Nandan Nilekani releases paper proposing Finternet, an interoperable financial ecosystem

Infosys Co-founder Nandan Nilekani and Agustín Carstens, General Manager of the Bank for International Settlements, have released a concept paper proposing an interoperable financial ecosystem called Finternet.

The paper proposes an approach that integrates essential technological features such as interoperability, verifiability, programmability, and governance in a single venue.

The structure of the Finternet can be described in terms of a series of building blocks, including unified ledgers, token managers, and a diverse ecosystem of trust and value service providers. Individuals and businesses would interact with the ledgers through applications, which could exist in multiple forms and allow users to conduct transactions within individual ledgers, between ledgers, or in exchange for assets that exist outside the Finternet.

Finternet aims to eliminate existing financial system barriers, such as slow clearing systems and minimum transaction values, enabling individuals to trade financial assets on their terms.

An example of this would be the money and other financial assets that would exist on the ledgers as executable objects. These can be transferred electronically using pre-programmed “smart contracts”.

The proposed system advocates for an open and competitive financial landscape that fosters innovation, lowers costs and empowers users by giving them control over their financial data and identities while preserving key components of the current financial system, like the role of central and commercial banks.

In fact, governance remains crucial in Finternet, requiring strict adherence to regulations to maintain trust, security, and integrity, the paper said.

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"Regulatory compliance would be simpler. Asset programmability would make it possible to

embed adherence to relevant rules and regulations within the tokens and transaction instructions in the

system. In other words, policy would exist as code" The paper said.

Upon entering the Finternet, users can create an account with any unified ledger of their choice. They may also create multiple accounts across multiple unified ledgers.

Every account is linked to a globally resolvable virtual address, and these addresses are human-readable. A user may set up multiple such addresses (transient or permanent) depending on their use cases, and if desired on multiple ledgers.

Users provide their virtual addresses to others for tokens to be issued into or requested from their accounts. In this ecosystem, users are endowed with unparalleled control over their assets.

They have the flexibility to create and manage multiple accounts and sub-accounts, tailor their authentication and authorisation protocols for each account and engage in a wide range of transactions across the Finternet.