Solving the Digital Islands Problem - a conversation with Frank Frank Seibold, Chainlink [EN]

00:00:00: And you make a good point there, too.

00:00:02: If you think about tokenized assets... You could be as a cynic and say so what?

00:00:07: Yeah I've tokenized something amazing!

00:00:10: Well the answer is now we need to create utility for that asset.

00:00:16: but at this moment when you do things which currently don't work in the world of traditional finance like move things instantaneously stuff settles right And it's happening twenty-four seven.

00:00:31: That is where I think a big unlocks working around the corner and rather than just being cost reduction play, It will be growth for industry.

00:00:42: collectively We'll make use of collateral more efficiently something that will be multiple billion dollar unlock For each institution participating.

00:00:56: Welcome to Insights Digital Assets, the podcast about the future of capital markets.

00:01:02: Tokenization digital assets and the technologies that power them.

00:01:26: Hey,

00:01:29: it's great to deep dive a bit today into what Chainlink does.

00:01:33: All the projects you have and there are tons of them.

00:01:36: so I'm very happy to do a bit of a deep dive here.

00:01:38: but let's first start on your sides.

00:01:41: how did you get in to digital assets?

00:01:43: What is with your journey to where you're at now?

00:01:46: Oh that's a very interesting question one i didn't prepare for.

00:01:50: no i'm kidding.

00:01:51: obviously i have a good answer for this.

00:01:53: um traditional finance, mainly selling market data but also enterprise middleware solutions and I'm fascinated by infrastructure.

00:02:05: That sounds a little weird maybe but connecting things, defragmentation of things is something that i witnessed was part over the last thirty plus years The phone call, would you consider joining Chainlink?

00:02:20: I immediately saw the infrastructure play in Chainlink's setup.

00:02:25: And I loved it and long behold like a year-and-a-half in having a ton of fun working with Chainlink amazing team to build infrastructure to connect things again this time on chain.

00:02:38: So Chainlink was actually your first step into digital assets world.

00:02:44: Well... The digital asset world.

00:02:46: quite a few times before, I always followed the blockchain technology as an application.

00:02:52: of new technology to bring innovation less friction to capital markets.

00:02:58: So as a natural instinct, I've followed the industry for quite some time.

00:03:03: in previous worlds like the CME we talked about blockchain applications quite a bit.

00:03:09: even at the end-of-the-day broker that i worked before at ICAP we talked like, yes working for a natively blockchain oriented company that was Chainlink.

00:03:21: Yes!

00:03:21: Great!

00:03:22: So it seems as you are not yet regretting it.

00:03:24: so let's dive a bit on what we're doing today with Chainlink, Chainlink Labs and um... You're obviously working together.

00:03:32: We can deep-dive from that as well.

00:03:34: With Chainlink you have established really much an orchestration layer which is currently being used by also major financial institutions such as SWIFT UBS JP Morgan become a bit also the name of, go-to names.

00:03:49: with regards to how can we connect different chains?

00:03:53: Different blockchain applications.

00:03:55: How can you feed data into the blockchain?

00:03:57: so let's talk about that starting us on what is part of your core but obviously only one Part of your offering.

00:04:06: Let's start out on the data side.

00:04:08: So can you quickly elaborate a bit What Chaining is doing in The Data World and why the offer of chaining Is such important?

00:04:16: Look, I mean Jean Nick at its core solved for the Oracle problem.

00:04:22: How do you inject data into smart contracts reliably?

00:04:26: As we all know blockchain is something that drives finality in instantaneous settlements and all the more Is there a requisite focus on ensuring That the data that you inject into a smart contract it executes Something on the back of that injection of data is using data that is non-mutilated, clean and has a consensus mechanism.

00:04:52: That presents the data reliably without interception.

00:04:57: so smart contract can do its job in liquidate Frank because Frank's collateral no longer sufficient Because of that finality, all the more focus is required to be on the injection of data into smart contracts or into blockchain systems.

00:05:14: So now when we talk about data it's all about also price data and net asset values assets under management and data points like that.

00:05:23: so can you elaborate a bit how are moving beyond that data topic?

00:05:27: And what is the offering of chaining apart from data?

