Two of the most prominent startups in enterprise blockchain are teaming up to tackle the hard, but now seemingly inescapable problem of interoperability.
At Consensus 2018 this week, Clearmatics and Axoni demonstrated how a financial derivative can be issued via a smart contract, trigger a payment and then instigate a cross-chain atomic transfer of value between two distinct networks. This marked the first time a derivatives contract has been originated on one enterprise blockchain and settled on another.
The milestone is important because interoperability is now emerging as a key design goal of distributed ledger technology (DLT).
While the financial world may be moving from a state of many ledgers to fewer ones, blockchain architects have come to realize that trades, deals and transactions will probably never be originated, processed and settled by a single, monolithic system.
Robert Sams, the CEO of Clearmatics, told CoinDesk:
“Facilitating end-to-end processing from point of trade to settlement, we need to make the assumption that that process is going travel through multiple systems, rather than a single monolithic settlement system, distributed or otherwise.”
The collaboration is significant also because of the clout of the players involved.
Axoni, based in New York, is working with a wide range of leading financial institutions and infrastructure providers to move trillions of notional value in U.S. dollars onto blockchain tech across a variety of asset classes.
Meanwhile, its partner in the demo, Clearmatics of London, is working with a consortium of banks and financial institutions to create digital fiat that is fully collateralized by cash at the corresponding central bank and transferable on a distributed ledger.
Axoni has also been doing a lot of work in the derivatives space and other areas of post-trade processes, while Clearmatics is focused on the settlement side of things, so the pairing was an obvious fit (both are building technology based on ethereum-derived architecture).
“If we can collaborate appropriately and facilitate linkage between those networks, what you end up with is a highly automated, highly transparent process all the way from trade agreement through to settlement finality,” said Greg Schvey, the CEO of Axoni.
Lessons from crypto
Stepping back, it’s fair to say blockchain interoperability is at the R&D stage.
To make sense of the problem involves a lot of requirements based on use cases and the domain applications, which all have to be considered together. Sams emphasized that the interoperability demo was just a proof of concept – but an important one, because it drives the spirit of open source collaboration.
“Interoperability needs to be tackled in a open and collaborative fashion and built around open standards and open source implementations,” he said, adding:
“There will probably be multiple types of interoperability solutions – not many, but more than one.”
The same spirit extends to the public blockchain community, where a lot of cutting-edge work is being done on the very technical aspects of the topic.
“There’s a lot of overlap between cross-chain atomic swaps in the cryptocurrency space and the stuff that we are doing,” said Sams. “Even though the domain application is entirely different, the underlying technological primitives are very similar.”
The contract in question was modeled using Axoni’s domain-specific language, AxLang, and then settlement finality of the resulting cash payments was achieved across different permissioned, ethereum-compatible ledgers.
Clearmatics’ contribution to the demo was Ion, an open source interoperability protocol, designed to perform atomic cross-chain transactions.
The AxLang smart programing language used here was developed by Axoni to make working with smart contracts in an enterprise setting a sure thing, so to speak.
Axlang is based on Scala and enables formal verification of smart contracts, a rigorous mathematical method used to prove the correctness of computer programs. It can also compile to both the Java and the ethereum virtual machines.
However, developers are often asked, why another programing language?
Schvey said that doing lots of work with large-scale application design on blockchains revealed certain requirements not being met by Solidity, the first step into programming smart contracts among the ethereum community.
In particular, Solidity lacks formal verification, which is the ability to have mathematical proofs that the code written has compiled properly, Schvey said.
“Being able to check for certain error vectors is a very powerful concept, especially if you are deploying a large scale multi-party infrastructure with a lot of value going through it,” he said.
Indeed, the proof of concept marries two hard technical challenges: interoperability and formal verification. And there’s an important connection between the two, Sams pointed out.
“Imagine an end state of distributed market infrastructure where you have an end-to-end process flow, occurring through multiple systems,” he said.
“It’s obviously going to be very important that at the semantic layer, a system taking over a process from another system, and vice versa, understands and can demonstrate exactly what the business logic is that they are consuming or producing for another system to consume.”
Two roads image via Shutterstock
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DerivativesAxoniClearmaticsSolidityCross-chain tradesinteroperabilityenterprise blockchain
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