$107 million has been invested into R3, a group developing blockchain-like technology for financial companies, by Intel, Bank of America Merrill Lynch, HSBC and dozens of other institutions.
Meanwhile, a source close to the situation said that the R3 group was left by Goldman Sachs and Santander who walked away from the funding round.
Working together to bring so-called distributed ledger technology to their processes, R3 is a group of major banks. Blockchain – the technology that underpins the cryptocurrency bitcoin, forms the basis of the technology. Transactions on the bitcoin network are allowed to be recorded and not tampered with by the blockchain technology.
From asset trading to money transfers, banks are trying to apply this same principle to many of their processes. Increasing the speed of several transactions and driving down costs are the advantages that this distributed ledger technology can bring.
With the final installment likely to be raised later this year, the first two tranches of a three tranche financing process is marked by the $107 million funding round for R3.
But with three tiers of investment available, R3 members could all get a piece of the action. The first tier was open to all investors. The second tier gave them governance responsibilities such as sitting on certain committees and required investors to put in more money. Investors had to put a larger sum in but got a board seat is meant by the third tier.
Among the top tier investors are SBI Group, Bank of America Merrill Lynch, HSBC, Intel and Temasek.
Development and implementation of its key product known as Corda, which is an open source distributed ledger platform, would be the main use that the money would be brought to, R3 said.
“You are going to begin to see the roll out of the enterprise grade Corda platform. You will see the beginning of the network standing up – connecting investors and members on nodes on the software,” Charley Cooper, managing director of R3, said.
“What is of more interest is that we are partnering with various different companies around the world to build applications to be sold to the world for real world applications that will be out by the end of the year.”
A network that will be interoperable between different institutions and will connect all the banks is being attempted to be built by R3. But systems that do not work together could be the result because there are a number of companies working on different distributed ledger technologies
One of the concerns is that there are a number of companies working on different distributed ledger technologies, and this could lead to a lack of systems that do not work together. And this is one of the concerns. Goldman Sachs and Santander both dropped out and left the R3 consortium in the process of the funding which began last year.
Goldman is understood to have wanted a very large stake in R3 with a lot of control whereas the current equity structure gives all the investors a fairly equal say. Goldman wanted a larger ownership stake and “outsized influence beyond what they were willing to invest,” a source reportedly told the media.
(Adapted from CNBC)