00:05:30: So we're moving.

00:05:33: We're trying to help our industry partners, move from manual reconciliation across multiple systems... ...to a shared, unshamed source of truth.

00:05:45: A golden source if you want!

00:05:48: We do SmartNav where fund administrators using the example one-of-the-many workforce in the asset management space publish that asset value once and every participant in the ecosystem we build an orchestrate is referencing the same data.

00:06:05: So all that friction goes away in that ideal world of like one golden source of truth where we are blowing through, I don't know, sixty billion dollars worth of unnecessary cost and then fundamentally changes how portfolios are viewed and managed from an asset management perspective.

00:06:24: so it's less about reconciling records that consistent goal to source of truth.

00:06:34: And the key point is, in my mind at least ,that you can run institutional grade smart contracts or smart contract based systems on bad or inconsistent data.

00:06:46: going back to my Oracle problem that we solved and That's why I think the data layer that we create with industry partners are all for industry partners like yourself really matters.

00:06:57: And you think about like the last twelve to fourteen months, we signed up quite a few traditional finance platforms that provide that kind of data.

00:07:06: and thinking about Deutsche Perse had big announcement with them not too long ago where were already publishing what's available which is billions of data points Institutional great data to institutional grade smart contracts on chain in a usable, reliable way.

00:07:34: And I underscore reliable for variety of reasons.

00:07:36: yeah

00:07:37: In that field you also recently announced your twenty four five US equity streams where are going to distribute data across over forty blockchains?

00:07:47: Is that a push in the same direction?

00:07:49: So really having one data layer being ready on different blockchains for apps to be used wherever it's needed.

00:07:57: Yeah, hundred percent and this is pretty close to home for me.

00:08:00: I mean like i spent seventeen years in market data infrastructure.

00:08:04: And how do you distribute data efficiently?

00:08:06: In what use case behind it was fascinating To see Like beta turning into gold almost right.

00:08:13: so look at my mind without Real-time pricing on chain, you cannot create credible reliable secondary markets period.

00:08:26: It's just the fact of life.

00:08:28: and we close that gap off like the real time traditional finance worlds And the onchain experience with a product called chaining data streams.

00:08:39: You know We're now dealing with sub second data delivery for use equities across forty plus chains And that way we can synchronize the off-chain and on-chain worlds.

00:08:51: Again, this goes back to my roots like connecting things in an intelligent fashion.

00:08:57: I think it's the biggest unlock because at least that allows tokenized equities to behave as actual financial instruments rather than some static digital twin representation.

00:09:10: so Representation to execution.

00:09:15: I don't know whether that translates well, but assets can be priced now or they can be traded and risk matched on chain in real time with a direct connection To the underlying traditional finance world which is what i what I think is the big convergence that we're all working towards.

00:09:32: What i really like in this story, it's also the whole asset management on-chain idea right?

00:09:37: So if you manage on chain assets and you want to automate it ,you wanna have it straight through end-to-end automized.

00:09:44: so having also data feeds on-chain really helps solving their problem .

00:09:48: And then we see already first use cases can leverage data on-chain.

00:09:56: So yeah, no very interesting and deep diving a bit also on the topic that has been pushed by Chainlink over recent years as well is the topic of digital island.

00:10:05: so you're saying what do we want to build?

00:10:06: this one single layer?

00:10:09: One single source of truth!

00:10:11: What we don't wanna build it's digital islands where there happens some oneside something under other Island something happened but really not connected systems.

00:10:19: how do having that idea in mind, also the idea of using public blockchains for that.

00:10:25: How has this discussion changed when looking at large financial institutions where you are very heavily involved?

00:10:32: That's another brilliant question!

00:10:36: For me again it is about building ecosystems.

00:10:39: but we have to accept the fact that traditional finance systems won't go away overnight and many instances they're highly functioning.

00:10:48: There's not a lot of problems to solve for.

00:10:51: So we need to build the plumbing, The infrastructure that connects traditional finance with the web three world, the World Of Blockchains and We are kind of Built-to.

00:11:06: be agnostic!

00:11:08: We don't really pick winners... ...we don't care what your preference is as a customer.

