Part 2: TechDesign—Shift Traditional Banks Services into Web3 Era

Our previous article explored how banks can use blockchain to enhance client services, focusing on transparent lending for construction companies. This article outlines an architecture and design plan for traditional banks to shift services into the Web3 era. Specifically, it details a proof of concept (PoC) solution to enable construction financing through permissioned blockchain technology. The system allows construction companies to receive microloans from banks, which banks can then offer as investment opportunities to their clients.  

Architecture and Design 

To implement this use case, we decided to use a permissioned blockchain over a permissionless one. The main reasons behind this are: 

  • As the data managed in this business case is sensitive, only the participants within its context should be able to view and access it. Therefore, a permissionless implementation could imply higher risk and is less suitable in this case.
  • The number of actors that participate in the distributed network is limited, and workflow between them is custom and subject to several compliance with regulatory requirements. Hence, a consortium blockchain is better suited. 

    We decided to use Hyperledger Fabric as the permissioned blockchain implementation because it provides the security and flexibility we need, with several organizations working over a typical distributed environment. 

    Based on the case description presented previously, we configured the Hyperledger Fabric as follows: 

 

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  • Organizations: An organization represents each bank and construction company. This helps keep user access separated by the entity. In our proof of concept and for demonstration purposes, we have implemented only one Bank and one Construction Company, with one peer each. This peer acts as an endorser, committer, and anchor. More peers could be added to meet scalability needs, separating concerns between them.
  • Orderer Peer: We use one orderer peer for the whole structure.
  • Channels: We have one channel for each relation between a Bank and a Construction Company. This configuration secures transactions and data between each entity. 

The Hyperledger Fabric is implemented on AWS Blockchain Managed Services, with two organizations, one node per organization, one MSP, and one orderer peer. We chose AWS for simplicity, scalability, and reliability. 

 

The Solution

The overall proof of concept solution works as follows:

 

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 The implementation contains: 

    1. Two web Dapps, each with specific functions: 
    1. The first manages Construction Company and client functions, including:
      i. Create Constructions
      ii. Register construction clients and payment notes
      iii. Request Loans
    2. The second manages Bank and Investor functions, including:
      i. Approve loans and create investment opportunities
      ii. Register investors
      iii. Participate in investment opportunities 

    2. An AWS Blockchain Managed Service with Hyperledger Fabric

    3. Following Chaincodes: 

    1. BuildingRecord: Chaincode that creates and queries new constructions.
    2. MicroLoan: Chaincode that creates new micro-loans and completes, approves, and queries them.
    3. InvestmentOpportunity: Chaincode that creates new investment opportunities, integrates investors with investment opportunities, and fulfills an opportunity investment.
    4. InvestorsRecord: Chaincode that creates new investors and shows investment opportunities.
    5. ConstructionClientRecord: Chaincode that registers new construction clients, adds promissory notes to a client, and checks if a promissory note code exists.
    6. MicroInvestments: Chaincode orchestrates investments. It invokes other chaincodes to validate all necessary data, save if it's correct, and throw errors if necessary. 

 

In summary, this solution demonstrates how permissioned blockchain and smart contracts can enable new Web3 financing workflows between traditional institutions like banks and construction companies. The system automates and tracks the end-to-end process while maintaining data security and compliance. If successful, this proof of concept could provide a blueprint for transformative blockchain adoption across the financial sector. 


 

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