To date, R3’s funding has come from subscriptions to its LRC
services, which cost each participant $250,000
per year. Those services include
access to restricted research as well as participation in various technology
and application PoCs, some of which have been requested by members.
With 70+ members, that amounts to annual revenues of $17+
million, which is a useful seed sum to fund operations ahead of the Series A fundraising
that’s now taking place. News
reports suggest that R3 is looking to raise $150 million (apparently down
from an earlier target of $200 million) and that so far the initial group of member
banks have committed only about a third of that.
So it’s clearly going to be a challenging time over the
coming weeks for R3’s top execs to steady the consortium ship and pull in
further funding from its members, and some wonder whether it will need to look
outside its membership, perhaps to technology firms, in order to reach its
While some observers are suggesting (a few of them with
glee) that these happenings spell the beginning of an early end for R3, that’s
not a likely scenario unless a large number of its members quit. It should be
remembered that R3 membership can cost a lot more than the subscription fee when
one adds in staff and operations costs of participation in PoCs.
More positively, R3 has now made good on its promise to open
source its Corda distributed ledger platform, submitting its code base to the
Linux Foundation’s Hyperledger Project for future incubation and community
development. For more on Corda in the open source world, visit the platform’s new website.
next step for R3 is to get the development community excited over Corda. “Our
intention is to encourage other people in the community to contribute to it, to
build on top of it, to drive its design and adoption,” said Richard Brown, R3’s
CTO in an interview with Fortune. “We
want a large number of people downloading and using it,” he said.
R3 is also looking to push Corda adoption along through the
creation of a partner ecosystem to build so-called CorDapps. The first partner
to be announced is Calypso Technology, an established developer of trading
support and risk management systems. Calypso has built a trade matching
application on top of Corda.
That R3 is looking to fintech application partners to give
Corda a wide reach is no surprise. It’s an accepted go-to-market strategy for
technology providers looking to establish ubiquity in the financial markets.
One just has to remember how in the 1980s, the Sybase database became
entrenched across trading firms as a result of being the database of choice for
financial software developers.
But R3’s partner strategy also represents a risk in the
longer term. With LRC revenues likely to decline over time as blockchain
technology becomes more commonplace, and with limited revenue prospects for
Corda and associated services and middleware offerings, the company will need
to create and sell its own applications to boost revenues.
One can imagine a scenario a couple of years out where R3’s
own application offerings face strong competition by CorDapp partners that can
boast the same Corda technology underpinnings but may well have deeper
application knowledge and business relationships. Product and partner management are going to be
important disciplines for R3 to embrace as it moves forward.
As it happens, R3 isn’t the only distributed ledger vendor
looking to build a partner ecosystem. IBM just announced that it is beginning
to build one to leverage IBM’s blockchain technology, which is based on the original
Hyperledger incubation, known as Fabric.
IBM’s early ecosystem partners include cloud middleware
vendor Cloudsoft, IP tracking service Everledger, professional services firm
EY, loyalty/rewards platform Loyyal and trade finance vendor Skuchain, among
News of IBM’s partner push came as a large contingent of
Hyperledger project members – representing most of the now 100 members and
focused on a number of different projects – met last week in Brooklyn, NY to
take stock of the project’s different activities.
By all accounts, the gathering was one of much early holiday
goodwill and enjoyed a collaborative spirit, which will be important to
continue to offset the impression that some observers have formed that the
project is in reality controlled (or at least heavily influenced) by Big Blue.
Equally important will be delivering 1.0 releases of key projects so that
production – at least pilot – implementations can be rolled out.
Finally, JPMorgan continued with the low-key rollout of its Quorum
project – an enterprise-focused version of Ethereum – by open sourcing it via GitHub. The investment bank
also created a web
microsite to describe its offering, and gave a demonstration
of the platform’s smart contract capability at a New York City women’s
Despite the lack of fanfare surrounding its release into the
open source wild, one should not underestimate the potential for Quorum to
become widely adopted in the future.
With its close technology ties to Ethereum, Quorum should
benefit from the popularity of the original permission-less platform that has
remained high, even among corporates, despite debacles like The DAO and
subsequent hard forks.
It’s also worth remembering that JPMorgan has some history
in creating open source software that has gone on to be widely adopted. In 2003,
it created the Advanced Message Queuing Protocol (AMQP) for low-level data
messaging. It has since become an OASIS standard that is supported by many
enterprise vendors. Interestingly, AMQP is a core component of R3’s Corda – a
fun fact learned from the recently published Corda technical white paper.