How to Scale DLT Infrastructure? What Is Needed from Industry Participants? | EBC10

[Music] so hopefully hopefully everyone can hear me um very pleased to be here in in Barcelona in this after lunch slot um also very privileged to be joined by three exceptional e experts on a a very interesting question of how to scale DT infrastructure it it's a a privilege to be here but we're also very fortunate to talk about a a systemwide topic um uh many many of the panels earlier have already kind of contributed to aspects of this but we we'll be taking a holistic View at this question of how to scale DLT infrastructure and what is needed from industry participants um a little bit about me so I'm Koko Chen uh from the association for financial markets in Europe I work very closely with large wholesale financial institutions on how they adopt new technologies so in some ways I'm I'm the traed of trfi here uh but I will be uh trying to be a voice of optimism and we'll we'll look to be Solutions oriented today um so maybe just uh looking at the panelists a first question starting with Dan is um can you tell us a little bit about what you're doing and what your vision for scaling is um we heard about the 1.4 million transactions per second already uh clearly a lot to learn from you thank you uh my name is Dan Hughes um maybe some of you were here earlier when I was on the stage again I'm the founder of radx which is a layer one decentralized Ledger technology protocol um it's probably the oldest project in the crypto space with the youngest actual main net chain and my reason for that is uh we spent over a decade researching the difficult problem of how do you scale a layer one protocol so that it can handle the traffic of 10 billion users and iot AI VR and all those things things um and the result of our research over that time period resulted in uh a network that is able to as Coco said uh scale to millions of transactions per second um in a decentralized way and a secure way with a refined user experience and a much more efficient developer experience and and what's your vision for for unate DT infrastructure I I think there's such a huge opportunity um for DL to revolutionize so many aspects of industry and daily life um that's part of the reason why I spent so long uh researching how do you scale these Technologies I think the the scalability of a protocol is the enabler of that change but as we'll find on this panel um scale is more than just the technological aspect right there's all of the social economic scalability that you also need to bring the potential to life absolutely and I think turning to the financial Market participants on the panel we I think we all know that uh as Dan said DLT promises a lot of great things efficiencies cost and risk reduction transparency accessibility but to really get to those benefits we need scale so um uh brener can can you tell us a little bit about what ing is doing to contribute to scale and what ing's vision is for for scaling and yeah thanks thanks Coco so first of all I think it's important to mention that scale collaboration is key or else all of these theories that we'll see on white paper for DLT and blockchain they won't come to fruition and ing is taking a very large stance in terms of how we collaborate with industry to get to solutions that matter make sense and ultimately provide value to ourselves and end clients now in the end of the day A bank's job is quite simple right like we help clients get access to funds we help them transfer funds we work with large scale financial securities and money and if we want to bring that on chain that's not an overnight process now scale to me means no liquidity fragmentation it means that assets and liabilities can live within the same Ledger the same ecosystem and can be freely transferable whilst also maintaining things such as security privacy and some sensical solutions that still remain you know to be the reason why customers trust in as a bank and trust is key if you lose trust you don't have almost anything with a end user um what we see in terms of the end state of scalability is indeed like I had mentioned taking money whether that is Central Bank Commercial Bank or other forms of money and assets and finding a solution that really works and bringing the market together to work on on uh yeah on a beneficial use case to to make it a reality thanks brener and and turning to to C we hear a lot about the exciting initiatives that santand there is participating in can you tell us a bit more and also how they paav the path towards scaling yes sure um thanks for inviting me today it's a pleasure to be here with this great panelists so um Santander plays its beds on blockchain technology um eight years ago when we founded our blockchain lab now it's called the center of excellence um since then we've H pioneered H different initiatives internal ones Consortium driven and um our digital assets program is quite um extensive um working on digital Securities digital collateral Mobility um different forms of um liquidity optimization um and we are following and participating in several digital cash initiatives um an example of that is finality which also in is participating on that um that's um finality is building um peer-to-peer wholesale payment system it's already live ER testing the Sterling pound H together with the bank of England that it's um well it's kind of um proving that this system work in order to go for um massive production H I think that brener is going to give more details on this but we are also participating in Latin America where we have a strong market with the Central Bank of Brazil in their Dre project they are um creating a wholesale cbdc and on top of that tokenize deposits that's just another example of collaboration where central bank and other different banks and um private sector companies are building together a network and infrastructure for all types of tokenized assets there are many other examples of these types of um of projects but the thing is that it looks like future is going to be multi- chained so we need to work all together on the interoperability so we can transfer efficiency um messages and and assets um we are also working um on the crypto space that's something more recent um we are um working on all the foundational elements to offer safely H crypto to our clients H while we are already testing in some markets we're live in Switzerland for our private banking clients and soon we'll