Look Beyond Short-Term Crypto Volatility Toward Long-Term DeFi Disruption

Over the last couple of weeks, we’ve seen selloffs of both stocks and cryptocurrencies. However, we shouldn’t be surprised. And as with stocks, we need to look beyond the short-term volatility of cryptocurrencies to their long-term value.

Over the long term, digital assets, and their underlying blockchain technologies, are set to form the foundation for the online transfer of value. This foundation is as transformational as the original internet of information was to become. Through this lens, it’s clear that established financial organizations need to bridge traditional financial infrastructure with that of decentralized financial (DeFi) infrastructure to leverage the best of both worlds.

The idea that digital assets would be immune to the pressures faced by traditional financial assets was always a myth. Instead, the fact that cryptocurrencies and traditional stocks are now similarly impacted by inflation and world events reflects the increasingly mainstream role that these currencies, and their underlying utility, are playing in the global financial system.

Of course, we can’t ignore how all digital assets, including cryptocurrencies, have also been affected by fear and skepticism spurred by the questionable practices of Terraform Labs, which saw the collapse of its TerraUSD stablecoin and its sister token Luna. At the same time, it is important to put this in perspective. The biotech industry didn’t disappear because of the Theranos scandal, and Web3 is not going under because of Luna. If anything, the success of snake-oil sellers speaks to our deep desire to see these ideas come to life.

As we move forward, bridging between traditional financial systems and Web3 blockchains and services will be critical to building trust, compliance, and risk management infrastructure into DeFi solutions. Blockchain is a transformational innovation in providing immutability along with a new set of financial rails built on top of Web2.

Equally important is getting traditional finance, with its wealth of experience and systems, involved. A new generation of software is emerging, which is bridging traditional financial compliance and risk management with the ability to transfer value digitally.

Despite the short-term devaluation of cryptocurrencies, all signals point to them moving from the edge and into the center of everyday commerce and finance. This is the time for traditional institutions to start reinventing themselves for the new world by bridging their existing Web2 infrastructure and applications to the promise of decentralized finance and the tokenization economy of Web3. The BCware team has been building the foundations for this world since 2018.

Off-chain, on-chain integration – the paramount challenge for DeFi & legacy finance

DeFi is short for “Decentralized Finance”, an umbrella term for a variety of financial applications in cryptocurrency and Blockchain, geared toward disrupting financial intermediaries. DeFi aims to reconstruct and reimagine financial services on the foundations of DLT “Distributed Ledger Technology”, Blockchain, digital assets, cryptocurrencies and smart contracts.

DeFi has been evolving since the 2015 launch of the Ethereum network which initially laid the groundwork by introducing Blockchain-based smart contracts. Although DeFi applications have continuously grown since that time, the year 2020 witnessed a major upsurge of activity. In one year, the value of digital assets locked in DeFi smart contracts grew by a factor of 18, from $670 million to $13 billion while the number of associated user wallets grew by a factor of 11, from 100,000 to 1.2 million. This growth in turn has stimulated interest from both the private and public sectors as in the examples of MicroStrategy and Tesla’s investments in Bitcoin and strategic initiatives in the space by mainstream financial institutions.

While regulatory challenges represent barriers to early mainstream adoption, the technology requirements to integrate legacy financial systems with DeFi applications represent an even more formidable task. Scalability, reliability and high performance have always been non-negotiable requirements in the financial services world where every new technology is scrutinized all the way to its smallest moving parts before being accredited as production caliber. While the race is on for traditional large financial institutions to offer crypto and digital services to their customers, they are faced with the paramount challenge of integrating their existing infrastructures with a variety of Blockchain platforms and emerging DeFi services without compromising the aforementioned technology requirements of Wall Street in an optimal fashion.

Founded by a team of integration pioneers who digitized Wall Street, BCware provides a Blockchain integration platform addressing these very technology challenges above. The BCware platform delivers mission-critical grade solutions for the convergence of legacy financial systems with cryptocurrency and digital asset infrastructures with its unique differentiators:

  • High performance and scalable symmetric on-chain/off-chain integration and orchestration
  • Transparency and interoperability of the underlying Blockchain platforms

The diagram below depicts the BCware platform connecting the islands of the new finance world:

BCware’s unique architectural approach is centered around the following key components:

  1. BCflow: The workflow engine orchestrating on-chain/off-chain events using concurrent tasks and a publish/subscribe model for superior scalability, high performance and reliability.
  2. BCware Abstraction Layer: Providing a symmetric integration model for off-chain applications, existing and future DeFi services and underlying Blockchain platforms.
  3. BCware API Layer: Enabling the creation of new crypto and digital asset services for our customers.

