The Third Option: 'Canton Network', Neither Ethereum nor J.P. Morgan
In my recent blog, I summarized how the entire financial market is beginning to shift toward blockchain, and the potential for significant business opportunities to emerge for SoFi.
By the way, which blockchain will that financial market actually run on?
Those familiar with crypto assets might think of Ethereum. In fact, Ethereum is currently at the center of the RWA (Real World Asset) tokenization market, and tokenized government bonds and tokenized MMFs are also being issued on Ethereum.
On the other hand, Solana is increasing its presence in the retail sector, such as payments and remittances, with its high-speed processing as a weapon. So, should financial institutions just use Ethereum or Solana as they are?
Actually, the answer is not that simple.
What financial institutions are looking for is neither a 'fully open chain' nor a 'fully closed chain.' A blockchain with a new design philosophy that bridges the gap between the two is emerging.
That is Canton Network.
Currently, global financial infrastructure companies are joining this network one after another, and there are movements suggesting potential touchpoints with SoFi.
While it is not at a stage where anything can be concluded at this moment, I would first like to understand what kind of blockchain the Canton Network is.
<Three Major Approaches to Blockchain>
From the perspective of financial institutions, blockchains can be broadly divided into three types.
The important thing is not to simply compare 'which one is superior.' It is that each has a different design philosophy, and the optimal blockchain changes depending on the use case.
So, why is Ethereum alone not enough for financial institutions?
<Why is it difficult with Ethereum?>
Ethereum is a very excellent blockchain. Anyone in the world can participate, and value can be transferred on the same network. However, there is one major problem for financial institutions.
That is that it is too transparent.
For example, suppose J.P. Morgan, Goldman Sachs, and BNP Paribas conduct a $10 billion government bond transaction.
It would be problematic if anyone in the world could check the details of this transaction. Information such as transaction amounts, counterparties, holdings, and positions is extremely confidential.
In this way, the advantage of Ethereum, that 'anyone can see it,' becomes a disadvantage for financial institutions.
<Then is a closed type better?>
That is where private networks like Kinexys, developed by J.P. Morgan come in.
Here, participants can be limited, and information can be kept completely private.
However, the opposite problem arises. The networks of J.P. Morgan, Goldman Sachs, and BNP Paribas are difficult to connect with each other, resulting in 'isolated islands for each bank'. To be used across the entire financial market, this interoperability becomes a challenge.
<The Birth of the Canton Network>
The Canton Network was designed precisely to solve this problem. Think of it as having a structure like an apartment building.
Each financial institution has its own private room, and the information inside that room is not visible from the outside. However, they share only the necessary information through a common hallway.
“Public access, selectively private data” is a new way of thinking.
<Its greatest feature is 'Need to Know'>
In Canton, only those who need to see information see it. This is called “Need to Know.”
For example, when Apple issues corporate bonds, only the parties directly involved in the transaction—such as the lead underwriter, custodian bank, and auditors—need to know the details. Other financial institutions and general participants do not need to know.
This mechanism allows for both privacy and regulatory compliance.
<The concept of a 'Network of Networks'>
Another distinctive feature is the concept of a “Network of Networks.”
It is not about everyone sharing one giant ledger. While each financial institution maintains its own independent network, they use a shared layer called the Global Synchronizer to share only the consistency of the entire network while keeping transaction details confidential.
As a result, while preventing issues like double-spending, the transaction details themselves can remain private. This is a design philosophy that did not exist in traditional blockchains.
<Why is the financial industry paying attention now?>
It is surprising to see the companies paying attention to this mechanism.
Goldman Sachs, BNP Paribas, Visa, Microsoft, Deutsche Börse (Germany's largest stock exchange group), DTCC (the U.S. securities market clearing and settlement agency), and the SBI Group are among the companies supporting global financial infrastructure that are joining one after another.
In other words, this is not a network created by the crypto asset industry. It is a network that Wall Street itself is beginning to choose.
<Next Preview>
When the financial market shifts to blockchain, it will be neither Ethereum nor a completely closed system. The Canton Network is rapidly increasing its presence as an entity that bridges the gap between the two.
So, what would happen if SoFiUSD were to support this Canton Network?
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