00:11:12: if you prefer Hyperledger Visa over like Solana We are connected to either, right?

00:11:18: So the whole story is that we built the plumbing first.

00:11:24: It needs to be there first and then that changes the conversation because you can enable that convergence.

00:11:30: And then these digital islands as you rightly say they just pop up like every time.

00:11:36: in traditional finance.

00:11:36: it's the same thing.

00:11:37: Islands pop-up but do.

00:11:39: real unlock happens when you connect them.

00:11:42: And the connecting the islands, making it an ecosystem is what Channing's really pretty good at.

00:11:47: Which was why I joined a company to begin with.

00:11:51: So we now see big institutions think like because you can in Switzerland UBS In my hometown New York JPMorgan The DDCC Swift they all are shifting away from piloting things To production use cases.

00:12:08: and you know, what I also observe here is like we're moving away from digital islands that originate form an experiment in a digital assets team to should be engaged with this kind of level.

00:12:24: How do we participate?

00:12:26: In the way it fits our operating model.

00:12:29: so let's solve real problem we have and remove friction.

00:12:33: use blockchain technology to solve for it.

00:12:37: That's what happening in the entire ecosystem that we're building, and where re-engineering existing traditional finance platforms to be available on chain again in a friendly coexistence so is no longer isolated.

00:12:51: We are thinking of ecosystems bringing all these islands together.

00:12:54: It's long-winded way saying its great to have Islands.

00:12:58: Its more important to have layer that connects them all To create ecosystems.

00:13:02: Yeah

00:13:04: And I think it's important what you're saying.

00:13:05: So creating new ecosystems on chain, but at the same time also allowing thereby to have added functionality more efficiency and whatever comes with a new infrastructure.

00:13:16: in that regard You also announced a partnership With twenty four institutions on corporate action Which is also huge?

00:13:25: Huge challenge into traditional financial infrastructure with reconciliation and so one can you discuss a bit what you're doing in that, or what do you did on this corporate action case and what are your planning to do in the future?

00:13:40: Yeah.

00:13:40: A hundred percent.

00:13:40: another great question.

00:13:41: so listen I spend quite some time in like the whole world of post-trade Another fascinating area often underappreciated In terms if it's complexity And the unlock but also the amount of friction.

00:13:56: I had a number in my head that, i think the industry spends about sixty billion dollars per year and kind of reconciling away into post-trade world.

00:14:04: Corporate actions are definitely one of the biggest pain points in that space.

00:14:09: so we've shown together with the DDCC is this not necessarily only technology problem?

00:14:15: it's data coordination problems right?

00:14:18: And its very interesting way on unpacking that.

00:14:22: you know if your thinking pilot in this case that we built with the DDCC and twenty-four participants across, you know, broker dealers and asset managers.

00:14:33: We demonstrated it with a smart NAV element of it That when participants use shared verified data layer.

00:14:43: You know The daily reconciliation needs kind of disappear right?

00:14:47: Corporate actions follow the same pattern really.

00:14:50: So what we've done with SmartVar first, then was kind of amplified in the world of corporate actions.

00:14:57: You know where you look at fragmented data multiple versions of truth consistent reconciliation cost and phone calls like... What is it?

00:15:09: The split is a one to eleven or ten.

00:15:12: again this could all go away if verified reliable, one golden source of truth.

00:15:22: And we work with our industry partners to create that single shared source-of-truth where data is validated at the source?

00:15:30: With AI models for example and distributed consistently through consumers on chain.

00:15:40: if you think about it I'm probably saying something some people might find less appealing because they make a lot of money in that process, is that the outcome is not faster reconciliation.

00:15:51: It's actually making reconciliation disappear because everyone's referencing one golden source of truth and debt would remove a lot friction and then a lot cost from this system.

00:16:04: so as I said summarizing it isn't about improving best consideration its kind.

00:16:14: That's the ad game.

00:16:15: And

00:16:15: getting twenty four institutions and large finance institution together to start a pilot on that is, it's very good first step.

00:16:22: have you any?

00:16:24: do we have any plans?

00:16:25: To continue dad or what is the future of that topic which I believe is a very important one?

