How could financial institutions benefit from being a participant / user of the Canton Network?
- Any institution looking to tokenize assets or cash, service the lifecycle of digital assets, or extend their existing business with multi-party applications on an interoperable network can build new apps, or connect with an existing application.
- The Canton Network increases the utility of distributed ledger and smart-contract technology for regulated financial institutions across a broad spectrum of uses, including the issuance of tokenized assets, cash and securities, trading, custody, securities financing, clearing and settlement, trade finance and more.
- The Canton Network aims to provide the scalability, flexibility and extensibility of the internet, with the security and privacy standards necessary for financial institutions.It provides one common interface, like the web, with access to unlimited applications that set their own permissions, fees and service levels.
- It creates a ‘network of networks’, allowing previously siloed systems in financial markets to interoperate with the appropriate governance, privacy, permissioning and controls required for highly-regulated industries.
- This creates opportunities for financial institutions to offer new innovative products to their clients while enhancing their efficiency and risk management.
- For example, if you look at asset registers and cash payment systems they are distinct and siloed systems in today's markets. With the Canton Network, a digital bond and a digital payment can be composed across two sovereign applications into a single atomic transaction, guaranteeing simultaneous exchange without operational risk.
- Likewise, a digital asset could be used in a collateralized financial transaction via connection to a repo or leveraged loan application.
- In these use cases and many others, assets and value can flow freely where they had previously been constrained by the design of market infrastructure and the trust boundaries and reconciliation challenges between counterparties.
How is the Canton Network different from existing smart-contract and public blockchain networks in the market?
Until now, smart contract blockchain networks have not achieved meaningful adoption among financial institutions and other enterprises because of three significant shortfalls:
- The lack of privacy and control over data: other chains have shortcomings around privacy that prevent the use of the technology by multiple regulated participants on the same network. There are currently no other blockchains that can guarantee data protection or control at any layer of its network.
- Trade-offs between control and interoperability: other blockchains require operators to forfeit their full control of applications using a shared pool of validators to gain interoperability.
- The inability to scale: with applications competing for global network resources and the inherent capacity limitations caused by how public blockchains operate, achieving the scale and performance financial institutions need remains challenging.
The Canton Network removes these obstacles by uniquely balancing the decentralization of a public network with the privacy and control essential to operating within a safe and sound regulatory environment. Only Canton Network enables participants to safeguard permissions, exposure, and interactions across the network, ensuring compliance with security, regulatory and legal requirements.
In particular, the Canton Network offers:
- Granular privacy at the sub-transaction level, which is unique among blockchain systems. Simply, that means it enables a financial institution to control who can see or participate in transactions. Ensuring privacy in this way is critical to regulatory compliance and trust from financial users;
- Real time data synchronization, which means 24/7 access to assets; and
- The ability to create new processes and transactions that connect different applications and ensure the atomicity of transactions across different types of asset and without privacy tradeoffs.
The adoption and full network effects of blockchain and digital asset innovation require interoperability and trusted, secure data and value exchange within and across applications.
Unlike other blockchain protocols, Canton Network allows private and public applications to have the same benefits as if they were sharing a single L1 protocol, without having to share validators or data.
Existing Daml applications using the Canton protocol will be able to connect with each other on the Canton Network by selecting to route transactions via shared synchronization (“sync”) domains. The shared domains can be the private sync domains used by existing applications, a sync domain operated by a private consortium, or a decentralized Canton Network domain. Applications will be able to nominate to route via different sync domains for different transactions, to balance trade-offs around scalability, trust and metadata disclosure.
What applications are being built for the Canton Network?
- There are a variety of applications across different use cases that will be able to connect to the network and interoperate with each other, while retaining privacy and permissioning. For example, innovative blockchain solutions in market today, such as Deutsche Börse Group’s D7 post-trade platform and Goldman Sachs’ GS DAP™ will be able to connect - as well as other applications that span asset servicing, securities financing, clearing and settlement, fund services, tokenized cash, mortgage origination and distribution, decentralized market data, insurance, and much more.
- Any application built using Daml will be able to connect to the decentralized network infrastructure by upgrading (to Daml 3.0 when generally available).
- As more Daml-built applications go into production this year and beyond, the number of connections on the Canton Network will grow exponentially.
How does the Canton Network support interoperability?
The Canton Network provides the foundation for interoperable applications with independent control. Similar to the internet that allows for independent but connected applications with a common protocol - but where application operators have complete control of their web applications.
Canton Network applications are also interoperable, run on the application provider and user's own infrastructure, and with data permissions written in Daml smart contracts at the application level. This ensures control and data privacy for the user.
How does validation and consensus work on the Canton Network?
- The Canton Network is unique in separating consensus among participants about smart contract validity, from consensus on transaction sequencing and confirmation. Consensus on transaction ordering and commits takes place via sync domains.
- Networks of participants validate transactions that they mutually agree to route via the same sync domain. The sync domain guarantees consistent transaction order and confirms that the involved participant nodes are prepared to commit a given transaction. The participant nodes then commit the transaction synchronously and send each other proof of consistent results.
- A collective of independent companies will run a decentralized synchronization domain for the Canton Network. This permissionless, decentralized Canton domain will accept connection requests, sequence transactions, and confirm that participant nodes will commit them, for any participant node.
- Applications may choose to use this decentralized sync domain, or they may order and confirm transactions via any private, centralized Canton sync domain, based on their own preferences around scalability, trust and metadata disclosure.
- The decentralized Canton Network sync domain will use a Byzantine Fault Tolerant consensus protocol. This protocol generates a consistent transaction order, and confirms transaction commits across participant nodes, without requiring trust in any single entity.
- The collective that operates the Canton Network sync domain will also create new applications and connections that bring greater utility to the network and unlock new revenue streams for the benefit of all who use the network.
- For further information and a deeper look, please read the Canton Network whitepaper.
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