Hyperledger Foundation Hyperledger Global Forum 2021, 14 Jun 2021

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From YouTube: Digital Currency Interoperability With Messages - Vipin Bharathan, dlt.nyc

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Digital Currency Interoperability With Messages - Vipin Bharathan, dlt.nyc

Digital currencies include crypto-currencies, stablecoins, eMoney and CBDCs. There is some interoperability between these systems today. Stable coins, for example, help fiat to crypto-currency interoperability. Most of this interoperability has been created in an ad-hoc fashion. The operators who facilitate this interoperability extract costs. A general description of the challenges facing digital currency interoperability is followed by a deep look at one of the current trends in implementing interoperability; message based interoperability. DLPC to ISO 20022 based systems to xcsi, a Hyperledger labs proposal that was created to formalize the semantics and syntax of such a message based system.

To learn more about Hyperledger, the open source community focused on developing a suite of stable frameworks, tools and libraries for enterprise-grade blockchain deployments. Which serves as a neutral home for various distributed ledger frameworks including Hyperledger Fabric, Sawtooth, Indy, as well as tools like Hyperledger Caliper and libraries like Hyperledger Ursa click here: https://www.hyperledger.org/

Session Details & Slides (if available)- https://sched.co/j3d8
Access All Sessions: https://events.linuxfoundation.org/hyperledger-global-forum/program/schedule/

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Hyperledger – Open Source Blockchain Technologies

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A couple of words about myself: one is, I am the chair of the identity and capital markets, fig identity, working group and capital markets sig in hyperledger. I've been involved in hyperledger since its inception, I was in the first meetings.

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I actually wrote the template for the hyperledger improvement proposal that everybody has to go through. Every project has to go through to get into the uh get into incubation inside hyperledger, so all projects that are currently in hyperledger have followed that process.

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And it's been an exciting journey of watching the progression of events in hyperledger and the way the community has developed and coalesced.

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Two things about me: uh one is that I am a technologist through and through I worked in various industries and in the fixed income space for about 15 or 20 years, so I'm very familiar with capital markets, especially the technology end.

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And I went through a crisis with the uh 2008 2009.

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And I am familiar with what happened afterwards and of course, I've been involved with blockchain, bitcoin and various other.

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Thought in this space for more than five years, and I try to bridge the gap between technology and business with that said, let me go to the next slide. The agenda is going to be interoperability.

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We segue into the various other aspects that are necessary to implement interoperability properly.

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We simply go into a particular proposal from baft for in the trade finance area.

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That is a single message. That's called a digital ledger payment commitment and we'll examine why that is so important and then the swift iso 2022 and the cryptographic.

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And finally, we'll go into the lab proposal that I have made, and you have done some work on this. It's called xtsi cross chain settlement instruction.

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So without further awaiting further I go into interoperability. Interoperability is a I I just wanted to get a one word. One sentence uh answer to this, which is ability of two two or more systems to exchange information and mutually use. This information, and it's based on iso 19941 2017.

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And in this talk, I'm specifically focusing on digital currency interoperability, so the only other change I've made to the previous slide is the fact that I say that at least one of the systems should be a digital currency system.

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So I stopped with four, but it's actually meant to be interrupt dot one. So I'm looking at several ways of looking at interoperability.

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One of them is the a layered approach which is starting with a transport, the syntactic semantic and behavioral and policy implications, since uh this is supposed to be a technical talk, we'll focus on the last, the first three elements, plus three layers, but obviously all the other layers depend on the performance of this. These three layers- and I have some examples.

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Of uh the layers on the on this side- and I see that uh the capability the another way of looking at it is you know this is a very busy diagram, but it shows you the complexity of any kind of digital currency interoperability, because you can look at it from so many different angles.

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uh It is easy to get lost, but I think one of the things we have to do is to get this complexity under control.

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One of the other ways in which you can look at it, which I lead, the digital currency, global initiative, interoperability working group. So I have the pleasure of interacting with many.

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Expert eric cohen who's, based this particular way of looking at things on capability maturity model.

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Of course, the names that are given here are completely zoned and they have no bearing on cmm, but the idea is that you can measure what is happening in the space and you can decide where you are in the journey from total chaos to the ideal state and the ideal state is not static.

