Talking about one of the most regrettable organizations in the history of blockchain, you can't help but think of R3.
This institution was established in 2014. Bitcoin was far less well known than it is today, but R3 has focused on distributed ledger research and industry standards development, see the foresight of its founder, David E. Rutter. In 2015, the establishment of the R3 Blockchain Alliance attracted the participation of several top financial institutions around the world.
But no one can think that in the short period of three or four years, this star alliance will encounter the dilemma of the giants withdrawing and the external competition is increasing. This year, R3 was exposed to news that the financial pressure is huge and may even be sold.
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As the industry grows, the stars of the past have gradually declined. How did this happen? Where will R3 go? We tried to find out the answer through this article.
Born with a golden key
R3's founder, David E. Rutter, has a wealth of experience on Wall Street. Prior to founding R3, he served as CEO of the UK's largest interbank trading broker, ICAP, for 10 years, leading the BrokerTec fixed income and EBS forex platform.
When I created R3, David was at least 50 years old. Unlike the talented programmers represented by Vitalik in the blockchain, David's body exudes the atmosphere of Wall Street. He has drawn his own years of experience and keen insight to conclude that the blockchain may A revolutionary impact on the financial system.
David E. Rutter founded R3 CEV in New York in 2014, a company focused on distributed ledger research and industry standards development. When I founded R3, David E. Rutter thought it would be a new financial operating system, just like Apple's App Store.
David has an extensive network of senior industry relationships. He has been on Wall Street for 30 years, has good relationships with some of the top institutions, and has deep market knowledge. Soon, with his ten years of networking and accumulation, David brought together nine top financial companies in 2015 to establish the R3 blockchain alliance. The nine founding financial institutions are: Barclays Bank of the United Kingdom, Bank of Spain, Bank of Australia, Swiss Credit Suisse, Goldman Sachs Group, JPMorgan Chase, Royal Bank of Scotland, State Street Bank of the United States and UBS.
We will give a brief introduction to the nine banks in order to let the readers understand how heavyweight players are:
– Barclays was founded in 1862 as one of the UK's largest commercial banks. With total assets of 1.13 trillion pounds in 2018, its wealth management company manages more than £74 billion.
– The Spanish Exchange Bank (BBVA) was merged by Banco Bilbao Vizcaya and Argentaria in 1999. It is the second largest bank in Spain with a total asset of 68.54 million euros in 2018.
– The Commonwealth Bank of Australia was founded in 1912 and is one of the four largest banks in Australia and the largest commercial bank. Total assets in 2018 were A$980.4 billion.
– Credit Suisse, formerly known as Credit Suisse, was renamed in 2006. Credit Suisse Bank is the second largest bank in Switzerland and the fifth largest consortium in the world with a total asset of 76.89 million francs in 2018.
– Goldman Sachs was founded in 1869 in New York, USA, and has the world's largest investment banking business. Total assets in 2018 were $931.8 billion.
– JPMorgan & Co was merged in 2000 by JPMorgan and Chase Manhattan Bank. In 2018, the total assets were 2.62 trillion US dollars, and the total deposits were as high as 1.5 trillion US dollars, accounting for 25% of the total US deposits.
– Royal Bank of Scotland was founded in 1727 and is the largest bank in the UK and is a banking subsidiary of the Royal Bank of Scotland Group. Total assets in 2018 were $69.42 million.
– State Street, formerly known as Union Bank, was founded in 1792. In 2018, the total assets were 244.6 billion US dollars, ranking 15th among US banks. At the same time, State Street Bank is one of the world's largest asset management companies, managing $2.51 trillion in assets and custody of assets up to $31.62 trillion, while the US's 2018 annual gross domestic product was $20.5 trillion.
– UBS was formed by the merger of UBS and UBS in 1998. The total assets in 2018 were 91.56 million francs. UBS's most famous business is private wealth management, which manages the world's largest private wealth, and nearly half of the world's billionaires manage their wealth. The return on capital in 2017 was 11.1%, surpassing 9.5% of Goldman Sachs and 9.2% of JPMorgan Chase.