be in Brazil and in and in other markets and our vision in Santander um we think that in the future all forms of value are going to be uh digital and probably there's going to be a kind of regulated defi so that's why we are since uh 2016 um working on exploring on researching and testing and now H some projects that are uh finally real thank you so much c um and I think I'm hearing a lot of commonalities among your Visions um including potentially a Consolidated Tech stock promoting investor accessibility um issuance of Central Bank currency on asset chains um a lot a lot of uh of different topics there that actually you you share a lot of shared interest among them um and and just kind of thinking a little bit about the the how how do we get there I know these are these are not small not small topics uh in it of themselves um what what are some concrete actions and solutions that you would uh uh encourage the industry to explore yeah I can I can start with that I think first and foremost and you know I Echo Coan saying that you know ing for almost a decade now has also been in the R&D lab and have been collaborating with many different chains and trying to build something that is future proof and excellent and right now I think in form in in terms of what we need to do is we need to start finding business case and we need to start embedding some of this logic and some of this value closer to our business and handle it with the center of excellence that knows their traditional business so for instance you know I come of from a traditional Capital markets background helping clients issue bonds those bonds thenone need to be eligible collateral that can be posted to receive loans for short-term financing reasons and right now there are solutions in the market today in which there is you know private blockchains that provide Solutions in which you can instantly settle certain assets you can therefore immediately reduce costs you can reduce settlement time you can reduce counterparty risk and this is the type of solution that you know we might not feel as the end state but at least is providing business value now I'll let you in on a not so secret secret um banks have a huge digitization agenda I mean we are using systems that are sometimes older than maybe some people in this room you know there is a lot of digitization desire and if you want to get into certain priority lists you need to provide certain value to clients and it doesn't have to be tomorrow but it needs to be more near term than maybe some of the solutions we're suggesting so I recommend to everybody who is here and is a practitioner to really think about business case now while building towards an end State I think I think that's a very pragmatic approach um if I may by identifying those um discret use cases and and starting the scaling process on that basis would you agree with that Dan I I know that we we spoke a little bit about um advancements on on the tech side of things does that sort of the the markets that considerations that Bren brener just outlined did they sort of align with your um Tech enablement and development trajectory yeah I think um like Banks and large financing institutions have a have a lot of responsibility right um and so even if there is a technology available to them today that can provide the scale that they need and the security and all of those things it would be irresponsible of them to just switch to that date tomorrow right um so you know brena's approach of we we trial things out we we we deploy private networks which uh you know some people have a lot of hesitation about applauding those kind of efforts but I think that if you're a realist about the situation and the responsibilities that banks have across the entirety of their uh you know their client base it would be irresponsible for to just go gungo into a public network right and there are certain things as a as a as as an organization that maybe you don't want to share or you can't share for legal reasons so um I made a presentation back in 2013 maybe 2014 uh where one of one of the slides was essentially you have this public network in the middle then you have all these satellite private deployments of blockchains um that overlap a little with the with the public network right so you can essentially get the benefits of Both Worlds where you can keep the stuff private you need to keep private and be conservative with that and the areas where it make sense for you as an organization such as a financial organization you can you can overlap a little bit with the public network where that provides value to your clients and your customers so I think brenon is bang on I think absolutely I think we we find that in particularly in in my work around working with Sovereign and supernational debt issuers to try to encourage them to experiment with the use of DT learning by doing is a huge first step and and the same goes for the investor Community as well um for custodians as well really getting the whole ecosystem on board is extremely important and and a first step to that is is really kind of allowing them to to experiment with the technology right they don't need to kind of take any actions at this point but actually that familiarity is is is really important yeah I mean you know the the I the ideal is that everything's on a public blockchain right but the the real the realist is it can't all be on a public blockchain so you will always have this compromise between the two yeah and and I think um just kind of speaking about bring more players and and more of the rest of the ecosystem um onto on chain um we know that you know the investor Community is extremely important the the other sorts of financial Market infrastructures are extremely important from from the perspective of financial institutions um we know that maybe standardization and interoperability have a have a role to to play in that um K just wondering if you could if you could speak to to your experience on that yeah so um I think that first of all when I think about the scaling um I think of a tokenized economy so that means that yeah current traditional Financial system must move to DLT right and public networks are great for some use cases but there are there are specific use cases that we need um High degree of privacy that in my opinion it's something that it's not really soloft today so I would I would start talking about privacy interoperability is key but I think that in privacy we have a a