The platform is further boosted for scalability and high performance via off-chain centric processing and optimized on-chain access.

Our mission is to be the de facto and ubiquitous integration platform between legacy financial systems and Blockchain powered DeFi infrastructures.

Bridging DeFi and Legacy Financial Systems with BCware

DeFi “Decentralized Finance” refers to a new generation of financial applications disrupting the market using cryptocurrencies. DeFi is built on blockchain, allowing participants on a network to immutably share data and the transaction history using a distributed ledger, meaning it isn’t controlled by a central source. Blockchain technology allows payments to occur directly between buyers and sellers, circumventing middlemen and thereby reducing costs for both parties. Blockchain also enables the transaction verification process, which is a significant cost center for banks today. In fact, Santander Inno Ventures estimates blockchain technologies can reduce banks’ infrastructural costs by $15–20 billion by 2022. DeFi is distinct because it expands the use of blockchain from simple value transfer to more complex financial use cases – a feature the e-commerce world and institutional banks will adopt, transforming the entire global finance system in coming years.

Early DeFi initiatives in 2020 are being driven by startups, typically issuing their own “stablecoins” – a type of cryptocurrency backed by an asset such as the U.S. dollar or Euro – to cut out middlemen from the services they offer to their customers. Stablecoins distinguish themselves from their highly volatile cryptocurrency brethren such as Bitcoin because their values reflect the value of the underlying assets to which they are referenced e.g., U.S. Dollars. While most of the early DeFi services are targeted towards cryptocurrency traders, a larger opportunity lies in settlements and transfers for consumers and businesses, signaling a dramatic transformation ahead.

Although DeFi seems to be a direct threat to the existing financial system and institutional banks, they are very likely to be beneficiaries of DeFi services as well. Complex financial transactions across banks will be simplified by removing middlemen, not only speeding up transactions to near real-time but also reducing fees, thus opening the doors for innovative new business models. Early adoption by banks will likely be in the form of using the services of the emerging DeFi innovators, but banks will start building their own DeFi infrastructures in order to remain competitive. JPMorgan’s recent announcements around JPM Coin and its establishment of a new business unit called Onyx to evangelize its blockchain and digital currency efforts exemplifies such a case.

While regulatory challenges represent barriers to early adoption, the technology requirements to integrate existing financial systems and applications with the DeFi world remain formidable.

At the top level, we see the following technology challenges:

  • A uniform and non-intrusive gateway into existing financial back-end applications
  • Integration with cryptocurrency exchanges
  • Transparency and interoperability of the underlying Blockchain platforms
  • Workflow orchestration across business boundaries

BCware has been addressing these technology challenges since it was founded in 2018 by enterprise integration pioneers who played a central role in digitizing Wall Street. BCware’s platform is built to enable Blockchain-powered business ecosystems, transforming multi-party processes and transactions. Our unique approach allows companies to harness the power of Blockchain by eliminating implementation and operational complexity.

The platform is fully API-driven with the following key features:

  1. API layer providing seamless integration with existing business applications
  2. BCflow core engine orchestrating and digitizing event-driven cross-company workflows
  3. Abstraction layer providing transparency and interoperability of the underlying Blockchain platforms

BCware is already working with DeFi start-ups providing infrastructural foundation for their technology and business including:

  • Vitreo, a security token issuance platform
  • Security token ecosystem linked to real-estate

BCware is committed to providing cutting-edge, mission critical technology to become a trusted partner to innovators in the DeFi industry. We take complexity out of integrating legacy financial systems with blockchain-powered DeFi, enabling our partners and customers to focus on their groundbreaking applications and creating new business models.

The Power of Unified DLT and Collaboration

I can’t believe it’s been 10 years since I wrote, blogged and presented the concept of Collaboration-Enabled Business Applications (see an example here). It’s fascinating to see that, while we’ve extended the range of integration between business process management and collaboration applications (as in voice, video, messaging and emailing), a more thorough integration that logs the complete set of data and knowledge worker communication that fuel digital, collaborative business processes remains elusive.