The joining of these top global financial institutions not only made the R3 blockchain alliance a darling born with a golden key, but also gave the blockchain world a shot in the arm. Soon, the blockchain will revolutionize the financial industry and spread in the industry, and for a long time a wave of public opinion has formed.
Financial giants flock to
Since R3 has set off a wave, its momentum certainly does not stop at only these nine companies.
On September 15th, two weeks after the gathering of nine top banks, 13 top-level banks of the same level joined in and announced their participation in R3, as if they were afraid that they would not be able to get into the blockchain after joining the night. The 13 financial companies are: Bank of America, New York Mellon Bank, Citigroup, German Commercial Bank, Deutsche Bank, HSBC, Mitsubishi UFJ Financial Group, Morgan Stanley, National Australia Bank, Royal Bank of Canada, Sweden Nordic Bank of Sian, Societe Generale and Toronto Dominion Bank.
Due to the large number of these banks, we will not introduce them one by one. But there is no doubt that these are similar to the nine banks that started with R3, and are among the top financial institutions in the world.
On October 28, 2015, Mizuho Bank, Nordic United Bank, and Yuxin Bank joined the R3 Blockchain Alliance.
On November 19, 2015, the five organizations of BNP Paribas, Wells Fargo, Holland International Group, Macquarie Group and Canadian Imperial Bank of Commerce also joined the R3 Blockchain Alliance.
December 17, 2015, Bank of Montreal, Danske Bank of Denmark, Bank of St. Paul, Italy, Foreign Trade Bank, Nomura Securities, Northern Trust, OP Financial Group, Santander Bank, Scotiabank, United Bank of America, Sumitomo Mitsui Banks and 12 Westpac Bank companies became the last financial organizations to join the R3 blockchain alliance in 2015.
Since the alliance has reached 42 members and basically covers the world's top financial institutions, the R3 official soon said that the initial window of the bank's participation in the R3 blockchain alliance has been closed, and in 2016 will seek non-banking. The cooperation of financial institutions to expand the scope of the industry.
Despite the official statement, there are still bank organizations joining in 2016. In April 2016, Japan SBI Holdings Co., Ltd., Korea Hana Financial Group, and Brazil Itaú Investment Bank became the first members to join in 2016. On May 24, China Ping An Insurance (Group) Co., Ltd. became the first organization in China to participate in the R3 Blockchain Alliance. Then Toyota Financial Services Co., Ltd. and Metropolitan Life joined the R3 Blockchain Alliance.
At this point, the R3 blockchain alliance has become the hottest organization in the financial circle. According to the Global Stability Banks (G-SIBs) issued by the Financial Stability Board (FSB) in 2018, there are 29 banks that are commonly known as “big but not down”, and 22 of the members of the R3 Blockchain Alliance. . If China's four major banks in G-SIBs are excluded, then 88% of the world's largest banks have joined the R3 blockchain alliance.
After the scenery: the exit caused by 200 million US dollars
After glamorous, there must be hidden dangers.
There is a saying in China that “a monk picks up water, two monks raise water, and three monks have no water to drink.” After the giants swarmed into the R3 organization, they quickly discovered a problem: Who will pay for research, who will register patents, and who will benefit from research?
This is a group of financial giants, not engineers, whose accounts are naturally scored. Companies with strong technical backgrounds try to control R3 to a greater extent, but how should more than 40 institutions negotiate? In addition, those companies with even worse technology can benefit from the alliance, but for the more technologically advanced enterprises, what is the long-term significance of joining the alliance? If it is a patent developed by R3 and is known by a certain company, can the employees of the company be able to pre-register this patent?
Things are particularly tricky when exposed to uneven distribution. Soon, this contradictory gunpowder barrel was ignited by R3 himself.
In 2016, R3 plans to raise $200 million with a 90% stake and the company's valuation will reach $222 million. However, after R3 felt that the shares it held were too low, the financing plan was revised to raise 150 million US dollars with 60% of the shares, and the company's valuation was 250 million US dollars. This change triggered dissatisfaction with members of the R3 Blockchain Alliance.
