It took just half a year for the team of National Settlement Depository (NSD), Russia’s central securities depository, to find a solution for the challenge of maintaining confidentiality when verifying distributed ledger transactions. The achievement has become a cornerstone in Blockchain-based corporate solutions for the financial sector in which financial privacy, in terms of client account balances, is a key. What is seen now as a breakthrough had started with the desire to try to create a distributed ledger-based e-voting system for shareholders.
The Global Issue of Confidentiality in Blockchain
Once distributed ledger technology emerged, both developers and businesses proposed a list of applied problems that could be efficiently solved using Blockchain. The list included a challenge of creating an e-voting system for securities owners. NSD accepted the challenge, as the company has long been developing similar solutions, although based on more conventional technology.
Once the solution designed by NSD is implemented, any company will be able to ensure confidential, transparent, and reliable shareholder voting, regardless of the number of shareholders voting or the complexity of the voting process. This is made possible by Blockchain technology which helps reduce costs associated with various corporate disputes. According to the data available to NSD, each year Russian commercial (arbitrazh) courts handle roughly 12,000 corporate dispute cases, of which 20% are disputes relating to decisions made by corporate management bodies, 18% are disputes over ownership of shares, and 14% are cases in which someone is seeking to invalidate a deal.
In the course of prototype implementation, the developers found that it was impossible to ensure complete confidentiality during the voting process on any of the existing Blockchain platforms. That is a global issue relevant to any closed corporate system migrating to distributed ledger technology.
Most centralized IT solutions are isolated, thus preventing external access. External players cannot get information on who voted, how they voted, and how many stocks they used to vote. Any attempt to get such information – either through insiders or through data leakage by the vote counting commission – is a violation of law and subject to penalty. However, if we launch a distributed system, we will be able to derive certain information from the data recorded on a computer of someone involved in maintaining the distributed ledger. Transactions are anonymized; however, as there is some information available regarding market players (such as, who makes most transactions, or who owns an interest in the company), one can interpret such information correctly and, thus, get knowledge of insider information.
That is why NSD decided to invest both in the development of an e-voting system, and in finding a solution to the confidentiality issue in general.
The issue of anonymization in the voting process was dealt with by a team of NSD’s employees, external IT security experts, and many developers from across DataArt offices in St. Petersburg, London, New York, Odessa, Kyiv, and Voronezh. The project also involved consultations with the ZCash protocol developers.
The project team applied special encryption techniques that allowed them to maintain the distributed nature of Blockchain technology, while ensuring complete data confidentiality. Thanks to the joint efforts, a new technology was created which maintains anonymity of participants in the course of transaction verification and allows to control the voting process and to automatically count votes in the distributed ledger.
From the business perspective, the solution makes it impossible to identify, even indirectly, deal parties, voting participants, or wallet owners in open Blockchain networks.
The solution was implemented on the Hyperledger Fabric platform and allows for any digital assets to be issued and dealt with, with any such transaction being protected against forgery through the use of cryptographic tools designed to verify the total balance of the asset in the network.
Creation of a Blockchain-Based Enterprise Platform
As part of the reference implementation of the Hyperledger Fabric platform, the confidentiality issue is solved by removing the network nodes that bear no relation to the particular transaction from the validation process. The remaining network participants are removed from the validation process and cannot see any data irrelevant to them. In addition, in the Hyperledger Fabric network, only a centralized transaction ordering service may, by default, see all data.
To make sure that all of the requirements to the voting process are met, ZK-SNARK algorithms were used. Those algorithms are, in particular, applied for implementation of ZCASH, an anonymous cryptocurrency, and ensure the highest possible level of confidentiality in distributed ledgers at minimum resource costs (as compared to other systems). Technically, the joint use of the ZK-SNARK and Hyperledger Fabric 1.0 algorithms allowed NSD’s team to solve the issue of confidentiality in Blockchain and to create an effective and efficient voting system. The system has been successfully tested throughout the entire process, from the voting initialization through to the voting, vote counting, and vote recording.
Opportunities for Business
The confidentiality solution opens prospects for implementation of Blockchain-based corporate solutions. NSD is in the process of having its rights to the new algorithms registered.
The solution designed by NSD may be used for Blockchain-based distributed recordkeeping of financial instruments and, in the future, adapted to a wide range of business challenges, such as delivery of goods and services, registration and transfers of rights, financial transactions, and quality assurance.