In another blog around that time, I wrote: “The problem with the work flow for knowledge workers is that, while it structures an activity and captures the documents we produce as part of that, it fails to capture what we could call collaboration metadata. And the latter is of vital importance to improve knowledge worker productivity.” And that shortfall still hampers collaborative business processes.

I have used the term “collaborative business process” twice, and while the term seems self-explanatory, it deserves to be defined: whether within a company or an ecosystem of partnering companies, we observe critical revenue generating business processes that depend on knowledge workers sharing information, communicating and reaching quick consensus to drive mutually beneficial outcomes.

The problem is that these collaborative business processes, which just happen to be the very lifeblood of the digital economy, remain fragmented: every participant keeps their own representation of the truth based on several sources, which may include:

  • Data kept in a local repository that other participants in the business process have no visibility into other than when shared in a meeting or any other collaborative effort.
  • Video, voice or email communication to exchange information, and which sometimes leads to business process participants to update their local data representing what they perceive to be the current consensus in the state/stage of the business process.

In a nutshell, there may be as many unreconciled versions of the state of the business process as there are participants, data repositories and collaboration tools. And each one is a multiplier when it comes to the number of resulting “ledgers” (ie sources of truth).

Unfortunately, from a business process architecture perspective, this creates several problems that can slow down and even cripple a collaborative business process. The fundamental issues include:

  • Unsynchronized data ledgers: Each participant in the data process logs their personal interpretation of the business process in their very own, insulated data ledger.
  • Uncorrelated data ledgers and collaborative events that drove the update of local data: the live meetings, the email exchanges and other communication that took place to drive the update of data is never correlated or kept track of as part of the business process.
  • The drift that happens between locally kept data ledgers and individual interpretation of the collaborative exchanges very often leads to the participants’ local perception of the state of the business process to eventually state their disagreement with the updated state of the business process.

The combination of the three factors above costs the digital economy billions of dollars a year in lost productivity. As soon as locally kept ledgers diverge and the communication that led to that divergence can’t be tracked reliably (which is impossible to do unless you find a tool to integrate both data and collaborative elements of the business process), the collaborative business process comes to a screeching halt. And without a way to log every step and every exchange of the collaborative business process that lead to the current state of conflict, the business process will get reset to stage zero. And costly audits to reconcile the privately held ledgers will be needed. The overarching human communication that led to that state will simply be forgotten because it wasn’t tracked.

The fundamental problem is a lack of a secure, trusted infrastructure technology that all participants in a shared, collaborative business process can trust. Hence everybody maintains their own private ledger, and the reconciliation layer is human communication, which can be both inexact and open to interpretation.

But now a silver bullet to address the needs of collaborative business processes is making it into the mainstream: Blockchain technology.

With Blockchain technology, it is possible to immutably record every exchange that drove a data update. It is easy to give every participant 100% up-to-date visibility into the current state of the collaborative business process: every update of data and the rationale for it. Including, and this is key for Unified Communications integration into a business process blockchain, all related collaborative exchanges between the knowledge workers driving the business process, be it via voice, video, email, messaging or any other means.

The integration of business process systems and unified communication applications has been elusive until now. Blockchain provides the foundational technology to finally, securely, indelibly link the entire track that drives the collaborative business process. For example, every participant would be able to easily see a critical update to shared data and click on a link to see the exchange that drove that update.

That also means the business process never needs to reset to zero to reconcile it with a state of truth. The last, mutually agreed upon logged state of the business process will always be there, and the business process only needs to reset to the immediately previous state, saving every participant time and money.

The integration of business process data and the overarching collaborative tools that drive it is a very powerful tool in the digital era. It does represent a silver bullet for knowledge worker productivity as well as to ensure data integrity and compliance.

It is safe to predict that very soon you will witness how Blockchain technology becomes an integrating, record-keeping link between business process data and the various knowledge worker collaborative tools that drive that drive the updates to such data.

Why Database and Blockchain Technology Need Each Other

A very common pattern emerges when discussing Enterprise Blockchain solutions. IT practitioners often assume that Relational Database Technologies (RDB, often simply called SQL for a de-facto industry standard) and Blockchain Technologies must be archenemies competing for hegemony as a Single-Source-of-Truth for Enterprise Data.

However, the simple fact is that both serve a key need as Enterprises seek a more agile architectural approach, allowing them to accelerate business processes that have been traditionally slowed down by un-synchronized data silos.

