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Bo Ye
Bo Ye

Reputation: 401

how to use corda to design an interbank payment system

I recently learned, traditionally, interbank payment systems need following features to carry out tasks:

  1. need a central bank to prevent parties involved from going bust.
  2. need a clearing house to perform netting algorithms to minimise liquidity requirement.

If we use corda to implement a similar payment system:

  1. do we still need central banks and clearing houses appearing in the networks as independent nodes?
  2. If so, what do they do?
  3. Do they serve as notary nodes or something else?
  4. What relationships do they have with commercial banks?
  5. Why this kind of corda-based design is better than traditional interbank payment system?

Upvotes: 0

Views: 229

Answers (1)

Joel
Joel

Reputation: 23140

Corda has been used to develop a real-time gross settlement pilot in association with the Monetary Authority of Singapore. See the report here: http://www.mas.gov.sg/~/media/ProjectUbin/Project%20Ubin%20Phase%202%20Reimagining%20RTGS.pdf and the source code here: https://github.com/project-ubin/ubin-corda.

Using Corda removes the need for clearing houses. Netting and delivery-versus-payment/atomic asset swaps can be achieved without the need for a centralised party. Corda also removes the need for reconciliation, which happens automatically via the platform.

More importantly, Corda is driving towards a vision of global interoperability. See https://medium.com/corda/universal-interoperability-why-enterprise-blockchain-applications-should-be-deployed-to-shared-3d4daff97754. In this vision, assets are not trapped in silos, and can move freely across the network. For example:

  • BankNode receives cash via the interbank payment system
  • BankNode lends this money to SupplierNode in exchange for an obligation
  • SupplierNode uses this money to purchase goods from FactoryNode
  • FactoryNode uses the money to pay the suppliers of its raw materials
  • And so on, and so on...

Coordinating things using a clearing house remains possible when looking at a single area like interbank payments. However, as the network grows to support many different business use-cases - supply chain, lending, assets, payments... - it becomes increasingly difficult to find a coordinating party that can be trusted by all parties, across industries and regions. Corda removes the need to identify such a coordinating party.

In this vision, central banks are likely to continue to exist as trusted issuers of fiat currency.

Upvotes: 1

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