JP Morgan Deploys Blockchain Payment Network

In the latest news, the JP Morgan Blockchain project in Singapore has gone live. You might think this is the first time you’ve heard this news. However, you’ve likely heard of this project as Project Ubin. As a recap, Project Ubin is a multi-currency network with the aim to explore the use of Blockchain and Distributed Ledger Technology (DLT). This was led by the Monetary Authority of Singapore (MAS) and Temasek. Together these organizations aim to gain support for open Intellectual Property creation and collaboration between key industry players. This might sound familiar. After all, there are several other countries conducting similar experiments including Canada’s Project Jasper to assess the feasibility of a Canadian Digital currency. If we remember correctly, the Canadian experiment also extended to include cross border payments to Singapore.

This was only one of the successes in the Project Ubin journey which aims to tokenize the Singapore Dollar (SGT) on DLT. Since 2016, the development team has released 5 reports to share the benefits of the experiment. With many innovations underway, we wanted to cover just what this JP Morgan project entails. Even better, we wanted to know what it means for the future of payment networks.

Why Distributed Ledger Technology?

DLT is a record of transactions that are maintained by many people, in many different locations. Since many people manage the ledger, we can say that no central authority is in charge. This might not sound secure. To ensure the same security standards are met, DLT uses cryptography and cryptographic signatures to secure it. This may sound quite similar to a blockchain; but, it isn’t quite the same. One of the key differences between the two is that the distributed ledger restricts access to who is using it. In comparison, the blockchain is permissionless. This difference allows for many unique use cases since a decentralized blockchain isn’t always going to be a feasible solution.

As a result, DLT has continued to gain popularity for its efficiency. Currently, 80% of all banks are beginning to experiment with different DLT projects. This was just the starting point for use cases to be identified. Cases were selected based on their potential for disruption and innovation of expensive, time-consuming, and insecure processes that are prone to fraud.

Currently, capital markets show an inefficient flow of information which results in poor liquidity. This leads us to the question, “why are current markets so inefficient?” The simple answer is that we record the ownership of assets on different platforms through different ledgers. Retrieving and consolidating this information then becomes very inefficient. The solution? A distributed ledger.

Exchange of payments symbolizing JP Morgan deploying blockchain payment network.

Introducing Project Ubin

One belief about the project drove Project Ubin. That is, different ecosystems would need to be linked together by multiple blockchain networks. This would allow for different services to be operated on different platforms and technical infrastructures. The result would be seamless end-to-end transaction processing in the financial services industry. Since then, Project Ubin has since expanded to consider the benefits of providing services in exchange for value. Some examples of this include advertising and salary payments. 

The project consisted of five key phases. The phases are tokenizing SGD, re-imagining RTG’s, delivery versus Payment (DvP), cross Border Payment versus Payment (PvP), and enabling Broad Ecosystem Collaboration. The final phase, phase 5, began with JP Morgan leading the technical development workstream. On the other end, Accenture was managing the use case development workstream. These two avenues merged together for connectivity and integration testing. With this phase drawing to a close, we see the starting point in Project Ubin was to explore blockchain technology. However, throughout the project, it could be noted that many of the design concepts are applicable beyond blockchain-based networks. Even before DLT becomes mainstream there is potential to implement the designs on more traditional architectures.

Ubin V Blockchain Payment Network

When referring specifically to the payment network, you might hear reference to Ubin V. Ubin V is a network designed to allow for open access for participants on the network including currency issuers. This means even users in different countries can transact with each other. Currently, the project’s testing is done with Singapore Dollars (SGD) and the United States Dollars (USD). However, the intention is to leverage other commercial and central banks to test this prototype with even more currencies. This network was created with the view that a single platform common to all banks could transact with currencies around the world. Therefore, using one platform would allow for greater efficiency. It would also result in greater FX liquidity since more parties can make exchanges, quicker.

To access the Ubin V network, users can use a variety of different wallets. These wallets would act as the front end interface that users would interact with. This means each wallet can connect to Ubin V. Therefore, a multinational corporation can connect to many platforms including Ubin V in Singapore. From a technical perspective, the Ubin payments network uses J.P. Morgan’s Quorum blockchain protocol as the base infrastructure. JP Morgan open-sourced Quorum as a branch of the Ethereum blockchain. They then coupled it with the network and application capabilities developed as part of the IIN and JPM Coin products. This means the infrastructure also provides API connectivity to applications.

The Use of Smart Contracts

Additionally, this project showcased the use of smart contracts in prototyping additional functionalities on Ubin V. This can be attributed to the flexibility of the smart contract programming language. Its flexibility ensures new functions can be created quickly and users can test it prior to it going live. Some of these quickly prototyped solutions include pulling payments, direct debit authorizations, escrow functionalities, and other payments.

The Future of Project Ubin

The Phase 5 report shares the Ubin V prototype’s success. Now, you can settle payments of different currencies on the same network. Additionally, the final phase of project Ubin validated the use of smart contracts for Delivery-versus-Payment (DvP). Since the prototype has successfully been implemented, we can say there is an official end to the five-phase project. There are more than 40 financial and non-financial firms engaged with blockchain during the testing phase. This is only the beginning of live commercial adoption. MAS and Temasek also shared that they will release parts of Project Ubin’s technical specifications. In doing so, they hoped to encourage more development in cryptocurrency and blockchain.

Temasek’s CEO, shares that they “look forward to supporting commercialization efforts emanating from Project Ubin and other application areas, with a view to driving greater adoption in blockchain technology.”

Furthermore, you might even remember Hedgetrade’s own Dave Waslen also shared his view on Singapore driving the mass adoption of blockchain technology. In a Cointelegraph article, he states,

“By bringing together blockchain projects and financial regulators to create the best possible building framework, companies will continue to be attracted to that atmosphere when often their own countries are too embroiled in political or economic turmoil to foster that kind of environment.”