The blockchain community is hard at work, doing work that’s worth doing. I’m elated to join it full-time!
Recently I became president of Symbiont and chairman of its board of directors.
I chose to join Symbiont because we have the best technology platform for financial sector uses, and we have a great strategy. Our software works. It’s fast. It’s secure. It does many things competing platforms cannot do. Ours is the only smart contracts platform that was purpose-built for institutional financial markets. We’re ahead of our peers in the race to build production-ready software, because it’s already going into production.
Symbiont’s strategy met my two philosophical criteria for joining: (1) investors will actually own the assets issued on Symbiont’s blockchain, which is a huge improvement relative to how securities are owned in today’s market structure; and (2) Symbiont’s platform can store all transaction data and documentation in a secure, anonymous manner without sacrificing institutional-level network speed. (Our speed is multiple orders of magnitude faster than competitors, as we detail below). Consequently, regulators can gain a tool they do not have today: a real-time view into how leveraged the financial system is. This capability of our platform more broadly opens a new “regtech” frontier. If you follow my blog (here and here), you know how passionate I am regarding these two topics!
My informal collaboration with many different blockchain start-ups began 2½ years ago at Morgan Stanley, where I served on its distributed ledger technology working group. I’ve been working (unpaid) to advance the ecosystem since leaving in April 2016. The journey from Morgan Stanley to Symbiont was amazing, partly because it involved digging into multiple projects with blockchain players—from start-ups to consulting firms to software companies to regulators to potential consumers of the technology. It brought me through Janet Yellen’s office at the Fed, to the floor of the UN as a conference delegate, to a workshop with the 50 state insurance commissioners, and to discussions with Washington regulators about how blockchain technology can help fix deep problems in the financial system. But it also entailed a difficult decision to step away from my other passion: fixing the pension problem.
So now begins, for me, the long journey to bring the huge benefits of blockchain technology to fruition, thereby helping our customers do things in simpler, cheaper and faster ways—while making capital markets fairer, safer and more transparent as we go!
Why I Chose Symbiont
Symbiont’s competitive advantage is our smart-contracts technology.
Our architecture is designed specifically for financial services uses. It’s sophisticated and it’s fast. It can support substantially more functionality, in spite of its superior performance, relative to competing distributed ledger solutions.
Smart contracts enable our customers to automate operational workflows that today are inefficient, error-prone, sometimes manual, and always require reconciliation across parties.
Smart contracts are all the rage, but most competitor platforms cannot offer full smart contract functionality because they are developed as extensions to Bitcoin’s payment model, which is fundamentally too restrictive for smart contracts in institutional financial services. A tiny number of true smart contract platforms exist. Of those, Symbiont is the only one purpose-built for financial services.
Distributed ledgers themselves cannot automate business processes but smart contracts can. The blockchain industry generally has not distinguished the various components that make up what we call a blockchain, which is why many of our competitors’ platforms have tightly coupled their consensus systems and smart contracts systems. By contrast, since its earliest days, Symbiont has enforced a clear distinction between these components, making its system significantly more elegant and powerful. A consequence of this design decision is that Symbiont’s smart contract system can run on any distributed ledger. (But it runs on our own because it’s the best! Details below…)
Before moving to the next point, I must share that I’m an Ethereum fan and am involved with the SingularDTV project. In the institutional financial services arena specifically, I believe Symbiont’s platform will win. Symbiont’s smart contracts can do things that are mission-critical for financial institutions and that Ethereum-based smart contracts cannot do, mostly due to Ethereum’s language and protocol limitations. One example is the case of parties agreeing to amend a smart contract after it’s published to the blockchain (i.e., the infamous DAO). Contract amendments happen all the time in financial services, and Symbiont engineers built our smart contracts to anticipate such real-world financial services functionality. Symbiont offers protocol-level support for amending contracts. By contrast, Ethereum has none. Only Symbiont’s system allows both the code that determines the contract, as well as the contract itself, to be modified at any time by agreement of the parties. This is just one example that demonstrates why the financial sector needs purpose-built platforms.
