Before becoming the CTO of Corastone, I had quite a journey working with various IT systems.
I started with the development of e-commerce platforms, then for several years, I had the opportunity to work closely with many banks and financial institutions all over the world in the field of integration with the SWIFT network, as well as other financial system integrations. In 2016, I noticed a new trend starting to emerge – the usage of distributed ledgers to meet existing enterprise business needs in finance, health care, and a variety of supply chains.
At that time, I was leading the development of several Blockchain-based solutions, mainly in the enterprise finance domain. I was honored to work for one of the founding members of the Hyperledger consortium as we aimed to establish and support projects in the Enterprise Blockchain area. Then in 2017, I joined the team here at Corastone, to help build a platform for a digital private securities market.
The investment platform we have built at Corastone leverages Blockchain to navigate the complex requirements in recording transactions involving private securities offerings. The opportunity to make an impact on a global level by leveraging innovative technology is an undertaking that we don’t take lightly.
“Take a human desire, preferably one that has been around for a really long time. Identify that desire and use modern technology to take out steps” – Evan Williams, Twitter co-founder
The purpose of investing is to generate the desired risk-adjusted return on your capital. Currently, investing in private securities is inefficient and still conducted on paper. One of the best fits for Blockchain technology is when it is addressing complex business workflows with multiple transacting parties who all require data authenticity validation and to keep the immutable history of records (ledger). Blockchain solves for that elegantly and efficiently by allowing us to build a digital ledger that can grow in scale with the private securities market and reduce inefficiencies for all market participants.
It is important to remember that any technology, no matter how cool and innovative, is just an instrument for solving real-world challenges. The key to building a successful product is having a thorough understanding of your business domain and a global vision of how it can evolve and become more efficient.
Private securities were primed for this type of innovation. Issuers of private securities must navigate complex regulations, lack standardized contracts, and generally have many participants in a single transaction. As a result, private securities markets to date have operated primarily on paper with no way to issue these private securities in a fully digital form. This creates inefficiencies and pain points for all market participants, but especially investors.
As we looked to build out the platform we had to ensure we complied with the complex rules and regulations that govern private securities in the USA, including custody, clearing, settlement, and reporting. We are able to meet current regulatory requirements by utilizing a private distributed ledger. The ledger contains all the information about all issued securities on the platform. All of this information is stored independently on each participant’s ledger in our private Blockchain network. In order for a transaction record to be valid, it must match all of the records across all the ledgers on the network.
Adopting the Hyperledger Fabric to power our Blockchain network, allowed us to meet regulatory requirements for private securities markets, which is why Hyperledger Fabric is one of the industry standards for enterprise distributed ledgers. In addition to the ledger’s immutable statements of record, user privacy and security is critical when developing a distributed ledger like Corastone. It is critical that we respect the privacy of our security issuers and investors, so some information, such as the identities of investors, is only visible to the direct participants of each transaction.
Following a modular development route for the platform opens up additional opportunities to create value for investors. Currently, we have a standard set of options available for various financial instruments, encoded into what we call “smart investment contracts.” These are in fact sets of business rules in the form of the Blockchain smart contracts. With smart contracts in place, and more efficient transactions, we are then able to facilitate a secondary market for these investors so they may sell their shares in the future if they choose to.
We believe that access to secondary markets is critical to the evolution of private securities markets, and will benefit issuers and investors. For investors, this creates an opportunity for market price validation on their private shares, as well as access to liquidity when they need it. For issuers, a secondary market may require they elevate their performance, but at the same time, secondary markets can validate company valuations long before approaching an IPO, and help management teams gauge investors sentiment towards their company more accurately.
All of this is aligned with our mission to enable a more efficient flow of capital in the private securities market. Whenever we think about potential improvements we first consider how it will impact investors. Does our proposed solution improve the investor’s experience? Does it reduce operational inefficiencies? This is driven by our belief that investors will continue to seek opportunities that could generate a return, and finding those opportunities is challenging enough! Corastone enables investors to continue doing what they do best far more efficiently.
Our entire platform is designed to enable efficiencies through the thoughtful application of innovative solutions and technologies. We will continue to invest in the evolution of our technology, so we can bring the right solutions to investors. Combining these layers of technology with our shared professional experience in financial services, into a platform that is intuitive and user friendly is a never-ending task and something we will continue to pursue relentlessly.