00:16:30: We are there to do It.

00:16:32: um...we are talking too big CSDs around The world who kind of rekindle the idea.

00:16:41: I think that indicated a little bit, this is an area where a lot of money's being made still on the back-of-reconciliation.

00:16:50: So it's like you tell us if we want to pursue this industry and are happy to help or facilitate?

00:16:56: We have built infrastructure moving into production though which requires the industry come together pull in one direction really wanna solve for their problem once fall.

00:17:09: but like the layer, technology is there today.

00:17:13: Now moving a bit away from also data and reconciliation topic more to the interoperability scene where Ginnick obviously is major player as well.

00:17:22: we have touch upon it already when talking about digital islands.

00:17:32: Can you describe maybe first a bit what CRE, Chainlink Runtime Environment actually is and how that helps in orchestrating.

00:17:40: And bringing interoperability into today's DLT world?

00:17:44: So look when we talk about cross-chain interoperable mobility as theme there are two layers to it my mind There.

00:17:53: the on ramp connectivity of existing systems have to be part and the on-chain experience.

00:18:03: You know, like we introduced CRE, Chainlink Runtime Environment, Java Runtimes Environment standard that allows to create an orchestration between traditional finance and on chain finance platforms.

00:18:21: because in reality a bank's CTO doesn't want have forty integrations from on to off-chain and off to on chain.

00:18:31: They want an orchestration there, they want middleware infrastructure that connects things efficiently at ease at speed and reliably.

00:18:41: so when you reference CRE in my mind this is a major unlock in terms of connecting web two and Web three which sounds simple but actually what the essence of all this is, because I again am a big proponent of the idea of friendly coexistence.

00:19:01: We're gonna see that two worlds will run in parallel and converging at speed at some point but we are not going to have a light switch which allows us to switch off traditional finance platforms.

00:19:14: so you know like... That connectivity between web-toon web three is important, and we demonstrated that with the DVP use case.

00:19:25: We did together with JP Morgan Connectsys in Ando.

00:19:28: where were the orchestration layer connected or connect?

00:19:32: still you know?

00:19:34: With cross-chain logic compliance.

00:19:37: all the necessary ingredients of a good workflow for cap markets was CRE.

00:19:45: I would be interested your personal opinion with respect to let's say, development of the different environments in the DLT space.

00:19:53: When I look at it from a settlement perspective we want to be on those chains where there is traction.

00:20:00: but what we don't wanna do is on as many chains as possible because if you have an industry lets focus on certain specific chains that might be changed for different use cases hundreds of different chains for the same use case.

00:20:17: Do we see a bit of, let's say convergence in industry without now pointing out specific change but at least a convergence on certain chains?

00:20:27: Or do you think are we still in the phase where lets try to do it as many changes possible?

00:20:32: Another good question The way I see the world personally is... It reminds me very much about times that were experienced when Trading went from voice to electronic trading.

00:20:47: You know, people were barking down prices into squawk boxes and there were like two venues for it.

00:20:52: I use foreign exchange Reuters an EBS a word for both funny enough And that was all there was.

00:21:00: and then after sudden when things went electronic There was like a massive Fragmentation across many many venues where you could transact your FX risk.

00:21:09: It's little bit like that with blockchains.

00:21:12: You know, there's a proliferation of blockchains.

00:21:17: We have lots of them chaining.

00:21:19: as the company is agnostic to The outcome.

00:21:23: we don't pick the winners.

00:21:25: We are the infrastructure if you need To be connected to Frank chain and Lydia has also starting a party relevant chain were there to defragment that world.

00:21:35: so for us it the more the merrier really But but in reality there will be some consolidations for sure.

00:21:44: And the industry, we'll kind of loop around a couple of bigger ecosystems without blockchains that suffer from specific problems.

00:21:53: but they all need interoperability to connect.

00:21:57: you know... You launch an asset on one and your liquidity is on multiple other chains.

00:22:01: how do you de-fragment?

00:22:02: Like in the FX world you build an aggregation layer Like CCIP in my mind, shameless plot for Chainlink.

00:22:14: But that's what we do for a living.

