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Blockchain fintech Symbiont adopts lighthouse client strategy

symbiont lighthouse

Several blockchain fintechs have novel technologies. Symbiont is one of a group that includes R3, Digital Asset, Axoni, Clearmatics and perhaps Baton Systems. Symbiont has a slightly lower profile. But it has significant blockchain projects with the likes of Ipreo for syndicated lending, Ranieri for mortgages, and Vanguard for index data.

Some of these companies have technologies which have relevance beyond financial services. Many pigeon-holed R3 because it’s majority-owned by banks. However, many in the insurance sector adopted Corda as their technology. Digital Asset also has plans outside of financial services, and in the past Symbiont has flirted with insurance and health.

In 2013 Mark Smith started Symbiont in New York. Smith previously co-founded Lava FX, a part of the Lava Trading company bought by Citigroup in 2004. For Symbiont, he teamed up with the two blockchain pioneers behind the CounterParty protocol, Adam Krellenstein, and Evan Wagner. They were amongst the first to recognize that the Bitcoin protocol could be used to represent other assets.

So far the company has raised $16 million in venture funding which is considerably less than R3 and Digital Asset Holdings which each raised more than $100 million.

Ledger Insights interviewed Ben Spiegelman who focuses on strategy and corporate development for Symbiont. The conversation highlighted two aspects of Symbiont’s plan: their go-to-market strategy and their technology strategy.

Lighthouse partner versus consortium

Spiegelman believes there are pros and cons to consortia in financial services. A large number of decision-makers can slow down the process and make it tricky to deploy in the early stages.

“When you are creating a permissioned Enterprise blockchain, you need very large Lighthouse clients that have these large networks,” said Spiegelman. “It creates this super distribution model where they can help you acquire additional clients and members of the network to get these networks up to scale and really get the benefits of what the software has to offer.”

The strategy is not dissimilar to IBMs and their relationship with Maersk (shipping), CLS (banking), and Deutsche Bahn (mobility).

Technology

Spiegelman described Symbiont’s Assembly technology as: “a purpose-built platform that can be able to model any financial assets or instrument and have the blockchain be the sole custodian of that instrument for its entire life cycle from origination to finality.”

Many blockchain privacy approaches involve segregation or obfuscation of data. In the case of segregation if you’re not concerned with a transaction or relationship, then your server doesn’t host that data. In the case of obfuscation, the full details are not stored on the blockchain. Instead, there’s just an illegible representation of the data called a hash. The real data lives elsewhere.

Symbiont adopts neither of these approaches. All the data is on the ledger but encrypted. It can handle large file sizes and claims to achieve high performance and throughput. Their team includes leading cryptographer Lisa Yin who previously worked at RSA and has an MIT Ph.D. in Applied Maths.

“The smart contract models the terms and conditions of any instrument, of any data, or anything of that nature that we’re doing and we have everything live on the ledger,” said Spiegelman.

“That way you have full replayability of transactions and you are able to have the smart contracts act autonomously throughout the instrument’s life cycle. Versus having to maintain them somewhere else and you have the same reconciliation issues you had before when you had multiple central databases.”

So all the data is stored on all nodes, but a node can only decrypt what it is allowed to see, and likewise, it can just execute transactions that it’s able to decode.

The technology is proprietary with no plans to open source it.

Use cases – syndicated loans

Syndicated loans is an over the counter market that currently involves communication via Excel, fax machines and emails.

In 2016 Symbiont created a 50/50 joint venture for syndicated loans with Ipreo, called Synaps. Ipreo is a financial services data provider that was recently bought by IHS Markit for $1.85 billion. The company competes with the likes of Thomsons Reuters.

In the same year, Synaps ran a Proof of Concept (PoC) for eight months. Credit Suisse was the primary client, but it also involved BBVA, Danske Bank, Royal Bank of Scotland, Scotiabank, Société Générale, State Street, U.S. Bank, and Wells Fargo.

It typically takes 20-30 days to settle a syndicated loan deal. With Synaps that comes down to three days and Symbiont is now working on getting the project into production. Earlier this year Finastra launched a competing syndicated loan product built on Corda.

Use cases – mortgages and index data

In April Symbiont teamed up with Ranieri Solutions, which specializes in securitizing mortgages. A feature of the 2008 crisis was a lack of awareness about the mortgages that underpinned the securities. The transparency promised by blockchain could help prevent a repeat.

For another project, at the end of 2017 Symbiont partnered with Vanguard, the investment company that looks after $4.8 trillion in global assets. CRSP the index data provider is also a key partner in the project which aims to improve index data distribution.

“Using this platform, investment managers will be able to instantly distribute, receive, and process index data, resulting in better benchmark tracking and significant cost savings,” said Vanguard’s Warren Pennington.

So the unique aspect is that the data providers and consumers are on the same network. While Symbiont didn’t say anything further, it’s evident that pricing enables trading.

Spiegelman wouldn’t comment on timescales for going live with these projects. However, there are two use cases which are in production but are currently confidential.

Conclusion

Symbiont is working several other projects beyond those mentioned. While he wouldn’t elaborate on the business model, Spiegelman believes that “each one of our opportunities is a billion-dollar company in itself.”

For each of these initiatives its a race to see who builds the largest, most meaningful ecosystem of participants.