Markets are decentralised and the software that runs them should be too.
Introducing Corda Enterprise
R3 has just launched Corda Enterprise — a commercial distribution of the open source Corda platform. The world now has the ability to deploy decentralised applications to optimise today’s markets, and to do so at scale and with integrity.
Here’s the thinking…
There’s a funny little contradiction at the heart of the economy: most businesses are centralised but the markets that most businesses operate in are decentralised.
Here’s what I mean: pretty much any company you can think of has a chief executive and a head office and a board of directors and a finance department and a head of sales and a marketing team and countless other departments.
It’s a bit weird when you first think about it: the beating heart of the capitalist system consists of institutions that are inherently centralised, top-down, and run along command-and-control principles.
But if you look at the markets in which these firms operate, it is very rarely the case that there is anybody in charge. Who is the “chief executive” of the reinsurance market? Where is the “head office” of the syndicated lending market? Who sits on the board of directors for the financing of world trade? Outside trade bodies, regulators and some specific organisations in the financial markets, the answer is invariably “nobody”.
Any competitive industry you can think of is typified by a large number of producers — companies — striving to earn income by providing things that consumers — individuals or other companies — are willing to pay for. And there’s nobody in the middle who is “in charge”.
So when the IT revolution began many decades ago, it was natural that it was companies and other centralised organisations that were the natural adopters of the technology: there was a competitive advantage to be gained by optimising one’s operations, and a command-and-control mechanism to get the technology adopted and working practices changed was the way to make it happen.
So it’s no surprise that if we now look back on the achievements of the IT industry over recent decades we see that IT has mostly been deployed within firms and has mostly been used to optimise those firms — and these firms look utterly different and more efficient as a result.
But when you raise your attention to the level of industries and markets, you see something different. It’s really quite remarkable, when you think about it, how little has changed in how many markets. The way international trade looks today would be easily understandable by a merchant from three hundred years ago. The mechanics of how a complex reinsurance contract is negotiated would look little different from a century ago. And so on.
In fact, it’s only when markets have introduced centralisation, such as with the creation of highly regulated centralised infrastructure firms in the financial markets, that we’ve seen transformational change at the level of an entire industry. The results have often been spectacular. But they have come at the cost of new intermediaries, greater risk concentration and a resulting regulatory need to ensure these new institutions do not become rent-seekers or stifle innovation once established.
Why is this? Why have we been unable to transform the economics of whole industries without introducing new points of centralisation and control?
An important part of the answer is that, until now, we simply haven’t had the technology that would allow us to do it. The deepest assumptions of most of the software that exists today is that it will be deployed within a firm, that it will be controlled by that firm, and that, because it is run by or for that firm, its outputs can be trusted by people in that firm.