Hyperledger Foundation Hyperledger Global Forum 2021, 11 Jun 2021

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From YouTube: Smart Contracts with Tokenized Fiat Currency on Sberbank's Platform - Oleg Abdrashitov, Sberbank

Description

Smart Contracts with Tokenized Fiat Currency on Sberbank's Platform - Oleg Abdrashitov, Sberbank

Oleg will present a platform for issuance of digital assets and smart contracts developed at Sberbank's Blockchain Laboratory. Smart contracts settle in Sber's stablecoin: a tokenized ruble. The platform uses Hyperledger Fabric with improvements: Smart BFT for ordering, and with localized cryptography. Transaction confidentiality is achieved via Confidential Non Fungible Tokens. Sber's platform is scheduled to go live in 2021 for the bank's commercial clients and will be open for developers to deploy their smart contracts and applications.

Session Details & Slides (if available)- https://sched.co/j3fe
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A

So um again, thank you for uh thank you for joining. um Let me uh let me start with a promise, or rather um a fantasy. Imagine um a new economy uh that runs on blockchain, where businesses can form networks and validate each other's transactions where they can describe their business deal or a contract in computer code in smart contract. This smart contract then settles in fiat currency and these fia currency businesses don't have to hold in bank accounts. They can hold them in their digital wallets, and this fiat currency has properties of cryptocurrency.

A

They have individual numbers so that you can trace them. You can assign attributes and you can run them in and settle them in smart contracts.

A

Now this has been a promise of enterprise blockchain for for many years, and it has been the motto of this great organization hyperledger to create blockchain platform for business, and we've built amazing technology that supports that we have enterprise platforms that uh allow businesses to do just that for networks deploy smart contracts, issue tokens and so on. Now um what have been missing is the legal framework for them, a legal framework that will make every smart contract legally binding.

A

A legal framework that will make, for example, if a business issues a token um with a promise that will make this promise uh legally binding. So we have technology um and we have a legal framework for that.

A

um Well, in russia, we do we live in exciting times, and there have been uh two major developments recently um that give us a hope that we can build this new economy.

A

Last year, a much debated, federal law, digital financial assets came into force. This law allows us to do just that. It allows businesses to issue tokens to raise money, issue, tokens that represent their goods or materials so that they can trade tokens instead of physical physical goods and, most importantly, it gives a legal framework for a blockchain platforms where businesses and users can deploy smart contracts, issue tokens and run a new economy. Another major development and you've seen this around the world.

A

I have central bank, digital currencies, cbdc and um our central bank bank of russia is developing a digital ruble, um which is a claim on central bank. It's a fiat currency that has properties of cryptocurrency. You can trace it and, most importantly, you can use it in smart contracts on um on other platforms.

A

So what we have now um is technology rather mature platforms, and we have a legal framework. Are we ready for that and we had spare bank uh ready? We have built a blockchain platform that is almost ready for uh it's ready for production, we're in the final stages of getting a license from bank of russia, and this platform allows businesses to do what I just described. It allows businesses to issue tokens. Those tokens are called digital financial assets and it allows developers and businesses to deploy smart contracts and settle smart contracts in fiat currency.

A

How do we? How did we do that?

A

We use hyperledger fabric as technology core. We have uh enhanced it. I'll talk a bit um a bit later about that. We made it available via our cloud, offering we've created basic functionality that lets users issue tokens and deploy smart contracts, and we build products on top of that.

A

Our main product is the platform for digital financial assets that is open to our clients, and we expect our clients to be businesses, corporations, financial institutions and, most importantly, developers fintech developers, so software vendors that we, we see a large interest from that in from them, and we hope that they will create smart contracts and applications that use um that use smart contracts and settle in in fiat currency.

A

Now, um a few words about what uh who we are spare bank is the largest bank in russia and in eastern europe. It's one of the top european banks by capitalization, and it has a huge customer base.

A

We have almost 100 million um retail clients, almost three million active corporate clients and, most importantly, spare bank is the center of uh xbr ecosystem spare um ecosystem uh com is comprised of almost 50 um 50 businesses in all different industries, from food delivery to taxi to video streaming and, most importantly, it's technology offering I already mentioned uh spare cloud spare cloud. Is our cloud offering and part of that technology stack? Are spare bank laboratories laboratory for artificial intelligence, robotics and spare bank blockchain laboratory that that I have so in our laboratory?

