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The Financial CryptoGrapher: The Brains Behind EOS, Mattereum, and More

advanced financial cryptography

Ian Grigg is a renowned financial cryptographer and principal architect at ChamaPesa, chief scientist at Mattereum, and partner at Block.One working on EOS. He has emerged as a key figure and thought leader of the community since his entry into the space in 1995. He completed his BSc (Hons) from the University of South Wales and MBA (Executive) from the London Business School. After completing his education, he went on to explore his skills in the arena of financial cryptography and security and risk management.

DigiCash, Ricardian Contracts, and SET

In 1995, when Grigg was a system programmer, he learnt about zero coupon bonds in his finance classes and realized that understanding zero coupon bonds is the key to understanding finance. At the same time, his friend Gary Howland introduced him to DigiCash, an Amsterdam-based company that had created a framework for putting money on the internet in the form of Digital Cash, or e-cash. Grigg analyzed the DigiCash dollar and realized there was more to it than just a “dollar.” According to his finance theory, a dollar can be treated as a zero coupon bond, which would bring in all of finance (shares, derivatives, bonds) under the purview. He thus realized DigiCash’s vision was too narrow: All of finance could be implemented using this technology, and be more advantageous for all stakeholders.

That’s when he and Howland decided to put all the finance onto a ledger and began bond trading. Initially, they planned to work with the founder of DigiCash and his ecash technology, but it was not available for licensing. So they delved deeply into financial cryptography and ended up inventing Ricardian contracts and a triple entry accounting system.

The DigiCash ecosystem had suffered a lot of ups and downs. It came to a head when DigiCash issued 750,000 cyberbucks as a test currency and David Chaum, founder of DigiCash, was summoned by the central bank in Amsterdam. The result of the discussion with the central bank was that DigiCash decided to only sell to regulated banks. But there was a further twist in the tale — the banks set up a competing project called “SET,” which stands for Secure Electronic Transaction, and killed off the DigiCash business model.

Advanced Cryptography and Ricardian Contracts

Grigg describes financial cryptography as substantially complex, requiring skills drawn from diverse and incompatible, or at least, unfriendly, disciplines. He introduces a 7-layer model consisting of finance, value, governance, accounting, rights, software engineering, and cryptography.

He also discussed the prelude to his most famous invention, the Ricardian contract. Howland and he had developed a platform where transactions can be easily managed and analyzed, but it had no clear description of what a bond was. He thus analyzed the basic nature and structure of bonds and concluded that the database that contained the details was inadequate to the task. He flipped the problem and concluded that a legal contract is the only database.

The Greek Bonds episode vindicated this design, and he discovered “a slight change in wording can really change the nature of a bond.” Greek bonds, written under Greek law, went under default when the Greek government changed the law, whereas those written under London law went into arbitration and forced a pay off to investors.

According to Grigg, “The invention called Ricardian contract became a document that captures legal prose, with some metacode in the markup language for the parameterisation (e.g. names, amounts, etc). Fundamentally, it was a contract that described what you were going to issue.”

Triple Entry Accounting

Grigg married the concept of “financial cryptography innovations such as the signed receipt with the standard accountancy techniques of double entry bookkeeping” in order to create the triple accounting system, as described and named by Todd Boyle. This allows a scalable solution for sharing accounts and makes bank reconciliation redundant. The concept is that the entry is shared by three parties — the payer, the payee, and the issuance server. This prevents abuse of the system if any one party loses a copy and allows the building of a trustless system.

Grigg’s Current Projects

ChamaPesa and the Journey to Kenya
Grigg went to Kenya in 2011 and stayed for two years. He learnt that the people residing there are using a currency named “M-Pesa.” The currency moves through a phone (M-Pesa) and was so successful that M-Pesa added to the GDP of the country. After looking at that successful environment, Grigg and Griffith, his business partner, decided to introduce a platform based on Ricardian contracts to digitize the savings of Chamas (small social savings groups in Kenya). The business is called ChamaPesa.

Unfortunately, impact investors involved declined to fund the project further and he left it in January 2015. But the company has a new lease on life and is leveraging a light weight blockchain to help Chamas enter the blockchain era. The company is currently in pre-sale for a coin distribution that will launch mid 2018.

Mattereum
Grigg is also associated as the chief scientist with Vinay Gupta-headed Mattereum – a legal-technical interface connecting digital assets on the blockchain with goods and services in the material world. Mattereum integrates Ian’s Ricardian contracts with current legal and arbitrage systems

Other Projects
Ian Grigg is currently consulting with multiple P2P and allied sector startups. He is an advisor to Knabu, a banking startup, and Akropolis, a pensions startup. He has also consulted with Block.One on their project to develop a governed blockchain based on the EOS.io software.

Author:

stephanie vaughanStephanie Vaughan is vice president at Block X Ventures. She is an experienced capital markets professional with a background encompassing crowdfunding, venture capital, and investment banking. She served as director of capital markets and development at StreetShares, a marketplace lender focused on providing small business loans to veteran-owned companies  funded by Institutional, Regulation A and Regulation D investors.  At StreetShares, she led all strategic initiatives for investor products. She also played a key role in raising the company’s $23 million Series B financing. Previously, she was a senior associate executing venture debt transactions for LunaCap Ventures and was an investment banking associate with Houlihan Lokey. A former captain in the United States Marine Corps, she served as communications and operations officer and held strategic roles assisting in re-designing the USMC Force and overseeing anti-terrorism efforts for U.S. Central Command in Afghanistan. She holds an MBA in Finance from Columbia Business School and a BA in Quantitative Economics from the United States Naval Academy.

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Allen Taylor

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