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You have to keep evolving as the state goes on. So that's. That is the idea of this slide, and uh this one is another way of looking at interoperability, which is a horizontal and a vertical model. That means suppose there is a digital currency system, a and another digital currency system b.

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They can interact with each other and they can interact with the user-facing applications, uh which is marked here as two, and they can also interact with the legacy and external data systems, normally articles various reporting applications and so on so suppose, digital currency system, a is uh let's say, bitcoin and digital currency system b, is ethereum.

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Both of them are completely unaware of each other. Obviously so, in order to interact there have to, there has to be some kind of intermediaries in the picture which I do not show here.

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uh So the number one would be currency is being sent from one system to the other through something like uniswap or some other way of interacting. That would be one.

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We are also aware of all of the wallets and everything else that come in the number two and number 3 would be legacy and external data.

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So this is a waypoint.

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We have gone through the various interoperability model models, and now I'm I'm going to start talking about operation, operation, open, operationalizing interoperability, try saying that fast, similar to the concept of universal description, discovery and integration, uddi or similar to the domain name system.

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So that means in order to operationalize you have to somehow you have to have registries. You have to wait, have a way of discovering the other system and you have to be able to pass messages between one one and the other.

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And of course this depends on standards, standard schema, standard ways of looking at things. Now, I'm going to do uh an escape here and look at the chat window to see whether there are any questions or anything.

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That's okay! I I do not see any specific questions, so I'm going to go back to the a presentation that I.

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So in the in the in this context, we want to talk about something called a ricardian contract which I'm sure many of you are familiar with, uh not in that specific name with that specific name but various ways of looking at things.

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uh The recording contract is a software pattern.

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It is a single.

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Well, it unites the human readable contract to the machine possible uh contract. So why am I talking about contracts here? Because, really speaking, the transport of value from one system to another should be driven by some contracts comes promise some obligations, some way of saying? Okay, I want to pay you.

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uh I want to take some money that I have in this system and I want to pay you in that system. uh So that's that's the whole idea.

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uh I I'm not going to go into the details of uh hash time law and various other forms of.

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Actually, transporting the value but I'll just focus on the messaging part.

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Anyway, going back to the ricardian contract, it is a human, readable document that has markups that allow it to be parsable and it is an immutable commitment using hashing and signatures and implementable using a smart contract and the dispute dispute resolution uses the original contract, which is available not only to the issuer of the uh exchange, but also to the recipient, and they know fully well what the obligations are.

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This applies normally to the issuing of a bigger sort of, let's say, a security that has a larger life in in the case of an exchange of value between two.

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Between two digital currency systems, it is more of a ephemeral, a short-lived contract, but uh this I idea of a participle but human readable contract. That then, is implementable using a smart contract, and it is also signed by the issuer and possibly by the recipient after receiving the.

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The exchange is contained self-contained in this one, four corners of the page- and this is the um a reflection of the recording contract that shows that the written contract is collapsed into a hash, which is a commitment which cannot be revoked, and then it flows from there into the world of accountancy.

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Where payments are then made.

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uh I wanna just show a couple of examples of these, even though these people do not call it a recording contract. It is, it is uh by the virtue of the fact that it's in json and it can be read by humans.

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Obviously it would be better to uh make this into a document, but this is called a digital ledger, payment commitment and it's created under the baft or big bank bankers, association for finance and trade, and it's completely open source.

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It is a instrument that can that is, complete, is legally binding, enforceable and negotiable, and this can be done with just a handful of data points which include commitments or signatures or attestations.

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And also, of course, the hash of this data, so this is a very simple concept you you have so now. The complexity of the interoperability surface has been reduced to this very short document and very short message really and that can essentially transfer value. You don't even really need a.

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Blockchain or dlt, but normally this is uh this unites the supply side of the con supply chain side of where you know hey, somebody is actually creating a product selling it to someone else, uh but the payment comes later.

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So the uh the consigning the committee uh I mean the committer promises to pay later promises to pay and that now becomes a legally binding, enforceable document. But the beauty of this document is that it's negotiable. That means that I, as a supplier, who's, got this document now can take that document to somebody else and sell it to them for obviously a smaller amount and and it's a better document, because that's what negotiable means so it becomes very similar to cash.

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It is a bearer instrument which is completely digital.

