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DTCC milestone: $ 11 trillion in derivatives move closer to blockchain

The company that is now paying the lion's share of US securities is pulling out its flagship blockchain project from the testing phase.

Revealed in an exclusive interview with CoinDesk, the DTCC reports that it has completed a first version of a blockchain that could someday support the $ 11 trillion credit derivatives trade. The milestone represents a major development for the provider of financial infrastructure, which also marks the continuation of the most important effort to adapt an existing financial infrastructure to a chain of blocks.

First revealed in January, the goal of the project was to modernize the infrastructure that underpins DTCC's Trade Information Warehouse (TIW) for OTC derivatives, thereby reducing time needed for case) to almost instantly. To do this, DTCC has partnered with the IBM computer giant, the R3 consortium of the block of business blocks and the start-up Blockchain Axoni, based on venture capital .

Now, with a full-scale full implementation, the partners are turning to the test and preparing it for the migration of TIW data in a compliant way.

Prior to the planned launch, DTCC's Chief Technology Officer, Rob Palatnick, sought to identify upcoming hurdles as a sign of progress.

He told CoinDesk:

"What is exciting is that there is always some comfort in the progress of the application and the environment, there are always some challenges, but we call this the "noise of progress".

The side effects of the ethereum

For the first time publicly, Palatnick also revealed that Axo's AxCore protocol was derived from the blockchain public ethereumeum and that the DTCC system uses the same intelligent contract language Solidity that powers its applications.

However, AxCore has been modified to include a modular consensus mechanism that allows it to tailor services to DTCC's specific needs, as well as submitting real-time reports to regulators and other counterparties.

"This is a huge improvement in situational awareness for individual businesses, regulators and the industry as a whole," said an Axoni representative.

And, unlike ethereum, DTCC's implementation of AxCore does not include a token – although Axoni and Palatnick have confirmed that the system is still powered by a form of gas ", implying a parallel to how transaction fees are paid for ether blockchain.

Although the ethereum is the most widely used blockchain protocol for developing these professional-quality implementations, the DTCC stated that complications were still occurring.

On the one hand, the business logic of the Ethereum is not as sophisticated as the DTCC required – mainly because Solidity has trouble recognizing decimals, which was deemed necessary for the project.

Palatnick said:

"There are a lot of exceptions, there are a lot of nuances, and that meant things like the capabilities of the technology and the abilities to use the smart contract language of the world. ethereum to handle business features. "

Very early on, to answer this question, DTCC thought that much of the actual work process should be conducted "off-line", which would significantly reduce the role of the blockchain itself in storage established data. In this way, "we would not do much of the business logic in the smart contract language itself," said Palatnick.

But after several months of construction, the developers discovered that they were actually introducing more complexity by doing this off-line workflow than they were removing using a blockchain in the first place.

"We ended up going back and moving a lot more business logic on the channel," said Palatnick, noting that determining what information needs to be transmitted in a chain and what processes should occur outside the chain was a challenge.

Going Forward

This behind-the-scenes work is expected to begin in the first quarter of 2018, if all goes according to plan.

But before that, additional tests and a series of integrations – both with the TIW itself and external parts – must be performed.

Currently, DTCC is working with regulators to align Axoni's integrated reporting database with regulatory requirements. According to Palatnick, the reports must be as good as the existing reports, but they will be available continuously through the intelligent contract feature.

In addition, DTCC is working with R3 and its network of more than 100 members of global financial institutions to learn from standardization bodies how to create 'standards around what data should look like a distributed ledger' ". ]

After the launch, Axoni intends to open the Axcore protocol.

Disclaimer: CoinDesk is a subsidiary of Digital Currency Group, which owns an interest in Axoni.

Image of the DTCC stand via Michael Del Castillo for CoinDesk

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