D3: Building trusted depository infrastructure for crypto assets

25 September 2017
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By Artem Duvanov, NSD Chief Innovation Architect

NSD’s Chief Innovation Architect Artem Duvanov speaks about D3, a decentralized digital depository, an initiative NSD supports and helps bring to life. Very soon it may cover all of the crypto investors pain points and grant a much desired legal status to digital assets.

What is D3?

D3  is a platform that provides custody and depository services for crypto assets. I like to think of it as a bridge for investors, connecting traditional assets and digital money. D3 is a startup as good as any — we started working on it in July 2017 after identifying a problem that is there for many of our clients. Let’s face it, institutional investors are afraid to enter crypto assets market, and there is none of the infrastructure they are used to on traditional market, there are no trustworthy and compliant custodian and depository services.

Who are D3’s future clients?

When it comes to crypto assets, there are two types of investors — ones that have already got hold of digital money and those who are only looking into it. The first group needs a legitimate status, a proof that what they do is in line with financial regulator’s requirements. They need a technological platform and above all —  record keeping and security.

The second group is represented by institutional investors, they haven’t invested in crypto yet, and need a business-service. The semi-legal status crypto assets have today is unacceptable for them, so they are looking for a hundred percent legal entry into the market that looks very lucrative. They may or may not (yet) see the risks the more experienced crypto investors recognize — such as theft and numerous vulnerabilities.

D3 offers security services and support for ones, and business services and confirmed legal status for others.

Why does NSD believe this initiative to be important?

Firstly, I believe that the new role of traditional infrastructure will be to create and operate technological platforms. NSD represents traditional financial market infrastructure, and of course we are looking for our new special place in the brave new crypto world. D3 will provide a platform and a service institutional investors are used to — in terms of instruments available. And then we will take them to a whole new level and offer  them access to key storage and maybe even conventional messaging channel like SWIFT.

And secondly, depositories, not only Russian NSD, need D3, and D3 needs them. For D3 to operate smoothly and deliver exactly the kind of services required, it needs a solid and growing community of central depositories around it. This will help the platform better serve ever-changing needs. It will be equally beneficiary for the depositories as they will be able to offer their clients, old as well as new ones, business-services for crypto assets.

Why blockchain?

Blockchain allows to create an integrated noosphere where information exchange and transactions are made easy. We strive to create a service that will meet all necessary requirements — including those of financial regulators, KYC/AML identification guidelines, etc. Every D3 member will be sure that it’s a safe environment to operate in, and all parties involved have been identified and meet AML and KYC requirements.

Technically speaking, we are building a multi cryptocurrency service to help buy all kinds of cryptocurrencies and tokens that are now running on totally different technologies that have different security levels. Institutional investors have high security requirements, and we must deliver an operational environment, where crypto assets will be securely incorporated to allow all operations with them.

It is an environment for institutional investors and central depositories where crypto assets are tokenized and can participate in various operations. In this case, platform’s task is to securely and safely transfer crypto assets from various blockchains they run on — to the safe environment and enable users handle operations on a decentralized ledger without any risk of a central/centralized entity being involved. This, to us, will lead to service’s high reliability and cost-reduction in perspective.

What blockchain does D3 operate on?

We only use blockchain technologies that are recognized as secure in the corporate world. D3 is operated on a private blockchain with a fast consensus algorithm. It allows us to have a security level higher than that of blockchains the crypto assets were issued on, a higher operation speed and lower costs compared to that of initial blockchains.

It’s an open ecosystem, and anyone can create new decentralized services operating on smart contracts. This can include corporate governance services, stakeholders’ voting, etc. The platform will remain open, so that entities present can create services.

What makes you confident that the service will become much-in-demand?

Firstly — all those questions we are being asked, our partners and clients are being asked all the time. We share a firm belief that blockchain and digital assets will shape the future, and there is a certain fundamental value to them that will be in demand.

And if blockchain will be in demand, it means that services granting access to assets on blockchain will be in demand as well. And thirdly, the technology itself is hard to use — and we are not even mentioning end users, but registered legal entities. Consequently, there must be an intermediary service between end user and the ledger to facilitate the access, ensure legal compliance and security. So yes, what D3 is doing will very much be in demand.

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