A Quick Overview of the Financial Blockchain Network Canton Network Planned by Microsoft, Goldman Sachs, and Others

Author: CoinDesk

Compiled by: liurui@Web3CN.Pro

Following Amazon's announcement of launching its private blockchain, fintech company Digital Asset will initiate a privacy-supporting interoperable blockchain network called Canton Network, designed specifically for financial assets. It aims to provide decentralized infrastructure for institutional clients, allowing various systems in the financial market to interoperate and synchronize.

The new network will launch in July, with companies including Goldman Sachs, Cumberland, S&P Global, SBI Digital Asset Holdings, Umbrage, Microsoft, Paxos, Deloitte, and CBOE participating in the network, which will test its interoperability across a range of applications and use cases.

Canton Network is the industry's first privacy-supporting interoperable blockchain network, built on the smart contract language Daml from blockchain firm Digital Asset. Joseph Cody, head of Deloitte Consulting, stated that Canton Network can tag assets, establish immutable records, facilitate rapid cross-organizational settlements, create new markets, share data, and promote secure transactions.

Canton Network creates a "network of networks," linking previously independent financial systems to achieve multi-chain functionality. Through Canton Network, traditional financial institutions can offer users new innovative products, experience a more secure, reconciliation-free environment, and allow assets, data, and cash to synchronize freely across applications. This creates opportunities for financial institutions to provide innovative products to clients while enhancing efficiency and risk management capabilities.

Yuval Rooz, co-founder and CEO of Digital Asset, stated:

For the first time, financial institutions can operate within a secure, stable, and fair financial regulatory framework while realizing the full benefits of a global blockchain network. This is an important step forward in the blockchain space. We look forward to helping this founding team of network operators and users build applications and connect them to the Canton Network.

Blockchain Technology

To understand the challenges facing blockchain, we first need to understand blockchain itself. Blockchain technology is a security mechanism that tracks information in a way that makes it difficult or impossible to modify or tamper with.

Blockchain integrates a digital ledger of transactions that is replicated and sent to every computer on its network. Each block in the chain contains some transactions. When a new transaction occurs on the blockchain, the record of that transaction is added to the ledger of everyone on that chain.

Blockchain uses distributed ledger technology (DLT), where the database is not stored on a single server or node.

In a blockchain, transactions are recorded in an immutable cryptographic symbol known as a hash. This means that if a block on a channel or chain is altered, it would be difficult for a hacker to change that block on the chain because they would have to do so on every version of the chain outside. Blockchains, such as Bitcoin and Ethereum, grow as new blocks are added to the chain, making the ledger more secure.

Applications of Blockchain

Here are some examples of blockchain applications:

• Cryptocurrencies
• Smart contracts
• Secure personal information
• Digital health records
• E-governance
• NFTs
• Gaming
• Cross-border financial transactions
• Digital voting
• Supply chain management

According to Statista.com, the market size of blockchain technology has been growing at a very fast pace in recent years, expected to reach $40 billion by 2025.

With the implementation of smart contracts in blockchain, there are scenarios for automatic execution without any human intervention. Smart contract technology enables the highest levels of security, privacy, and anti-hacking measures to be implemented.

Why Did Canton Network Emerge?

The emergence of Canton Network is driven by demand, as previous blockchain networks have significant drawbacks for financial institutions:

Lack of privacy and control over data. Public blockchains have privacy flaws, and currently, no public blockchain provides data protection at any level of its network, with asset issuers not having control over the assets. Public blockchains require operators to relinquish complete control over applications to achieve interoperability.

Balancing control and interoperability is challenging. Public blockchains require operators to relinquish complete control over applications to achieve interoperability.

Capacity limitations. Conventional blockchain networks have strict vertical limits on transaction capacity at layer 1, and the operation of public blockchains leads to inherent capacity constraints, which may not meet the scale and performance required by financial institutions.

Canton Network combines the smart contract capabilities of blockchain networks like Ethereum (ETH) and Solana (SOL) with privacy features similar to Bitcoin's Lightning Network and ZCash (ZEC), helping to distinguish it from other restricted operational blockchain networks. Canton Network addresses these limitations by enabling applications across multiple subnets to achieve native interoperability without the need for layer 2 protocols or asset bridges.

DAML supports different blockchain technologies, and DAML applications on Canton Network already support interoperability, allowing the option to use other enterprise blockchains to enhance certain trust attributes, while core data remains stored on Canton Network. Currently, the Canton Network blockchain can interoperate with other blockchains.

(DAML is a purpose-built domain-specific language designed to encode shared business logic for applications, used for developing and deploying distributed applications in a blockchain environment. It is a lightweight platform for rapid application development.)

As of early 2023, financial institutions are trading over $50 billion daily on the restricted access subnet of Canton Network.

The potential of Canton Network is vast, and its widespread adoption will bring more possibilities to the market, inevitably becoming an essential part of the financial market. As Jens Hachmeister, issuer of Deutsche Börse Group, stated: "Achieving seamless connectivity between various blockchain networks in the industry is a key component of the future digital and distributed financial market infrastructure."