A

We developed uh this platform tokenization platform and our main product is uh a platform uh for issuance of digital financial assets. Now what this platform is? It is open to our clients, um our corporate clients, via a familiar um user interface, the interface that they use every day to manage their accounts to move money. um But now it has a window into our blockchain platform and they can issue and create tokens simply by filling out the form um in in their bank business online application.

A

So they can issue tokens that represent their goods, for example, grain or metals that they pre that they produce or it could be a monetary claim. It could be a commercial paper. So we see in this new functionality the new economy, where a business no longer needs to go to an investment banker to organize an ipo or to issue commercial paper or or a bond. They can do this all in forms of tokens that they issue on the platform once the token goes through. All the.

A

Eml and kyc requirements it becomes available to investors, investors can they can buy the token uh trade it and um what's important, is that uh we know uh we as operator. Of course we provide governance um of the platform, but we also provide a settlement coin on the platform, so when an investor buys a token, it actually exchanges a stable coin, which is tied to um fiat currency to russian ruble, and we provide a smart contract that provides for delivery versus payment, one atomic transaction, where you exchange the token with a token representing money.

A

um What is the stable coin? Stable coin, of course, is stable. It is tied to a russian ruble. It is controlled by smart contracts.

A

You can validate these transactions by connecting your own node, your own server to the network, where you can spawn your node in sparecloud in our blockchain as a service offering and what's important, is that this coin and the movement of this coin is integrated uh with the bank's back end, so that the movement of the coin represent movement of fiat currency in our clients.

A

Bank accounts. What's important here is that, unlike perhaps other stable coins, which are perhaps algorithmic or stable, coins that are backed by metals or other reserves, this stable coin represent actual money in our users accounts.

A

So in order to transact on the platform a user, um we will lock this amount of money in our users, bank account and we'll create sparco and stablecoin um on the platform, and then our users can use it to trade, to buy other tokens to trade or to send it to a smart contract.

A

So this table coin is the is a native currency of uh the blockchain platform. Just like uh ether is a native currency in ethereum and just like an ethereum, you can send uh spherecoin to a smart contract.

A

um A very simple smart contract that uh we present to our our users, to our clients or to businesses, uh could be as simple as um a three-party contract where there's a seller, a buyer and a third party, almost almost an escrow or a letter of credit contract.

A

Of course, contracts can be written in computer code in chain code in hyperledger fabric and can be of any complexity. You can describe um a financial instrument, uh a bond or an or a swap or exotic derivative in the computer code, and what's important is that it can settle in stable in fiat currency and um the the new legal framework um gives legal binding to this new instrument described described in code.

A

Now, not every business um wants to describe the contract in uh in code or have an ability to do that so for that we created a smart contract modeler or a smart contract constructor as we call it, which is a graphical user interface that can cover actually a vast majority of supply chain or trade finance contracts.

A

um Two or more parties can come to an agreement and sign their agreement with the the private keys, uh the digital uh signatures, and they can describe um conditions of delivery conditions of this trade deal and many stages of many stages of payment, and each stage of payment can be tied to a certain event or a certain action by an inspector or how we call it in blockchain and oracle.

A

um So you can like I said you can describe a vast majority of supply chain or trade finance contracts by this visual gui.

A

um The platform is open to developers where they can upload their smart contracts. They zip up their chain code, they add their own web application and they can either spawn a node in our blockchain as a service use the gui interface to upload the chaincode archive upload, the web application, and they can make this application available in the app store.

A

The app store is curated by us and we hope that developers will create new applications and create new financial products and make it uh available in app store for our clients and for their clients and start selling their apps. Now um this blockchain is a service. um I mean you, you you have this offering in other cloud solutions in amazon and until recently, uh microsoft as well, but um what's important is that uh we also offer a native currency for this smart contract.

A

So simply by importing a library in your chain code, you can start using the stable coin to settle your smart contract and that's what makes this offering uh unique, because this offering is not only from our cloud solution, but it's also from the bank.

A

So what is the platform made of? um It is based on hyperledger fabric 2.3 protocol. We have uh adapted it for a local cryptography in russia, just like in china, there's a different standard for elliptic curve cryptography. So we um use russian cryptography to sign transactions so that our users, who already have digital digital certificates, uh bigi certificates, that are issued by a government body they can, they can sign their smart contracts and sign their transactions, and you can trace every transaction every signature to um as a government certificate authority.

A

We have also enhanced the consensus protocol of hyperledger fabric by replacing the transaction ordering mechanism from kafka, which is a cft protocol with a variant of bft protocol, a smart bft that allows us to offer a true blockchain consensus mechanism to our clients. um Why is it important?