Goldman Sachs subsequently announced its withdrawal from the R3 Blockchain Alliance, but stated that it will continue to study blockchain technology. A few hours later, Santander also announced its withdrawal. Morgan Stanley also decided to withdraw after some discussion.
In April 2017, JP Morgan Chase announced its withdrawal from the R3 Blockchain Alliance on the grounds of strategic inconsistency.
On the surface, the trigger for this series of exits is that R3 has changed the amount of financing, but in fact it is not the core reason. According to informed sources close to Goldman Sachs, the main reason is that the R3 blockchain alliance has gradually lost its scarcity. A few days before its withdrawal, the China Foreign Exchange Trading Center (CFETS) and Minsheng Bank also joined the R3 Blockchain Alliance. As members increase, how to distribute the interests of all parties and the use of patents becomes more and more complicated. Goldman Sachs itself has a certain technical reserve, and the benefits that can be obtained from the alliance are far less than the benefits.
According to CBINSIGHTS data, R3 financing totaled $112 million, which was lower than the initial $200 million and less than the $150 million after the revision. The most recent round of fundraising is mainly funded by 43 banks including Bank of Montreal, Spanish Exchange Bank, BNP Paribas and B3 Stock Exchange, with a fundraising amount of US$107 million.
Competitor on stage
Unlike Ethereum, R3 is not a very open platform.
In the second half of 2016, Sberbank, Russia's largest financial institution, applied to join the R3 blockchain alliance, but R3 refused to join the United States on the grounds that the United States imposed international sanctions against Russia. This shows that R3 is not a pure enterprise and alliance organization, but also has a certain political color. This also makes many financial institutions have concerns when choosing.
In April 2016, R3 launched its first distributed ledger, Corda. Corda is an application tailored for financial institutions with a distributed general ledger that is different from Bitcoin's unlicensed transactions. Corda does not maintain a complete transaction history, only disseminates certified transaction records, and provides regulatory agencies with “supervised observer nodes” to operate from the node supervision system. On November 30, 2016, Corda's code was open sourced on the Hyperledger Project.
Due to various reasons such as the lack of openness of R3, uneven internal distribution, and private ownership of members, some financial giants have turned to other R3 competition platforms, such as the Ethereum Enterprise Alliance.
On March 1, 2017, organizations such as JP Morgan Chase, Microsoft, Santander, and Credit Suisse joined the Enterprise Ethereum Alliance, a new blockchain alliance based on Ethereum. They use pyethapp as a standard client and use Ethereum's clone chain Quorum.
In 2019, JP Morgan issued JPM Coin on the Quorum-based chain, becoming the first banking giant to try to “send money” in the blockchain; this also allowed more organizations and users to learn about the Ethereum Enterprise Alliance. On the other hand, R3, although this alliance was established for such a long time, JP Morgan Chase was also one of the first nine members to join the R3 blockchain alliance, and finally issued a coin on Quorum, which made people feel very impressed.
The financial giants on Wall Street first captured the revolutionary atmosphere brought by the blockchain, but Silicon Valley quickly took the baton. Not to be outdone, IBM founded the Hyperledger Fabric and launched Blockchain as a Service in 2017. The Hyperledger Fabric project has a 55% contribution and 62% of the code submissions come from IBM, but is attributed to the Linux Foundation-led Hyperledger project.
At the same time, Microsoft and Amazon have joined the war, and the R3 blockchain alliance has caught up early in the morning.
"We don't need a blockchain"
Behind the influx of members of the league, R3 also staged a ridiculous farce.
In February 2017, R3 said to the outside world: "We found that what we want is not the blockchain itself, but the inspiration from the blockchain." At the same time, R3 is gradually clarifying its own about the "blockchain." The promotion, such as its launch of Corda, is an open source distributed ledger platform. Although it is inspired by the blockchain database and is expected to have many benefits of the blockchain, it is not a blockchain.
This remark immediately attracted criticism. Bitcoin Think's editor, Beautyon, described the matter directly on Twitter as R3 "accept failure." "The gathering of so many financial giants cost $59 million. The final result is that we don't need a blockchain. The game is over!"