Symbiont’s platform has more functionality, with superior performance and security, relative to competing blockchains. And it’s already going into production.
Symbiont’s platform can store data in a private and secure way, without sacrificing institutional-level speed. The ability to store data on-ledger—including all transaction documents—is huge, and will immeasurably help everyone (the contracting parties, operational staff, auditors and regulators) keep track of what really happened in a business transaction.
Symbiont’s platform is not merely a shared, timestamped log to record that an agreement took place, which is exactly what many competing platforms are. Rather, on Symbiont’s platform all the terms of the agreement are recorded on-ledger, and that’s why we call our smart contracts “smart securitiesTM.” A Symbiont colleague put it this way: a timestamping ledger can guarantee that you won’t lose your trade confirmation, but it doesn’t help with much else—so it’s not very meaningful.
Symbiont’s system is capable of being used as a record-keeping platform, allowing storage of archival data (e.g., Delaware Blockchain Initiative) and maintaining a chronological record of multiparty workflows and signatures (e.g., syndicated loans and reinsurance syndications). This aids in compliance, regulatory reporting and dispute resolution. So in addition to being able to automate business processes via smart contracts (by recording inputs, recording and executing business logic, and then recording outputs on-ledger, on a confidential and immutable basis), Symbiont’s platform is a whole new breed of market infrastructure.
Symbiont’s smart contracts platform is modular—built up from multiple software services with distinct functionality—while competitor platforms are monolithic pieces of software, with limited modularity. This means we can spread smart contract execution across multiple machines—achieving superior scale, performance, resiliency and ease-of-updating relative to our competitors. It’s harder to build service-oriented software that works, but Symbiont has done it and our clients already appreciate our consequent greater functionality and potential for further innovation.
And here’s what’s amazing: Symbiont figured out how to store user data anonymously on-ledger while still achieving institutional-level network performance. Symbiont’s ledger is currently processing 80,000 transactions per second in a single region, and tens of thousands per second globally. Plus, transaction latency is on the order of milliseconds. So Symbiont’s software is not just outperforming all competitors whose comparable statistics we know—it’s outperforming them by multiple orders of magnitude.
Competing systems are hybrids that store data and business logic somewhere else, requiring disparate systems to communicate over multiple channels, using the ledger just as a timestamping mechanism. Our system, on the other hand, supports encrypted, point-to-point communication over the ledger itself, allowing us to put all business logic on-ledger while meeting the financial industry’s standards for privacy. We think storing data and business logic on-ledger is fundamentally necessary to achieve the true promise of blockchain technology, which is the radical simplification of business processes. It’s hard to create software that achieves this and is fast, but our development team did it. Symbiont is better!
News that Symbiont is already implementing our platform at a production level may surprise industry watchers because Symbiont has kept a relatively low profile, and intends to continue to do so. Our publicly disclosed customers include the State of Delaware (Delaware Public Archives project) and a top European insurance company (catastrophe swap pilot project). Other customers are not yet disclosed. If you’re not familiar, Symbiont was the first blockchain start-up to eat our own cooking by issuing securities in our own company on our platform, which happened already more than a year ago (on August 4, 2015).
Symbiont’s platform focuses on newly originated assets, not on tokenizing pre-existing assets.
A former colleague once wisely observed that existing IT architecture in financial services merely digitized legacy business processes, and that the sector hasn’t yet reaped the true benefits of digitization because its business processes are stuck in the pre-digital age. What wisdom!
On Symbiont’s platform, financial assets will exist natively on the blockchain during their entire lifecycle, from origination to maturity. They won’t ever exist in paper form. This contrasts with competing platforms that tokenize existing assets previously issued in paper form. I believe tokenization-focused blockchain start-ups will add value too. But tokenization does not fundamentally change inefficient business processes—actually, it adds extra operational steps to tokenize existing assets. Maximum efficiencies are achieved by radically simplifying business processes. That’s what Symbiont’s technology does.