A

um It's important when I, when I describe it to to the clients, I give them the minimum number of notes, let's say: there's spare bank and three other independent validators. Now, if it runs a true consensus protocol like like smart bft, then we can server our nodes, barebanks, node or god forbid. We can throw in invalid transactions and the consensus algorithm will weed out those transactions and will not let them propagate.

A

So when you have 10 nodes, then it's spare bank and at least two other um nodes that they can exhibit business and behavior turn off their service, and uh the network will still continue operating, and that is the basis of this new decentralized uh economy that uh uh we hope will uh uh will be our our future again in this future, a smart bft uh protocol will allow us to allow our clients not to trust our name but uh trust the cryptography and consensus algorithm.

A

um Since we have uh independent validators, um they need to validate transactions. They cannot see the details, the transactions because they they hold confidential business details for that we use um the mechanism that we developed and call confidential non-fungible tokens.

A

What validators validate is an atomic exchange of one token to another and a transfer of one token to another, and the token does not reveal its details. It has, of course, a unique id. It is tied to a specific owner by its public key, which is a one-time public key, and it has its whole body encrypted in an encrypted payload and the content of the token, which is a promise of the token it's uh quantity, uh what it represent, be it a financial instrument or a shipment of goods.

A

It's all encoded so that the validators cannot see its contents. Part of the platform, of course, is the wallet.

A

We're we're fortunate uh by that uh uh businesses in russia have already have digital keys. They have their private keys on usb sticks that they sign their tax documents and other documents, um and we uh reuse this these tokens to sign smart contracts and to sign their user transactions.

A

So uh all users uh need to do is to go to their familiar user interface, spare bank business online again the application that they use every day and they use the same um private key. The same digital wallet that they'll that lets us just out of the box, offer our clients uh offer the businesses um ability to issue tokens and run smart contracts and operate on the platform.

A

And, of course, major work went into integrating the platform for the bank's back end. Of course, this needs to be done if you need to, if you run a real stable coin, which is tied to a user's account like I said, this has been a major work because it needs to adhere to all the security constraints and all the regulations, but it allows our users to seamlessly represent money that they have in their bank.

A

Accounts by stable coins, use the stable coins to settle trades in tokens um and also send the stable coins to smart contracts, and once they're done trading or once they've made money on uh using smart contracts, they can withdraw their money into their fiat account and again this has done via major integration work with the back end.

A

Now, how does it look to the user? um Those are the um the screenshots that uh our users uh see when they issue tokens, so they can create a type of a token. um A token can have, of course, a sticker. It's name, it's um uh it's logo, um and it can have many attributes that are specific to this issue right. If it's a commercial paper, it's uh principle and rate, if it's grain, it's the quality of grain and so on, and they can keep issuing tokens um every time they um they need to.

A

Now we'll already use this functionality on the platform um for uh the issuance of uh renewable energy certificates. They don't. um They do not fall under the law of digital financial instruments on assets and we started trading in this rec certificate, so renewable energy certificates in december last year, so the platform is already open for business treaty very soon. We hope to get licensed by uh the bank of russia so that our clients can issue a full-fledged financial instruments in um in tokens on the platform once you've issued the token and it has been approved.

A

um Of course you can transfer it or you can offer it for sale and then it is available for investors to buy in order to buy tokens or trade them. Investors of co, of course, need to represent their money in stablecoin and that's what they do in the um in this user interface.

A

Now, before um before we're licensed before we open um for business in digital financial assets, we we've opened a test map for developers. It is, uh it consists of the minimum of four independent validators for nodes four nodes. um Of course they run on our variant of hyperledger fabric on fabric.

A

We have uh deployed, uh we've created a public channel and we've deployed the cmft smart contract and, of course, it's open outside vm api developers can use a simple javascript bundle to build web applications on top of that um web applications use a limited subset of api calls like issue transfer and regime, and of course you can build a full-fledged application. Your own application, but middleware database, your own ui, and for that we have another java bundle or a jvm bundle to use.

A

And of course, you can create your own custom chain code. This chain code, you can upload to the network to the platform and, like I mentioned already, this custom chain code can already use libraries that move tokens and, most importantly, that uh libraries that move stable points. So you can uh write a smart contract that uh moves a stable coin and, of course this is for now on test net, not a real ruble, but once you've tested, you can migrate it to a real production system and create a new fintech application.

A

um This concludes my presentation. I hope it uh it's been entertaining. We live in exciting times and I think we're ready for this in this exciting times. Thank you.

A

We have a few minutes, for we have eight minutes for q, a.