00:22:15: We do it really well and we do it reliably And we don't cut corners and...we don't facilitate like things That lead to bad outcomes as we saw recently couple of weeks back.

00:22:27: So yes There is going be fragmentation but the industry just need to worry about because there are very healthy layer that will defragment and aggregate efficiently called Chainlink.

00:22:38: CCIP

00:22:40: Understood, thanks for your assessment on that.

00:22:43: Now knowing you are based in the US also personally how do we look at the whole regulatory development when looking as to the

00:22:52: U.S.,

00:22:52: so we have the Genius Act?

00:22:55: We already feel quite of an impact also on European side-of things by simply having the Genius act and now seeing the further developments How does it feel in the United States?

00:23:05: Has it accelerated also on your side of things?

00:23:09: Oh my god, yes.

00:23:13: It really did and still does.

00:23:16: I think when you think about genius... ...I think of it as defined rules off the road And that's what institutions have been waiting for.

00:23:27: When they weren't there people were stuck in pilot land.

00:23:32: What Genius has done is moving things from pilot and from a good idea, should we to into our production environment?

00:23:43: We talked about data quite a bit.

00:23:44: You already seen in data stable coin adoptions accelerating not only in theory but they did actual integrations and actually institutional deployments.

00:23:57: In my mind there's some fascinating aspects too like how stable coins and tokenized deposits coexist.

00:24:04: then what that does with the banking system.

00:24:07: But stablecoins are really a very effective cash lag for tokenized markets.

00:24:11: And I think that becomes clearer and in, I see standardization not to this in future and that unlocks a lot.

00:24:21: so if you want we are recreating as we said earlier like the asset versus cash motion on chain And I think that's something the Genius Act really enabled and accelerated.

00:24:37: From a market structure perspective, it removes a lot of uncertainty right?

00:24:43: People are clear about what the rules on the road is so they can now move to scale actively rather than behind closed doors without certain timeline.

00:24:55: for us That great because We are the source of trusted data and, you know we do proof-of-reserves for stable coins.

00:25:06: And we provide valuations like smart daff or assets.

00:25:11: We do attestation in and provide transparency mechanisms.

00:25:15: We provide compliance that we provide into operability.

00:25:19: so for us it was to perfect storm.

00:25:21: genius unlocked production use cases on all these use cases need data orchestration and reconciliation and cross-train interoperability.

00:25:32: And now if you look from the US also, compared to what we see in Europe or maybe Asia working together with financial institutions on that side do you see a big difference?

00:25:42: In how one site regulatory landscape is but also the willingness of the institution actually act upon those new technologies?

00:25:51: Yeah I think the U.S.. has the most dominating capital markets, right?

00:25:59: The biggest and variety of reasons they get bigger like our debt piles up.

00:26:05: And so there's got to be more US stressories out there I guess.

00:26:08: but kidding aside i think it wasn't unlocked for the world.

00:26:12: really you know people see that That the largest cap market platform in the world is moving on chain rapidly created a use case globally in Asia, in Europe.

00:26:29: And I feel like the entire industry has gotten a boost out of the US kind of getting out of this funk around.

00:26:37: we don't know what can do.

00:26:38: there's regulatory uncertainty and it's driving adoption globally as have lots great conversations in Europe.

00:26:46: There is lot positive vibes agility around what you do for a living as well, they did with your team which was amazing in my mind.

00:26:58: And the same is true of Asia.

00:27:00: it wasn't made to unlock not only for us but globally.

00:27:03: yeah I totally agree there and also seeing other pushes on the regulatory side.

00:27:07: um In other jurisdictions such as Europe Um To actually be still be ahead and uh Also allow our businesses to grow.

00:27:16: i think we are in good time from a regulatory perspective Totally agree.

00:27:21: So, in terms of also looking ahead where we are heading to what our future looks like.

00:27:28: In terms of DLT on-chain data and so on how do you see maybe looking at five years from now?

00:27:36: How does the world look?

00:27:39: Do you see it having merged already that we have been talking before about?

00:27:42: maybe TratFi And the on chain word?

00:27:45: merging has happened for a long time.

00:27:50: That's

00:27:51: another brilliant question, you got me there.