Joshua Scigala, co-founder of Vaultoro Exchange, believes that R3 is both stupid and inefficient, and that the private chain represented by R3 is difficult to succeed. In fact, when R3 released the latest view of the blockchain, they spelled the blockchain "Block Chain" and the correct spelling was "Blockchain." The journalists at the time quickly captured this tiny detail and thought it was a clear sign that the technical features of the R3 had gradually disappeared.
Therefore, despite the explosive growth of digital currency in 2017, R3 is gradually drifting away from this big bull market. The bull market failed to input more blood to R3. The funds that were previously melted are still burning, and the financial situation will become a problem sooner or later.
R3 will spend a lot of money.
In order to build blockchain services to global customer networks, R3 has invested heavily in employee and travel costs. While it seems that some employees can do it online, executives and consultants often attend meetings around the world and follow the customary business travel and first class flights on Wall Street. This is not cheap.
According to reports, CEO David Rutter’s salary is also a source of controversy among R3 staff, which some call “hateful”. R3 refused to provide the number, but it was not excessive. In addition, R3 has purchased expensive properties in London and New York.
Those who are familiar with R3 culture and operations have reunited one thing in common: the company has shaped itself into a technology startup, but acts like a bank. This means that R3 is more like a member of Wall Street or a luxury consulting firm. One employee said: "They are not hiring technicians, but they are starting to hire bankers and suits. They know very little about technology."
According to Fortune's June 2018 report, two former R3 employees revealed that R3 will spend money in early 2019. And there is news that R3 is consulting a number of consultants about the initial public offering (IPO), but the road is very difficult. Another way of saying this is that R3 tries to sell itself and exchange more money to live.
R3 official said that it will not comment on profitability, but has already seen "significant income." R3 also said: "We are not surprised by the success of Corda, but the IPO is not the path we are pursuing at this time."
Jesse Edwards, co-founder of R3, left the organization at the end of March 2019.
to sum up
With the introduction of JPM Coin, Quorum has been known to manufacturers. As a cloning chain of Ethereum, the learning cost is lower, the application is more scalable, and it is also an open source project, which makes it more popular with enterprises.
At the same time, traditional cloud service providers such as IBM, Microsoft, and Amazon quickly deployed blockchain enterprise service markets, which made Corda's shoulders more and more stressful. The inside of R3 is not a piece of iron. For R3, 2019 is not good.
If Corda doesn't have enough highlights, maybe people will only remember that he was brilliant.
.Banco Bilbao Vizcaya Argentaria.https://en.wikipedia.org/wiki/Banco_Bilbao_Vizcaya_Argentaria
.2018 list of global systemically important banks (G-SIBs).http://www.fsb.org/2018/11/2018-list-of-global-systemically-important-banks-g-sibs/
.R3's Refusal of Russia's Sberbank is Against the Principles of Blockchain.https://www.cryptocoinsnews.com/r3s-denial-russias-sberbank-principles-blockchain/
.Goldman Sachs Leaves R3 Blockchain Consortium.https://www.coindesk.com/goldman-sachs-leaves-r3cev
.Report: Morgan Stanley Might Leave R3 Blockchain Consortium.https://www.cryptocoinsnews.com/report-morgan-stanley-might-leave-r3-blockchain-consortium/
.Insurance blockchain company B3i gets new board. Hints re funding.https://www.ledgerinsights.com/insurance-blockchain-b3i-board-funding/
.Report: R3's Banking Blockchain Software is Going Open Source.https://www.cryptocoinsnews.com/report-r3-banking-blockchain-software-going-open-source/
.JPMorgan, Microsoft, BP, UBS, Credit Suisse, Intel, and more are forming a new blockchain alliance.https://www.businessinsider.com/r-jpmorgan-microsoft-intel-and-others-form- New-blockchain-alliance-2017-2
.The Linux Foundation's Hyperledger Fabric: Are we there yet?https://www.ibm.com/blogs/blockchain/2017/02/hyperledger-fabric-yet/
Carbon chain value original group works
Author: hydrogen -3
Editor: Jiang Xiaoyu