The financial innovation firm R3 has been in the headlines recently due to the exodus of banks Goldman Sachs, Banco Santander, and National Bank of Australia. Each of these banks opted out of paying the membership dues of $100,000, essentially causing their memberships to lapse. Of the original 42 bank members, an estimated 36 banks now remain with official memberships in the consortium, according to Reuters.
In May of 2016, R3 sought to raise a $200 million round that offered the consortium’s original 42 bank members a 90 percent equity stake, as well as contractually equal rights. The opening bid was then renegotiated to raise $150 million from its bank members, with potential support from outside investors that would give 60 percent ownership to the bank members, and 40 percent to R3.
According to Fortune, insiders close to the fundraising deal state that banks have expressed interest in investing only $59 million into the consortium, which is short of their $150 million set target. This figure amounts to an investment from 36 of the original 42 members ranging from $1 million to $3.5 million. In an attempt to reach $150 million within the next nine to twelve months, R3 will reach out to the original 42 banks along with 30+ additional financial institutions it has relationships with. Because R3’s fundraising is private, the identities and amounts pledged from interested parties toward the project are unknown. With the restructured $150 million cap, the cohort of prospective companies has expanded to around 70 institutions total.
According to a source for Fortune, part of the reason Goldman Sachs left the consortium was because it wanted more control. Under the new model, Goldman Sachs believed negotiations would have become too difficult due to the increased membership cost and potentially competing interests. Fortune’s sources also stated, the bank may have also sought a board seat or other elements of control that the consortium could not guarantee.
Goldman Sachs remains committed to blockchain technology, a spokesperson for the firm reported. The bank co-led with IBM a $60 million investment in Digital Asset Holdings, as well as a $50 million fund in Circle, a digital payments startup headed by Brightcove founder Jeremy Allaire. Santander, also an investor in Digital Asset Holdings, recently named the startup’s CEO Blythe Masters as their senior blockchain advisor.
On November 30, 2016, R3 will launch the open source code for its distributed ledger platform Corda.
According to R3’s official website:
Corda is a distributed ledger platform designed and built from the ground up for the recording and automation of legal agreements between identifiable parties. It is heavily influenced by the requirements of the financial industry but we believe the community will find the underlying architecture will lend itself to a broad range of applications.
- Corda is the only Distributed Ledger platform designed by the world’s largest financial institutions to manage legal agreements on an automatable and enforceable basis.
- Corda only shares data with those with a need to view or validate it; there is no global broadcasting of data across the network.
- Corda is the only Distributed Ledger platform to support multiple consensus providers employing different consensus algorithms on the same network, enabling compliance with local regulations.
- Corda is designed to provide a great developer experience and to make integration and interoperability easy: query the ledger with SQL, join to external databases, perform bulk imports, and code contracts in a range of modern, standard languages.
With the upcoming launch of Corda’s code and many banks eyeing blockchain technology to make transactions faster, cheaper, and more secure, investments in R3 seems to be growing. Whether or not other large banks will leave the consortium is anyone’s guess, however, the interest in blockchain remains steady, if not on the rise. According to a spokesman at R3, “As with any project of this scale and scope, we always expected the make-up of the consortium to change over time. Developing technology like this requires dedication and significant resources, and our diverse pool of members all have different capacities and capabilities which naturally change over time.”