How to Build a Better Blockchain Technology Platform
There has been a lot of talk about the potential of blockchain technology to transform financial infrastructure, and the stumbling points that headline projects that have hit in the last year. So much so, that one might think that a successful distributed ledger effort is finance’s new Holy Grail.
Finance can and has seen successful blockchain technology use-cases and projects that have come to production. In fact, Tassat has a shining example of exactly this, and the secret sauce in this case was how it was done using collaboration with an iterative approach. We believe this approach is essential to blockchain projects reaching the tipping point. Although enthusiasm for the technology is held by institutions across the world, many projects are cultivated in isolation and/or an overly aggressive approach. We believe the lessons behind each triumph and tribulation need to be shared to push the industry forward.
One of the best examples of a successful blockchain project is our modernization of a payment system solution. In this project, we developed and brought to market a blockchain-based platform for a major US-domiciled bank. This on-chain tokenized US dollar payment platform has enabled secure, real-time, 24/7/365 payments for the banks commercial users. This platform is the first US-domiciled bank payment application based on blockchain technology approved for use by the New York State Department of Financial Services (NYDFS).
Tassat is a FinTech company actively involved in this space and which interacts regularly with a large number of financial institutions and corporations. And having successfully partnered with a commercial bank to develop and operate this NYDFS approved blockchain enabled fiat currency tokenization platform, we’d like to offer some perspectives as to how such projects can be conceived, developed and successfully deployed. We hope we will help move the industry narrative forward. The industry has done a laudable job of explaining ‘why’ blockchain is beneficial and we believe it is just as important to show the ‘how’ this can be achieved.
Focus and Start Small
Especially for the highly regulated and critically important banking infrastructure, any project of this kind has to be evolutionary (not revolutionary). It is advisable to focus and start small. The approach we used was predicated on delivering a minimal viable product, a live version that served a clear and distinct purpose for its audience, and then adding new capabilities from there. In our case, this iterative approach focused on solving the most practical and necessary use case that would unlock the most value for our bank partner: deposit, transfer and redemption of tokenized USD.
The scope was purposely limited to ensure rapid and widespread adoption. Most importantly, demonstrating that the platform could handle the most important core functions gave users the confidence to use and explore the platform, and suggest additions that added more value. The early simplicity and minimal feature set minimized the learning curve, and provided a safe environment where new users felt comfortable moving from previous habits and work practices to a more functionally rich and better alternate solution. It generated further interest from the platform clients for greater functionality, which gave us the direction to add more robust features in a series of updates.
From the time we signed the agreement with the bank up until the go-live, this transformational project took 8 months, which is extremely unusual for a blockchain project. Our discipline in sticking with a simple, yet practical ideology was a primary reason for the quick implementation. We saw that having a focused use case and a disciplined approach to what is necessary for success, eliminates a lot of the obstacles that often impede successful blockchain projects.
Prioritize User Experience – Easy and Intuitive
Early in the planning, we identified the user experience as a key component of the platform and prioritized this throughout our process. The thinking behind this was also simple: there must be an extremely intuitive user interface for people to feel comfortable using a new tool that does very important work.
At the core of the implementation was an interface that users could very quickly access and share feedback on functionality and usability. We also put the interface in front of brand-new users, asking them if they could intuitively make a deposit. Based on those interactions, we made adjustments to ensure that every action could be done simply. Our take away from this was that the user experience doesn’t have to be fancy; it did, however, need to be simple and elegant to encourage use. That eliminated one of the bigger concerns the bank had about early adoption.
Insert Blockchain Here
For a variety of reasons based on the extensibility of the business needs, we identified that we had to implement this platform on a blockchain based platform. Like our user experience, we again chose to stay simple to begin with. We chose to initially use Ethereum, decided on ERC-20 contracts, and chose to do a private node implementation using Proof of Authority (as opposed to Proof of Work). Again, by choosing an underlying blockchain with smart contracts that are well known and for the business purpose, we removed unnecessary impediments, another example of keeping it simple. Our choices here allowed us to tap into a larger pool of seasoned blockchain developers, the ability to configure the behavior of the chain based on our needs, and maintain control of the network. Maintaining control in the early implementations limited external dependencies, and allowed us to accelerate our delivery cycle. While we built this platform to scale, and effectively use any number of underlying blockchain technologies, we feel our initial choices to use Ethereum and ERC-20 helped get us to market most quickly.
Bringing it Home
From this point, we grew out our architecture solution, fine-tuning the block size and duration of time between blocks to confirm it was in lockstep with the number of transactions the bank wanted to handle and the amount of time the bank expected to wait for the transaction to be written to the blockchain.
As the application evolved, we launched a beta release with limited clients to confirm that the monitoring and reporting tools were aligned, that the users were happy, and that reconciliation with the bank ledgers (legacy systems) was timely and transparent. From there, we worked closely with the banks internal security review teams and the regulators to familiarize them with the platform functionality and security, and gain their approval. A few more iterations later, we had our first NYDFS approved digital asset tokenization platform.
There’s a saying that sports fans are familiar with: “trust the process.” However, “trust the process” can also apply to the path towards successfully implementing a blockchain project. Developing this platform was very much a continuous and transitional effort, rather than a “big bang.” We rolled out new releases every two weeks, engaged in continuous course correction and ensured that we had a functional, road-tested product. By the time it was released to the larger group of bank clients, the platform was well-tested with raving-fans of both internal stakeholders and more importantly bank clients!
If there’s a main point to be taken away from this project, it is the importance of focus and discipline. It’s far too easy to get swept up in blockchain and attempt a grand, sweeping project in an effort to “disrupt” a space. But, as with any new technology, this will take time. Blockchain will help change the world. For now, it’s just a matter of proper implementation. Hopefully, our experience helps in this regard.