- UC Berkeley Opens New Blockchain Lab – Steve Chen Appointed to Co-Lead Newly Formed Berkeley Blockchain Lab - December 10, 2017
- Peter Vessenes Announces Deluge Network To Support a Safe and Direct Way to Contribute Bitcoin Directly to ICOs - December 5, 2017
- EXMO Launches Token Sale with Blockstarter’s ICO Solution - December 5, 2017
- AdHive, A Blockchain-Based Native Advertising Platform, Engages with WINGS DAO Platform - December 5, 2017
- Perkins Coie Adds SEC Attorney in San Francisco with Fintech and Blockchain Experience - December 5, 2017
- Cryptocurrency Monero Announces Breakthrough Online Shopping Initiative Featuring Top Global Artists’ Music and Merchandise - December 5, 2017
- Bitcoin for a ‘bit’ of Caribbean paradise - December 5, 2017
- With the Launch of SunCoin, Solar Bankers Takes On the World’s Energy Giants - December 4, 2017
- Blockchain News Is Merging With Token Report - November 30, 2017
- Mira launches Pre-ICO for Mira – an Easy and Convenient Way to Buy, Store and Send Cryptocurrency - November 23, 2017
- Dash and KuvaCash Partner to Fight Inflation in Zimbabwe with Cryptocurrency - November 22, 2017
- INS Ecosystem Partners with Ambrosus to Overhaul the Grocery Supply Chain - November 22, 2017
- Global Debt Registry Unveils Collateral Pledge Blockchain Proof of Concept - November 22, 2017
- Ripple Appoints Former New York State Superintendent of Financial Services Benjamin Lawsky to Its Board and Ron Will as CFO - November 22, 2017
- Advised by the Co-Founders of YouTube and Twitch, Theta Announces a Blockchain-based Video Delivery Network - November 22, 2017
- Modex adds top advisor from Google ahead of ICO - November 22, 2017
- Decentralized Ad Exchange AdEx Partners with INK to Handle the World’s First Blockchain-based Ad Auction - November 22, 2017
- Zilliqa Lowers Funding Cap Despite Heavy Demand from Investors - November 22, 2017
- Health Startup Etheal Combines Blockchain Technology with Micro-Incentives to Build a Peer-Reviewed Global List of Health Professionals - November 22, 2017
- Bitquence Rebrands as Ethos.io, Charting a Course to Unlock Crypto and the Future of Investment for the Masses - November 22, 2017
- Eidoo Introduces User Friendly ICO Engine – Allowing Crypto Startups To Launch And Manage Their Own ICOs For Fundraising On The Blockchain - November 22, 2017
- Simdaq Launches Social Platform for Democratisation and Development of Cryptocurrency Trading - November 22, 2017
- Gameflip Shatters FLIP Pre-Sale Goals, Sets Sights on December 4, 2017 ICO - November 22, 2017
- Golden Alliance Gold Mining Launches Token Sale - November 22, 2017
- Genaro and Storj Labs Announce Collaboration and Product Integration - November 22, 2017
- Metal (MTL) Now Available on the Chinese Cryptocurrency Exchange - November 22, 2017
- Mark.space & Jaguar Land Rover Announce Cooperation - November 22, 2017
- Exscudo – EON Testnet Was Successfully Updated - November 22, 2017
- Valorem Foundation Launches All-new Cryptocurrency Platform - November 22, 2017
- WAX Partners with Xsolla to Offer Its Platform to More Than 2,000 Video Games - November 22, 2017
- Brave expands Basic Attention Token platform to YouTube - November 22, 2017
- Narrative Launches Blockchain Based Social Network That Puts Revenue In Your Pocket, Not Mark Zuckerberg’s - November 22, 2017
- Gladius Uses Blockchain and Spare Bandwidth to Revolutionize Cyber Security - November 22, 2017
- Indorse Announces Partnership with App Store Cryptocurrency, AppCoins, ahead of MVP Launch - November 22, 2017
- Secutix And The Paléo Festival Nyon Announce The Success Of Their Blockchain Pilot Project - November 22, 2017
- ING launches major addition to blockchain technology: Zero-Knowledge Range Proof solution - November 22, 2017
- Cofound.it Announces Teams Participating in Upcoming Live Crowdsale Event - November 22, 2017
- PUBLIQ goes public: The blockchain and AI company that fights fake news announces the start of its Initial Token Offering - November 22, 2017
- Blockchain for Business SophiaTX Reveals New Details of Platform; Confirms Date for Token Generation Event - November 22, 2017
- BCShop.io Launches Partner Program - November 22, 2017
- World’s First Social Entrepreneurship Platform Moms Avenue Challenges Etsy by Gearing Up With Blockchain - November 21, 2017
- WAX Partners with Xsolla to Offer Its Platform to More Than 2,000 Video Games - November 20, 2017
- Pundi X integrates NEM blockchain to Bring Cryptocurrency Payments Into Retail Stores - November 20, 2017
- Fujitsu Develops Security Technology to Safely Connect Blockchains - November 20, 2017
- Jibrel Network Announces a Highly Successful Pre-sale Round - November 20, 2017
- KRAFTWERK on Blockchain - November 20, 2017
- MintHealth: Empowering Patients to Take Control of their Health and Data via Blockchain Technology - November 20, 2017
- IBM Completes PoC Of Blockchain-based Shared KYC With Deutsche Bank, HSBC, MUFG And Cargill, IBM Treasuries - November 20, 2017
- LetsEnhance.io to process images on Neuromation Platform - November 20, 2017
- Blockchain And AI Researchers Propose A New Model To Return The Control Over Human Life Data To The Patients And Accelerate Biomedical Research - November 20, 2017