Scheduled for release later this year, NEM’s upcoming Catapult protocol will enable atomic cross-chain swaps and include support for the emerging security token market.
According to NEM Ventures co-founder Dave Hodgson Catapult is a full re-write of the NEM protocol – with several new features. “We’ve applied all the learning that comes with running version 1 in production for four years,” he says. “It is a more performant, scalable and feature-rich protocol as a result. Catapult will become the core NEM engine, powering both private and public blockchains.”
Catapult’s features will include unique smart contract plug-ins to enable a wide range of capabilities such as digital asset creation, atomic cross-chain swaps, advanced account systems, and business logic modeling.
Hodgson says that enabling atomic cross-chain swaps will “allow companies to run a private chain, and create new transaction types which can then reconcile to the public chain. Examples would be patient health data, retail energy trading, and high frequency and log value internal cost movements. You could store that data on a private chain, but then reconcile a summary up to public chain for external settlement or record keeping.”
Ongoing development of Catapult will be assisted by NEM Studios – a strategy, and development unit launched specifically to support the next generation of the NEM protocol. NEM Studios will be led by NEM Ventures Investment Committee chair David Shaw, who says the new division is looking to recruit “the best in the business” to create a more effective and scalable ecosystem for the NEM community.
Security token support
With an eye on a future that is expected to see rapid growth and interest in the emerging security token market, Catapult will support security tokens. “We have incorporated a number of features into the public chain release which supports security tokens as defined in the Verified Token Framework which enables cross-chain compatibility,” Hodgson says. “These will include metadata support at both account and asset level along with some other features not yet ready for public discussion.”
The Verified Token Framework was developed by a consortium of blockchain industry leaders to facilitate market interoperability of security tokens. The Millbrook Accord working group, formed at the Blockchain South Leadership Summit 2018, includes NEM, SharesPost, Techemy, tZERO, Gibraltar Stock Exchange (GSX) Group, Global Advisors, ERCDEX, HyperLink Capital, Alchemist Ventures, Bankorus, Blockchain Labs, and AnyPay.
An advantage of security token contracts is that they can be written in a way that gives buyers exposure to the revenue and profits of an underlying project, and in so doing they potentially represent better digital value than has been the norm with traditional ICOs.
Secondly, because security tokens are subject to securities laws, they are seen as less risky and compliant. Furthermore, since the assets represented by security tokens already exist in the real world, they can function as a bridge between the blockchain space and the legacy financial system. This enables greater access to institutional investors, a wider potential investor base – and therefore greater liquidity. In this scenario, NEM’s move towards a protocol that enables atomic cross-chain swaps and supports security tokens appears an astute one.