B

Yes, thank you, oleg um and great hearing you. um So we have two questions from white. First fabric now prefers the raft service to kafka. Have you looked into raft.

A

um I believe we have, we made the choice with smart bft.

B

A

Well, the reason that smart bft uh is business in full torrent that that's what we rather offer to our clients, not a crash fault or consensus.

B

Right um so uh also matthew was asking a while ago um the extension to fabric will this be contributed back.

A

Yes, they will be now. Smart bft is already available on github. It's a great work of uh former ibm developers that we're using and yes, we will. We will open source integration of smart bft into fabric together with another.

A

I will not name the names, but another major contributor.

B

Great, thank you, um and uh there are two three questions. um So another question was.

B

As a fabric maintainer primary primarily of the chain code, libraries would very much like to get thought your thoughts on how you develop a smart contract.

A

How do we develop smart contracts? um Yes?

A

um Well, there are different smart contracts for different applications and fabrics support several languages for that and uh for some for some applications you use golang for some, for example, if you need to use some, let's say financial libraries that are not available and go like you would use uh java. So it's a it's a different approach. Every time yeah, I hope I hope it answers your question.

B

Yeah there's a question uh about: uh how do you get access? How does one get access to the test net.

A

Well, um that was the uh that was my last slide. We have a simple email blockchain at the sparebank.ru, so simply write us an email and we'll get you set up.

B

Great that's very easy. um Kamlesh kamlish is asking most people prefer ethereum and related projects for tokenization. Why did you choose fabric? Do you have any specific reason.

A

Well, um there are several reasons well, first off we need we needed an enterprise, blockchain platform that was um uh developed for the enterprise from the growing up from the ground up most importantly, um a platform um that would have um a consensus mechanism not for public and anonymous networks, but for validators who know each other and for limited subset of validators. Basically, we cannot use ethereum because it uses proof of work, and if we have four or ten validators a small network, then we cannot really use ethereum but um another.

A

Another reason is that uh hyperledger fabric is uh well perhaps well, not perhaps, but it is the um the most popular enterprise blockchain platform and we really need to target as many developers as as we can so so simply by popularity. I know ethereum is also popular public um public protocols.

B

Yeah, that makes total sense. um I'm checking if there are any more.

B

No, I there are no, not many more. There aren't any questions. If anyone has questions, please feel free to ask um um hyper ledger. Basso and quorum also are also an enterprise blockchain with build inbuilt tokenization, so that could also be a choice. I'm guessing the answer here is that you've been working on this way longer than bess or quorum were around and hyper ledger.

A

That is too, but we're not um I mean what we. Our main goal is to offer uh products to our clients right, so we're not tied to a particular platform or a protocol. um So if um and I think it's only logical to start offering different protocols- let's say hyperledger, besso or quorum or polkadot as stage two three and and so on.

A

What's important is uh in this network that we're building um uh independent validators and uh integration with the woody banks and integration of um issues of tokens with their own backends.

A

So at the end of the day, um you may want to choose different blockchain protocols for consensus and to validate transactions, um and it's perhaps even less important than the tie to the real world that you have so integration of your blockchain node to the bank system is more important than a particular protocol that the nodes talk to each other, but.

B

A

That's right so the short, the short answer that uh uh yes, it's very likely that we will use quartum zone next step or other ethereum uh derivative.

B

And um I mean we, we have two more wondering you know: um oh wait, there's a question uh in the q a as soon as I can.

A

B

um How can an application in your app store earn money.

A

Well, that's a good question that we, um to be honest, don't have uh an answer for we have well. Rather we have several answers right. You can uh charge by um by an apple model right, you can charge by transaction, um but also don't forget that uh the bank makes money of uh transactions, so it another model is also very much possible where fintech application fintech developers develop their applications, they host them for free.

A

We don't charge anything for the sale of this application, but we continue making money off our transactions.

A

B

Okay, that's that's great. I my question is probably much more loaded, so I'm not going to ask it I'm going to ping you about it um after the conference, um because it would take too long to answer well alec. Thank you so much for presenting it was a pleasure as always, and thank you for sharing uh all of your insights. uh uh If anyone wants to chat with you or comes up with questions um after this session finishes in in 30 seconds, how can they reach you?

B

uh Are you interested in having some offline, chats or breakout sessions.

A

I just posted our general email in the chat, it's a blockchain, it's bearbank that are sparebank.ru and, of course we answer every um every email and you can continue this conversation via email and we can then move to another channel.

B

Okay sounds like a plan. Thank you so much and enjoy the rest of your day.

A

Thank you. Thank you. Everyone, bye-bye thanks.