty helps to reduce the complexity; however, with centralisation comes privacy issues and settlement delays.

Career history: Shaul Kfir  

  • 2014 Digital Asset, co-founder and chief technology officer
  • 2013 Bits of Gold, director of technology
  • 2012 Technion – Israel Institute of Technology (SCIPR-lab), software developer and research
  • 2011 Intel Corporation, software developer

Today, enterprise distributed ledgers can provide granular privacy controls. “We can have, for example, two legs of a trade, where some parties see the first leg and others see the second, but we know that the two legs will occur at the same time, so there isn’t a lag in settlement,” Mr Kfir explains.

Pivoting the business

When Digital Asset launched in 2014, there were no mature enterprise blockchain platforms on the market; out of necessity, the team set out to build a full vertical software stack. “Once the technology giants started to build robust platforms, we decided to focus on our value-add as a start-up that understands both the business and the technology. In 2019, we moved from building our own platform to partnering with tech giants like VMware and becoming a trusted adviser, evaluating use cases and helping customers understand how the underlying platforms work,” says Mr Kfir.

It created DAML, an open source smart contract language. DAML helps developers and companies to build cross-company applications first and foremost for distributed ledgers, including blockchains and other non-blockchain distributed ledgers.

According to Mr Kfir, DAML helps overcome two barriers to greater adoption of DLT. The first is the fear of vendor and/or platform lock-in. “Big enterprises have been through this rodeo before and are afraid of both vendor lock-in and also betting on a specific technology that may become obsolete,” Mr Kfir says. DAML is platform agnostic and works on Hyperledger Fabric, VMware Blockchain, the Chinese blockchain FISCO BCOS and R3 Corda, to name a few.

The second barrier is blockchain technology’s inherent complexity. Digital Asset aims to make blockchains approachable for a typical enterprise developer, allowing them to think about their business instead of understanding the nuances of the underlying technology. “We’re providing an intuitive interface which abstracts away the complexity of what happens under the hood,” says Mr Kfir.

Applied use cases

DAML is used across a wide spectrum of applications in the capital markets. For example, Broadridge Financial Solutions is developing a next-generation trading platform for bilateral repos using DAML; while BNP Paribas Securities Services is using it to develop a new digital interface to allow its clients to connect to multiple global DLT projects without requiring a major overhaul of their operating models. Digital Asset is also working with UBS on using smart contracts for some Asian structured products to reduce manual inputs required for trades.

Possibly the most well-known project is Digital Asset’s work with the Australian Securities Exchange (ASX). In 2017, ASX decided to replace its Chess clearing and settlement platform for Australian cash equities using Digital Asset technology, including DAML. Originally envisioned as a five-year project, ASX recently announced that it was postponing the go-live until April 2022 as a result of Covid-19.

Mr Kfir believes that adoption will “explode” when such an infrastructure is in place. “Putting in a new platform takes time and coordination across many entities. However, when a platform is live, the business functionality and agility experienced will cause a sudden acceleration in adoption,” he says.

Future vision

DAML is open source because that is the standard of IT infrastructure today, according to Mr Kfir. Plus, Digital Asset’s founders are firm believers in the power of open source communities. “We didn’t just set out to build a commercial company; we wanted to build a vision for the future of IT, which can’t be done without a community,” he says.

Mr Kfir also stresses the importance of interoperability, or the ability of multiple networks that were deployed in different contexts by different entities to communicate. “Industry silos need to be broken down or we won’t see the technology’s full potential,” he says. “If someone builds a DLT network for healthcare, another builds a network for capital markets and then a third comes with a business idea of workflow that spans these two, that should just work out of the box.”

He believes that while the business of finance is currently distributed, the underpinning IT infrastructure is not. “We’re making it easy for the IT infrastructure to reflect the reality of the business,” he says. “We see the future being much more distributed from both an IT and an innovation perspective.”


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