Datachain and JCB Start Demonstration Experiment to Build a “Digital Currency Exchange Platform”

Datachain and JCB, Japan’s only international payment brand, have started a demonstration experiment on interoperability between different blockchains to build a “digital currency exchange platform.”

The purpose of this experiment is to verify the technical usefulness of introducing a hub structure using IBC (*1) for the interoperability between heterogeneous blockchains using YUI, a Hyperledger Lab (*2), and Cross Framework (*3).

In the near future, various digital currency issuing and circulation platforms are expected to be launched, including those issued by the private sector in addition to the Central Bank Digital Currency (CBDC).

As the existing fiat currencies are widely exchanged, it is essential to develop exchange functions that enable interoperability among digital currency platforms to make use of digital currencies.

At present, the most common way to exchange digital currencies is to have a third party mediate the transaction. However, given the fact that blockchain was originally designed to be “autonomous and decentralized,” it is highly likely that exchanges that do not rely on a third party will be widespread in the future.

As the first stage of the joint research, Datachain and JCB, which has expertise in payment infrastructures and payment networks, have been discussing the technical usefulness of a method for interoperability between different blockchains that does not rely on the trust of a third party (the Relay method *4). Now, in collaboration with JCB, Datachain has started a demonstration experiment of interoperability between different blockchains to build a “digital currency exchange platform.”

The purpose of this demonstration experiment is to verify the technical usefulness of introducing a hub structure using IBC for interoperability between heterogeneous blockchains through the Relay method.

The demonstration experiment will be conducted in the following environment.

• Rather than blockchains verifying each other directly, verification will be executed between each blockchain and the exchange platform that serves as a hub, using a method that does not rely on the third-party trust by IBC.
• This Hub mechanism allows various IBC-compliant blockchains to verify each other through this hub. However, in this demonstration experiment, Hyperledger Fabric, one of the world’s most used enterprise blockchains, and Tendermint, a blockchain used by CBDC and global stable coins as a blockchain developed to connect heterogeneous distributed ledgers, will be used as the blockchain infrastructures.
• We use YUI, a Hyperledger Lab, as the verification modules and IBC for communication between each blockchain and the hub.
• For cross-chain transactions (simultaneous execution of multiple transactions across blockchains), we use Cross Framework.

By combining the assets and know-how of both companies, Datachain and JCB aim to continue to create innovative services and discuss widely with companies and projects responsible for the digital currency-issuing infrastructure for the practical application of interoperability between different blockchains.

*1 IBC: Inter-Blockchain Communication. A specification standard to ensure interoperability between blockchains, being developed by the Interchain Foundation and the Cosmos Project.

*2 YUI, a Hyperledger Lab: A project to achieve interoperability across various blockchain platforms through IBC, led by Datachain and available in OSS as Hyperledger Lab.

https://github.com/hyperledger-labs/yui-docs

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*3 Cross Framework: A framework for enabling the execution of smart contracts across multiple blockchains (cross-chain smart contracts).

https://github.com/datachainlab/cross

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*4 Relay method: There are two interoperability methods that do not rely on a third party to mediate transactions: the “HTLC method” and the “Relay method.” The “Relay method” allows service users to automatically execute transactions without handing over their private keys to an administrator.

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