Those data silos are implemented with traditional database technology – which excels in performance, and thereby allows enterprises to update data repositories (often called “ledgers”) quickly and arbitrarily. Which does speed up any linear, internal workflow within a tightly delineated team.

However, in the Age of the Digital Enterprise, many critical, revenue-generating business processes include intra- and inter-company participants. Each of which maintains one or multiple versions of ledgers that drive collaborative business processes forward. And of course, enterprises are reticent when it comes to opening up their ledgers and allowing every participant to enter, update or delete data in the ledger. That would represent a huge liability in an age of data breaches, GDPR, etc.

Hence the distributed silos (i.e. databases) are typically reconciled in painfully slow, manual and error-prone ways. In fact, many workflows are still governed by paper, fax or physical presence of two or more ledger owners. Inevitably, this results in un-synchronized ledgers between participants, leading to lengthy disputes, expensive reconciliation processes and painful audits. The un-synchronized ledger model clearly hampers business agility. On top of that, if a data breach occurs and malicious change is performed… how do you re-trace your steps back to a clean version? The un-synchronized ledger model also leads to an architectural security liability, both because of multiple attack surfaces as well as the fact that it becomes harder to re-establish the un-breached version of the ledger.

Enter Blockchain technology. It provides enterprises with an ideal platform to automate the synchronization of participants’ ledgers. No transaction is approved without secure consensus between all participants. Every transaction is immutably recorded as part of the data in the shared Blockchain. This provides a solid foundation for secure synchronization of privately held ledgers.

Database technology provides a supremely high performing source of truth within a trusted environment. Blockchain in turn delivers an over-arching mechanism to securely synchronize distributed, privately maintained ledgers (Blockchain is a shared ledger technology, after all), and is the perfect “shared source of truth enterprise messaging bus” to accelerate business processes that are the very essence of the digital age.

To put it in a different way, think of the CAP Theorem, which states that no technology can provide simultaneous Consistency, Availability and Partition-Tolerance of data. In any data exchange that involves transfer of financial goods (and most do), for obvious reasons the architectural trade-off is strictly in favor of Availability and Partition-Tolerance, since it guarantees the integrity of any privately-held ledger. And by the way, that is equally valid for Database and Blockchain technology – only at a different pace. There are several mechanisms to then provide for something called “Eventual Consistency” if the sources of truth drift apart. What Blockchain can do is seamlessly automate, accelerate and secure the path to “Eventual Consistency” whenever ledgers are shared, dramatically cutting down the time and cost incurred to achieve consistency.

With un-synchronized siloed ledgers, “Eventual Consistency” is a painfully slow process. In our private lives most of us have confronted the stress of an unresolved ledger inconsistency – be it fraudulent charges to our credit cards, disputes with our health care provider, mismanaged car title transfers (that was my latest one, so I am throwing it in) … and don’t we always feel we are fighting a slow-moving, archaic and arbitrary system? That’s what un-synchronized ledgers feel like in a digital age business process, too. Blockchain technology can ease the pain.

So, the way to think about this conundrum is as a layered architecture: Individual, protected and privately-held ledgers, augmented by a Blockchain-powered intra- or inter-enterprise bus that establishes, secures and provides full trace-ability when it comes to ledger synchronization between participants. Both layers deliver business value, but business value is maximized if their individual strengths are aligned as a design pattern to power business processes for the digital enterprise.

In a nutshell: Of course, database technology is here to stay. And database and blockchain technology are entirely symbiotic. Database technology benefits from being augmented with Blockchain as an “inter-ledger synchronization bus” in order to deliver on the needs of business processes in the digital age.

If you are asking yourself: “Well, this makes perfect sense – so what’s stopping enterprises from doing this right away?”, the answer is: It is not easy to build the expertise and the integrated solution required to augment your existing enterprise database ledgers with Blockchain technology. The barrier to entry can be dramatically lowered via abstractions and re-usability.

BCware recognized this early on. Hence, enterprises do not have to become Blockchain experts, with BCware’s solution they just take advantage of an abstracted Blockchain infrastructure to drive faster business outcomes, with total transparency and security.

Visit on LinkedIn and let’s brainstorm how BCware’s Enterprise-Grade Blockchain solution can power your own business processes more effectively, driving faster results while reducing cost and risk.

Blockchain in Core Networking Technology? Why?