Symbiont has prioritized building our tech to create a first-mover advantage.
I commend Mark Smith for his strategy to build a lean, developer-heavy team from the beginning. Surprisingly few of our employees don’t write code! It’s why Symbiont has a first-mover advantage. The team’s results speak volumes. Symbiont is ahead of its peers in delivering a distributed ledger and smart securities platform that already works.
Symbiont’s strategy to prioritize building the software comes from his deep experience as a successful fintech entrepreneur. Symbiont is the 6th fintech start-up Mark co-founded. Of his prior five, four had successful exits (The NexTrade ECN, MatchBook FX, Lava Trading and Anderen Bank of Tampa Bay), and the fifth is still operating. It’s a privilege to work with him, his co-founders, and the terrific team of rocket scientists they’ve built!
Symbiont is currently focusing on 3 product areas—the Delaware Blockchain Initiative, insurance and syndicated loans—and all of them are ripe for big improvements in business processes. We are a fintech, insuretech and regtech company!
I’ll just touch the surface here.
It was Mark Smith’s idea to approach Delaware with the proposal to change corporate law to enable corporate registrations on a blockchain, along with counsel Marco Santori of Pillsbury. Delaware’s governor embraced it. By giving corporations a choice to register either via traditional stock certificates or on a blockchain, likely by early 2017, Delaware will unlock the potential for fundamentally simpler business processes during a corporate lifecycle—from initial incorporation, to capital raising, to M&A, to investor communication and to winding up. Delaware’s move will also unlock the potential for radically simpler business processes in the securities industry. Practically speaking, I expect Delaware’s action to impact markets for private equity, IPOs, asset-backed and mortgage-backed securities, and commercial real estate. Symbiont is already working with Delaware to record its state archives on Symbiont’s platform by creating a new category of smart assets called smart records. The State is constructing a roadmap for adding other government data to Symbiont’s platform—potentially including government data such as professional licenses, property deeds, liens and birth/death/marriage records, among others. (Again, how many other institutional blockchain platforms can handle such data on-ledger, in a confidential manner and with speed?? Only Symbiont can!)
In insurance, Symbiont successfully provided the technology for a top European insurance company’s catastrophe swap pilot with Nephila. This has opened the floodgates of interest in blockchain technology from the insurance industry, which is now exploring the possibility of blockchain to reduce risk and operational costs. I’ve worked in and around the insurance industry for 22 years and have seen many ways blockchain can help both insurance companies and insurance regulators alike.
In syndicated loans, Symbiont has a joint venture with Ipreo, a key market infrastructure player. The syndicated loan market is a classic example of a business line in which front-office growth outpaced back-office investment, and this is true across the industry. I was fortunate to dig into this product area with key players before leaving Wall Street. Faxes and spreadsheets are still commonly used, which means incumbents recognize the need for upgrades and are not firmly wedded to legacy systems.
To blockchain ecosystem colleagues, I wish all of you well! Let’s compete vigorously—and in the process create a fairer, safer, more efficient and better financial system!
To pension industry colleagues, you have important work to do! There’s so much more to be done in pensions, as I expect >$500 billion of corporate pensions ultimately to settle but only about $45 billion have settled to date. It was an honor and privilege to work with so many talented people in the field. Fare thee well!
To financial services colleagues, blockchain technology can increase your return on capital by providing a profitable way to transition from capital-intensive principal businesses to fee-based agency businesses. Software will automate inefficient business processes, thereby allowing the industry to realize the true benefits of digitization—finally!
To corporate clients, I’ll still be focused on helping you solve your challenges—not pensions anymore, but different ones now! Specifically, I look forward to helping you reduce your cost of capital by improving your execution in securities offerings and loan syndications, and to helping you free up working capital by improving your execution in cross-border payments. As issuers, Symbiont’s smart securitiesTM platform offers you tangible benefits, and you will hear from us soon!
To my new colleagues at Symbiont, I’m all-in! I’ve personally stepped up with a substantial investment in Symbiont’s Series A round. Let’s do this!