Yuval Rooz: Achieving on-chain capital markets requires solving privacy and settlement finality, misconceptions about Canton are unfounded, and super validators play a crucial role in transaction processing

Key takeaways

• Achieving on-chain capital markets requires addressing settlement finality and privacy concerns.
• Canton faces criticism due to its successful partnerships, not its operational model.
• Misconceptions about Canton being a centralized database are unfounded.
• Criticism of Canton’s execution and objectives often stems from misunderstandings.
• Partnerships with traditional finance institutions highlight Canton’s integration efforts.
• Canton lacks some foundational blockchain properties, raising questions about its classification.
• Atomic composition of smart contracts with privacy is a unique feature of Canton.
• Canton prevents double spending using a UTXO model similar to Bitcoin.
• Super validators on Canton act as a decentralized ordering service.
• Super validators coordinate and timestamp transactions without seeing them.
• Understanding the role of super validators is crucial for grasping Canton’s transaction processing.
• Canton offers unique capabilities not achievable on other blockchains.

Guest intro

Yuval Rooz is co-founder and CEO of Digital Asset, a New York-based enterprise blockchain company that provides infrastructure for institutional-grade financial systems. Before founding Digital Asset in 2014, he managed an algorithmic trading desk at DRW Trading and worked as a trader and developer at Citadel, where he built computer models during the financial crisis. Rooz played a pivotal role in developing the Canton Network, a privacy-preserving public blockchain now used by JPMorgan, the DTCC, HSBC, and other major financial institutions globally.

Overcoming challenges in on-chain capital markets

• To achieve on-chain capital markets, it’s essential to address the challenges of settlement finality and privacy for issuers.

  — Yuval Rooz

• Convincing issuers to move their records on-chain requires solving settlement finality and privacy issues.

• You need to be able to convince issuers to move their books and records to be natively on chain.

  — Yuval Rooz

• Privacy concerns are a significant barrier for issuers considering on-chain solutions.

• How do you give settlement finality and get an issuer to be comfortable if they don’t want their books and records to be public?

  — Yuval Rooz

• Integrating traditional financial records with blockchain technology is complex.

• Understanding the complexities of integrating traditional financial records with blockchain technology.

  — Yuval Rooz

• Addressing these challenges is critical for the adoption of on-chain capital markets.

Misconceptions and criticisms of Canton

• The criticism against Canton is largely unfounded and stems from its successful partnerships.

  — Yuval Rooz

• Successful partnerships have led to criticism of Canton, not its operational model.

• If people really had those topics deep in their heart and really said that this is not good for the industry, I would say that those topics would have come about.

  — Yuval Rooz

• Misconceptions about Canton being a centralized database are incorrect.

• Some of the things that have been said, Canton is a centralized database with a coin on top of it, are all things that are not true.

  — Yuval Rooz

• Understanding what constitutes a centralized versus decentralized network is essential.
• Criticism often stems from perceived biases against certain projects.

• This insight provides a strong viewpoint on the nature of criticism in the crypto industry.

  — Yuval Rooz

Execution and objectives of Canton’s project

• The criticisms faced by our project stem from a misunderstanding of our execution and objectives.

  — Yuval Rooz

• Misunderstandings about Canton’s execution lead to criticism.

• I would love to understand how what we’re doing is so existential for this industry and is so terrible compared to other things.

  — Yuval Rooz

• Partnerships demonstrate Canton’s commitment to integrating traditional finance with blockchain.

• We just announced a partnership in Japan with Mizuho and Nomura and JPX around tokenized JGBs.

  — Yuval Rooz

• Execution of partnerships is a key aspect of Canton’s strategy.

• Last week it was HSBC Payments, and we’re just executing on those things.

  — Yuval Rooz

• Bridging traditional finance and blockchain is central to Canton’s approach.

Canton and the definition of blockchain

• Canton is not truly a blockchain despite its claims, as it lacks the foundational properties that define blockchain technology.

  — Yuval Rooz

• Questions arise about Canton’s classification as a blockchain.

• It’s really about the properties when you say blockchain, you’re tapping into more than a decade of an industry with certain values.

  — Yuval Rooz

• Understanding fundamental blockchain characteristics is essential.

• This insight challenges the definition of blockchain and critiques Canton’s claims.

  — Yuval Rooz

• The debate on Canton’s classification highlights differing views on blockchain technology.

• I believe and like I would like to understand it better in this debate that Canton is not really a blockchain.

  — Yuval Rooz

Unique features of Canton

• Canton enables atomic composition of smart contracts with privacy, which is not achievable on other blockchains.

  — Yuval Rooz

• Atomic composition with privacy is a unique feature of Canton.

• That’s what you can achieve on Canton that you cannot achieve on other blockchains.

  — Yuval Rooz

• Canton’s UTXO model prevents double spending, similar to Bitcoin.

• The issuer of an asset can be a real-world issuer or a decentralized party like Bitcoin.

  — Yuval Rooz

• Understanding the UTXO model is crucial for grasping Canton’s mechanics.

• This claim provides insight into the operational mechanics of Canton.

  — Yuval Rooz

Role of super validators in Canton

• Super validators on Canton act as a decentralized ordering service rather than validating the business logic of assets.

  — Yuval Rooz

• Super validators differ from traditional validators in their role.

• They behave more like ISPs on the internet.

  — Yuval Rooz

• Understanding super validators is key to understanding Canton’s operations.

• They act as an ordering, a decentralized ordering service, but they’re not validating the actual business logic of the asset.

  — Yuval Rooz

• Super validators coordinate and timestamp transactions without visibility.

• The super validators purely act as a coordination layer and a timestamping layer.

  — Yuval Rooz

• Their role is crucial for transaction processing in Canton.