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Our aim is to reproduce some of these qualities in uh transporting value from one digital currency system to another digital currency system.

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Of course, uh we are aware of swift and the iso 2022 swift itself is based completely on transport of messages, and iso, 20 or 22 is a standard for standards, but it does have more than 65 or so uh schemas for the transport of uh standard financial transactions and swift is the registration authority for iso 2022.

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And if you look at the ideas or look at the way in which governments are approaching cbdc's, you can say that see that many of them are going to be relying heavily on iso 20 or 22.. Unfortunately, iso, 20 or 22, is it's a rather sprawling standard?

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So if you look at the dlpc which we just saw, it is very short, it doesn't have too many data items, but swift has you know, dreams and dreams of xml.

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And they lacked the hashing and signatures in the document which, which I in the schemas, which I thought was kind of strange. Because.

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Because that cryptographic basis is what would give the document immutability.

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They subsequently have made those modifications to the standard and it's part of the optional header structure now so message based transport of value has been around for a while and it's being done every day through swift.

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Obviously, the swift, regular swift messages do lack the.

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Hashing and signatures proper signatures embedded in the document and that causes uh problems anyway, I'm going to before I do the final section, I'm going to look at the chat again and see. If there are any questions, I need to answer.

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Just bear with me.

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uh I guess there are a couple of quick q a's, which I'll come to later um craig's uh question. What are the most mature methods of interoperability? You see at the moment dlpc. For example, digital ledger, payment commitment is live, so it is very mature and obviously all of the ways in which money uh the value is transformed by both into and out of, most of the uh public blockchains are maturing.

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One can say I mean the most uh salient form of that is I mean salient uh idea around. That is the idea of amm automatic market making, which is you know, part of the unislock protocol.

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There are other forms in polka dot and others that are quite mature. Anyway, I go back to the presentation and I'm going to talk about a few things uh that are very concrete about the proposal that we are making uh in hypology.

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And this is a project that I proposed and created in hyperlogic labs called cross chain settlement instruction. It is very nascent I mean not much. Work has been done in in this, but we have tried to create at least a skeleton of a message back settlement instruction, so it looks very much like the lpc, but is it it's a different beast?

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The number of items there are limited to like 10 to 15.. The schema is defined in json.

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It is not based on an atomic swaps swap because everybody in uh interoperability is going for atomic swaps, which I think is not the right way to look at things, maybe in the retail context it's important, but in the enterprise context, uh netting prevails for various reasons.

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So this is for counterparties with existing master agreements, and it is of course not a beautiful and immutable with hashing and signatures. The most elemental concepts around blockchain hashing in particular, is very powerful idea.

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The message is freestanding and transport agnostic, uh it's similar to did com in that way. Vidcom is a effort by aries um and a discovery mechanism called chain name service is proposed for this to fully implement something like this.

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I'm just giving you a bare-bones sketch of this uh the schema and data elements. Everything is standardized. For example, the timestamp is a secure timestamp, uh which is follows the ncx 9.95 standard.

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The message id is a uu id which is very familiar to most programmers.

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And the message signature is a digital signature from the origin. The origin is the name of the chain in a chain name service.

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Well, this is more a thought experiment than an actuality at this point, but we are going to propose uh a way to implement chain name service. That means how do you discover.

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The characteristics of a chain just knowing the name- this is very similar to the way dns works. Dns, as you know, is a database, but it's implemented as a text file. uh It is not only the ip address of the party you are connecting to that is available in that database.

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It has things like uh the who who's a registrant. How do you contact them? You know various other other uh pieces of data about the domain. Similarly, the chain name service will will allow us to discover a lot more about the guarantees surrounding the chain and in the amount of course there is the numeric payment amount.

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But when you go to currency it is it gets more interesting because currently I saw 4217 covers uh the ground for regular uh three-letter codes, but a new standard iso 24165 is going to address cryptocurrencies and similar to the way in which we talked about the domain name service.

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They, oh, so it's uh it's 4 10 already so anyway. So basically, everything is standardized uh and I think this is the end of the session. So I'm going to go back to the to the window and I'm going to look at the chat and see how.

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How we are doing with chat and everything seems to be fine and I'm going to end the session and leave. I leave the session. Thank you.