huge elephant in the room and why I'm saying this um I've already mentioned the the Drex project in Brazil H where they are building a wholesale cbdc for interbank H settlement on top of that commercial banks are going to issue tokenized deposits and other instruments and they will distribute to the to the citizens and and the project had a specific plan where they were going to test different H privacy solutions they tested three different ones um I'm not going to say it but I don't want to talk and say bad things about Solutions it's public so it's you can Google it um but H they tested them and the result was not satisfactory so the it didn't meet the the requirements because when you add PR these privacy Solutions you add complexity uh and that means that it goes slower right um so what has happened that H well the project has been delayed and they will need to continue testing more privacy Solutions so for me that's that's key um blockchain was designed to be transparent to be public and we are trying to use it for something else and when you start ER designing these networks Bank a says that he doesn't want Bank B to know that he's transacting with bank C so it's not only the payload of that transaction if I'm sending a million or two million that's that's easy to um um I mean to to encrypt is that they don't want that you know that we are talking so that's that level of privacy and that's not easy to solve that's one thing the other thing interoperable ility I already said that I see that the future is going to be multi-chain we are working in several projects where we are envisioning a unified shared layer but there are hundreds of different projects working in in parallel in different chains different protocols so um we have to build secure Bridges between them I mean if not you are creating a a silot infrastructure so there's privacy there's interoperability and then standards I mean we need a way to communicate in the in the same language just as we've got ISO 222 in in Swift so um something like that and and there's a there's a a long way to get there and we are doing tons of tests there's a lot of uh research and development and and but there's not like the the factory to produce tokenized Assets in Spanish I would say the Tura so for the Spanish people to understand me to create the CH Ros no like like like that no um and and it's like we are taking a lot of time to do so but it's because and I said this on the last European blocking convention because in the financial industry this is like changing the engine of an aircraft while it's flying 30,000 ft because it has to be still compatible with the Legacy systems so it's going to take a a while and well but hopefully this collaboration public private companies a different Consortium is going to help yeah and I think you you mentioned something which is really important to the financial industry which is that kind of into interim there's a lot of investment and a lot of cost of duplication that actually need to go into moving onchain which need to be justified and and and need need to be borne by um either by the industry as a whole or potentially there their public incentives that that are needed you know if we're all working towards something that's 10 times or 100 times better um is you know does the public sector for example have have a role to play in that um Al so so a lot of a lot of kind of different nudges and and different levers that need to to be pulled for the whole kind of for for all of us to to pursue those Collective aims and and maybe just kind of going back to something you said cot about um the different uh initiatives around the world to to look at you know potentially establishing a a global layer one a unified Ledger um Dan just turning to you what what are your thoughts on that is it um is it realistic is it also kind of projecting uh the current model of a centralized Financial system onto something that is by definition decentralized or distributed uh I'm very much in the camp of uh at the moment I think uh there's a lot of frag augmented technology there's a lot of protocols um there's a lot of you know then you get kind of use case issues like uh fractured liquidity and all of these kind of issues that put friction in front of any um use cases that you want to roll out to clients and customers right um and I'm very much of the camp of that I think there will be over the the medium to long term once once it's been provably demonstrated that there are protocols that can scale to the likes of radics and beyond that that I think there will be at some point in the future a consolidation of of protocols right because if you have protocols that can scale essentially unlimited that can provide levels of decentralization and security that are needed that everybody is satisfied with and and and it is enough to mitigate risk why would you need other protocols that can't achieve that right and I think the main problem is being especially for um large Industries such as the the banking and finance industry is that there isn't been a technology that can provide those three things in a sufficient way for them to even aggressively move forward if they wanted to right because I think probably the the question that gets asked in the blockchain labs in these various institutions is okay but what happens if we launch this and it really gets traction how does this scale right um so I do think that over time you will have a unification of protocols that will solve a lot of the issues around liquidity and interoperability will still be needed but it won't be as complex a problem as it is right now um you know Bridges and cross chain swaps and all these things they are very complex they have a very Dynamic Security Service uh and they're very difficult to get right yeah because the The Current financial system is complex right so moving towards a a financial system on chain is a complex process you're putting complexity on top of complexity on top of complex spaghetti mess problem that always ends badly right so but I think we we do have a number of those those visions that you mentioned in in mind and and that's what we're all kind of working to collectively towards um brender maybe just kind of coming to you I think we mentioned that you know potentially having um the same Tech stock uh having um moving towards um a a blockchain based uh financial markets can actually help overcome some of the liquidity challenges that we have in the current