00:27:56: I really don't think that we have a light switch in which... We can just move everything magically on chain.

00:28:05: There are lots of processes running at scale and they run efficiently.

00:28:12: You will see certain hesitancy to change the winning team And I don't think that industry is well-advised to kind of push blindly for everything beyond chain.

00:28:29: What we're going see as an accelerated convergence, people will remove friction.

00:28:34: blockchains enable a lot of innovation and it enables with the low barrier ventry.

00:28:49: My vision of twenty thirty is that there will be convergence, but they also would be a friendly level of coexistence.

00:28:58: You know and again it will be driven by building reliable infrastructure the moment we can connect things efficiently.

00:29:08: Convergence will be accelerated which is why I was so fascinated about a chain link value proposition.

00:29:15: you now in this no doubt on my mind to stop a long-winded answer that there will be convergence by twenty thirty.

00:29:23: Will it be completed and everything will beyond chain?

00:29:27: Not so sure, you know again its all about the efficient way of connecting things creating ecosystems.

00:29:34: in my mind ecosystems comprise both often onchain components.

00:29:39: It would be amazing to see that the speed is, we are going ahead with quite of a speed but I agree it's likely gonna take much longer than that and still need time.

00:29:50: We're changing financial backbones right?

00:29:53: Financial infrastructure backbone.

00:29:54: so this will totally arrive in my opinion.

00:30:01: when Also looking in what would be possible, I think it will be amazing if you could see like assets also being transferred very openly and freely across borders.

00:30:10: And just talking about the European Union for example where we are working on.

00:30:15: but let's assume that you can simply send an asset from US to Europe over Asia without any frictions, fully regulatory compliant.

00:30:25: I think that would be an amazing vision looking ahead also with respect to having interoperability in our mind because obviously those infrastructures won't run on the same infrastructure tech stack.

00:30:35: so i think that's definitely something we can work all together towards.

00:30:39: yeah And by the way, that idea has been discussed very actively.

00:30:44: If you think about large CSDs and where I come from there's only one My friends at DDCC have done this great collateral experiment Where the idea is to be able To move collateral around a globe twenty four seven.

00:31:01: That Is something that would majorly unlock.

00:31:04: um cap markets were days friction and silos.

00:31:07: right now we can break them down.

00:31:10: And, the blockchain technology stack will allow for that.

00:31:15: undoubtedly very good data point that you said, I

00:31:19: think it's actually absurd in like the digital age we are in.

00:31:22: That that's not possible.

00:31:24: now We have assets You can move freely but with all the frictions regulatory wise Market-wise It just not there yet.

00:31:32: And

00:31:32: and you make a good point There too if you think about tokenized assets you could be as a cynic.

00:31:37: you Could say so what?

00:31:39: Yeah, I've tokenized something amazing.

00:31:42: and now what?

00:31:43: well The answer is Now you need to create to create utility for that asset.

00:31:49: But the moment you do, things currently don't work in the world of traditional finance—you move things instantaneously and stuff settles right at a time when the transaction is occurring... And it's happening twenty-four seven!

00:32:04: That's where I think big unlocks are working around the corner.

00:32:10: rather than just being cost reduction play… It will be growth play collectively, and you know we'll make use of collateral more efficiently.

00:32:22: Something that will be a billion dollar multiple-billion dollar unlock for each institution participating.

00:32:29: one hundred percent.

00:32:30: Yeah, I think that's very good.

00:32:32: So then also a good thought to close on.

00:32:35: fully agree there and Very much looking forward to continue working with you guys.

00:32:39: We are going to publish our data That we have generating.

00:32:43: an hour exchanges two chain link.

00:32:44: so definitely working together here.

00:32:46: Also working together another topic?

00:32:47: So very happy to continue dad.

00:32:51: It has been a pleasure talking to in today's podcast Likewise And very happy too also continued the past together with you.

00:33:00: It's been fun working with you.

00:33:02: Thank you so much and there is more good stuff happening between the two of us.

00:33:06: Definitely, thank you Frank!

00:33:07: Take care, bye-bye.

00:33:10: This was Inside Digital Assets a joint project by Biggs Digital Anceturion.

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