Article By Ian Allison
U.K. banking giant Barclays is challenging up-and-coming blockchain coders to help revamp the global derivatives market at a hackathon next month.
Revealed exclusively to CoinDesk, DerivHack will take place simultaneously in London and New York on September 20-21 at Barclays’ Rise accelerator spaces. The International Swaps and Derivatives Association (ISDA), Deloitte and Thomson Reuters are co-sponsoring the event.
Those taking part will be asked to apply ISDA’s Common Domain Model (CDM), a set of process and data standards, using their choice of distributed ledger technology (DLT) platform, to efficiently model post-trade processing of derivatives contracts.
CDM attempts to harmonize the way data is presented and reported across different firms and platforms. As such, its adoption is widely viewed as a prerequisite for the financial industry to adopt DLT and smart contracts.
One goal of the hackathon is to suss out which of the commonly used enterprise DLT platforms – R3’s Corda, Hyperledger Fabric or ethereum – handles derivative life cycle smart contracts most elegantly.
“It’s up to each team to decide what they code on,” Dr. Lee Braine of the CTO Office at Barclays Investment Bank told CoinDesk, adding that it is a “good, and genuinely open, question” which will perform the most efficiently.
“I think the sort of things that will come out of this hackathon will include exactly that,” he said.
Braine said, by way of an example, there may be cases where existing blockchain platforms benefit from some enhancements to make them more naturally compatible with the CDM.
Referring to object-oriented computing languages such as Java, which use classes to define data formats and available procedures for a given type or class of object, he said, “you could imagine this being equivalent to adding some extra classes to raise the level of abstraction closer to that of the CDM.”
Braine pointed out that the CDM, which is all about how you alter the data structure before and after each life cycle event in a trade (such as an amendment, modification or termination of a contract), will give the judges a neat way to assess those solutions.
“Because it is the ISDA CDM, it will be very clear what are the inputs and expected outputs for each life cycle event – but it will be up to the hackathon coders to implement the smart contracts using a programming language and platform they think is appropriate,” he said.
For ISDA, the hackathon presents an opportunity to get some feedback from members of the industry (and newbies) about the CDM.
“Following the release of ISDA CDM 1.0, it is important that the model is explored and validated by a broad set of industry participants,” said Clive Ansell, head of market infrastructure and technology at ISDA.
A key component in the standardization of smart contract-enabled post-trade processing of derivatives are smart oracles which pipe in data to the contacts. Thomson Reuters was the first large industry player to launch a smart oracle back in June 2017 with BlockOne IQ.
“Making this capability available during the hackathon is a great opportunity to explore the evolution of standards for blockchain-based financial instruments, as they are a much-needed component in shaping the industry’s future infrastructure,” said Sam Chadwick, director of strategy in innovation and blockchain at Thomson Reuters.
Also, the two intensive days will give participants access to derivatives experts providing guidance on applying the ISDA CDM, said Braine, which should be useful whether the team is a fintech startup looking to implement derivatives smart contracts or a group of students looking to build skills and enhance their CVs.
Summing up, Sunil Challa from the business architect team at Barclays said:
“If the industry is to realize potential efficiencies and reduce costs via the adoption of standards, then there needs to be greater compatibility across different solutions in capital markets.”