system which is uh you know actually has a lot of um fragmented liquidity pools right just wondering if if there's kind of any asset classes or any specific use cases that you you want to kind of dive a little bit deeper into as to you know how we can we can get there or or good examples even yeah so liquidity is fragmented for sure um if we move completely on chain right now it might become a little more fragmented but that's Innovation right it's a hockey IC growth so in order to transfer to a new future you might have to take a step back to then take two steps forward so if you really want to globalized liquidity that needs to be on ledgers that are more distributed than they are right now living in silos you know we we won't be able to globalize liquidity that well so I really stay away from predictions because I'm mostly wrong but maybe Daniel or C are right but I'll tell you what maybe my 5-year plan is in order to get this right so collateral markets Trading issuing of Securities is something that I know decently well from a traditional financial markets background I really do not know smart contract coding so well so I'll let them tell you how you can do cross chain Bridges and swaps but what I will say is when I'm talking to invest an investor and they want to buy an asset rarely will they ask me well what tech stack is that asset being delivered on it's more like what is the coupon is it safe can I get in into and out of it as I want and when I please can I manage credit risk and Market risk so what I will do is I will do my best to explain to them in financial terms what is better about this asset than was before but in order to get the actual benefits of said you know asset origination or asset trading we first need the smarter people on the left and right to me of me who are building incredible things um in terms of deploying chains that work and make sense for these industries so you will start to see a natural flywheel people migrate to things that are cheaper faster and better and this will happen and another thing that I think is quite important with what the apme is doing in general Regulators need to be up up to speed industry needs to understand a direction that we are going there's no Forks in the road anymore so collaborating with people who all have similar but yet slightly different professionalism is so key and when these assets are moving more freely more globally and 24/7 the work will speak for itself and people will naturally migrate yeah actually you you mentioned a new benefit which we we hadn't really touched on before which is around programmability and and it's a Hu huge benefit I see I see coachi nodding her head um for investors as well for for assets asset servicing bypassing and streamlining a lot of the manual reconciliation and processes that that take place currently um is is that something you you can speak to you a little bit about um just in terms of uh how you know I think there's a lot of recognition even from the investor side that this is ultimately going to reduce cost for them um but how do we get there is there um kind of what are the steps you know yeah sure so I think that when we talk about programmability an important piece of that is that Atomic delivery versus payment or Atomic payment versus payment so for that to happen that's why interoperability it's important I mean we've already tested for example in in finality um connecting hql ax and finality which are different protocols H different assets and we manag to that do that um swap in an atomic way so one asset is not transfer if the other one is not right so that's part of well I think it's one of the most uh important pieces of that programability apart of I mean that you are creating digital programmable assets so the asset itself it's a it's a computer program and you can add there whatever behavior that you want so er I mean from here to the Moon you can imagine right um but that's why it's important that they all talk the same language so that standards because if not you you end up with the same thing that we have right now a complex infrastructure absolutely I think I think we're looking at an extremely powerful and transformative future right and whether that's 5 to 10 years or 15 years or or 25 years as as one of your colleagues said earlier cotti um I think we're we're all working towards that that future and maybe just uh my last question to the panel um as a kind of final uh quick fire round of um say just pretend you're a DLT doctor right now and you're looking to sort of assign and and give prescriptions to the the system what is the one remedy you would give I think the two main things aside aside I'm going to give two aside from the tech right so weget the tech let's assume that there are scalable platforms that are secure it is definitely collaboration and education collaboration education you need people who can educate other people who aren't in the same Lane as so that they can understand the the business use cases the business problems and the Business Solutions and then we can all collaborate to build those solutions that everybody is now educated upon great brener yeah I would say if I was a doctor and someone was coming with their aches and pains of trying to trial DT I would say just go do some there's a lot of amazing Solutions out there there are a lot of Builders who are building things that are fit for purpose and you can't yeah you can't progress if you don't try so originate assets bring money onto infrastructures that you feel are the right ones for the future but just try it just try it just try just try it so I would add to collaboration public private meaning public networks sharing with private permission it because there's a lot of innovation going on the public chains but sometimes that's not transmitted to the the um private use cases like in the financial sector and public private in the sense of public sector H central banks governments and private sector as well and we see there a great example of collaboration with the new the recently launch Agora H project which is H which well it's formed by seven central banks and 41 financial institutions I think the the good news for all of all of us is that a lot of that is in train ready right and and not least kind of thanks to all the work that people in this room are doing so I think we're we're on a a great path and just with that I wanted to thank the panelists can we have a a round of applause for them thank you