Networking world – something new may be coming your way! We’ve added some REST APIs to the networking mix to fit into a more dynamic business environment, but all in all TCP, UDP, RTP, MPLS and a few routing protocols (EIGRP, OSPF and BGP) have ruled the landscape for a very long time.

While use cases for Blockchain technology abound in pretty much every potential market, the networking world still seems to be shrugging its shoulders and wondering what to do with it. Networking is busy enough transforming itself to fit a DevOps-minded world to accommodate another transformative technology, right?

Well, there seem to finally be some solid use cases for distributed-ledger technology (DLT) -which has become de-facto synonymous with Blockchain; and while inaccurate but we’ll use the term here- in the networking world. Unsurprisingly, they circle around use cases where consensus is required to perform, secure and immutably record a transaction. If you think about, it seems a bit of a “duh?” thing, because consensus and security is a critical requirement for the network to build into its DNA. The consensus protocol itself can protect a world of RESTful controllers in Intent-Based Networking from pushing policies that may be toxic – which is a huge exposure in Intent-Based Networking that is not even remotely discussed enough. Because if hackers can mess up major Websites’ reachability by hijacking a BGP-route through a poorly protected BGP peer (which seems to happen a couple of time a year)… what do you think they can do when they crack an Orchestrator or Controller for a large network?

Hence, there are some obvious use cases that I will just describe at a high level:

  • Critical routing updates: BGP, the routing protocol that controls Internet routing and hence availability, relies on establishing a peering environment manually for “security”. There is lots -too much, as some outages show- of implicit trust when manually configuring a peer. Once in, peers can -intentionally or by falling prey to another peer they configured- poison your routing tables. And suddenly your network is just reachable via very questionable routes, or not at all. Blockchain technology’s consensus algorithms (there are a couple to pick from, the popular Proof-of-Work is by far not the only one) are truly a mid-term no-brainer here.
  • IoT Networking: The great news for networking is that billions and billions of devices are going online with IoT. The bad news is… as you clearly can’t manage that manually, how do you ensure your automated IoT device onboarding doesn’t fail prey to attacks? Ever heard of a wolf disguising as a sheep? Blockchain technology provides consensus, but even more important here is traceability: any IoT device joining via IoT will have its complete imprint revealed and indelibly recorded. You can’t get out of the Blockchain. Who you are, what you did, and what transactions you tried to execute will be forever imprinted in the Blockchain. Traceability is a key deterrent in attacks.
  • Administrative settlements: One little-known reality of Internet traffic is that, while the ISP you’re paying may give you traffic guarantees that they can enforce within their own network (as in you mark bulk and voice traffic differently), as soon as your traffic leaves that environment (which in a global digital economy happens all the time) you are on your own. Few internet service providers feel motivated to guarantee another ISP’s priority markings, since their “settlement” happens in terms of bulk traffic as a rule. Blockchain can provide a mechanism for several ISP to reach consensus on settlements that go beyond sheer bulk traffic, since every ISP involved can now collaborate in a consensus mechanism.
  • Trusted Workflow for IBN Orchestration and Controller: IBN brings much needed agility and operational efficiency to networking. However, the power orchestration and controllers are gaining over the network infrastructure will surely attract the breaching forces of evil every enterprise should fear. Without a network, business comes to a screeching halt. Clearly enterprises need to zealously protect their network infrastructure, and with IBN more than ever. Blockchain technology enables secure, trusted workflows and can surround the orchestrator/controller infrastructure with a key element for workflow security and -again- immutability.

I am sure there are so many others. The conundrum of the Internet is that, while the universal connectivity proved radically transformative, it’s now become a liability. Hence mechanisms like encryption, firewalls and micro-segmentation try to defeat the universal connectivity paradigm. But if you think about it – they are just defensive mechanisms. And a pure defensive play may just indicate that you resigned yourself to lose a war – only slower. Blockchain technology fundamentally can change the battlefield strategy. Consensus, traceability and immutability are powerful tools.

Networking has become the key infrastructure of the digital economy. And as it moves to being software defined, it is sure to attract even more attention from potential attackers. The power of IBN also implies that half a nation’s economy can be disrupted by malicious configuration. All in all, it does look like network operation workflows ought to be a primary target of Blockchain technology.

BCware provides the benefits of Blockchain in a way that abstracts them from overarching applications and use cases. All of the networking use cases showcased above can be implemented on top of BCware’s “Blockchain Middleware APIs”. One of them in fact already is. BCware is looking for more partners to address the rest.