Scintilla solves the inefficiencies of today's capital markets, leveraging the best distributed ledger technologies available. Scintilla is a digital asset creation engine created by DLA Piper, a Hedera Governing Council member, that couples the compliance and regulatory rigor of a global law firm with the innovative technology solutions of tomorrow.

Assets on Scintilla are distributed, traded, and settled rapidly, without the need for slow and expensive intermediaries. The Hedera Token Service (HTS) enables Scintilla to easily issue non-fungible tokens representing various asset classes, such as real estate, fine art, intellectual property, ESG, debt restructuring, fund structuring, equity / digital IPO, and reinsurance. Scintilla empowers value creation for both the asset issuers and investors — from large-ticket institutions down to the average retail investor who wasn't historically given access to previously illiquid assets.

For private transactions of assets that live on permissioned blockchain frameworks, such as Hyperledger Fabric, Scintilla utilizes the Hedera Consensus Service (HCS) with the Hyperledger Fabric plug-in, deployed in Microsoft Azure, to make confidential transactions verifiable on the Hedera public network. HCS ensures privacy while still offering a decentralized, fairly ordered, and publicly verifiable log of transactions for marketplace participants and regulatory bodies.

Capital market inefficiencies add costs, obstruct participation, and increase settlement times

In a traditional value chain, securities' issuance is limited to conventional asset classes and requires slow and expensive intermediaries to meet regulatory compliance. Additionally, securities distribution is often limited to a handful of clients only authorized to trade when matched with other participants during market hours. Transactions of this nature can easily take multiple business days to settle and require manual execution of corporate actions such as dividend payments, voting, and more.

In hopes of reducing the inefficiencies found in traditional capital market value chains, DLA Piper evaluated many blockchains to power its securities tokenization platform. While evaluating several architectures, DLA Piper took issue with gas fees associated with issuing and transacting NFTs on Ethereum. In the same vein, on most public blockchains, transactions execute and are ordered based on which application paid the highest gas fee, which creates unfair marketplaces for bids and asks. DLA Piper found that lackluster scalability and long-term network instability (forking) of Ethereum may hinder their ability to attract mainstream investors and ecosystem partners, such as custodians and banks. All stakeholders of Scintilla must be able to trust its underlying infrastructure and be confident in its long-term stability.

"Effective asset management relies on trust. Scintilla – working with DLA Piper, and using cutting-edge distributed ledger technology to tokenize assets – delivers that trust" said Simon Levine, Global Co-CEO at DLA Piper.

A fast, inexpensive, and fair platform for security token offerings

Scintilla utilizes Hedera for non-fungible asset tokenization in two distinct ways. The first is through the Hedera Token Service (HTS), where native non-fungible tokens represent assets that are issued directly to accounts on the Hedera public network without the need for expensive and potentially faulty smart contracts.

The second is for more sensitive transactions and uses a combination of blockchain technologies — specifically, Hyperledger Fabric (HLF) and the Hedera Consensus Service (HCS). Scintilla issues and manages tokens through a private instance of HLF but, for every transaction, writes a fairly ordered, encrypted, and publicly verifiable message to the Hedera public network using HCS. This combination brings together the privacy of HLF, with trust and public verifiability of transactions on the Hedera public network.

By utilizing HTS, Scintilla overcomes smart contract tokenization limitations through the efficiency of Hedera’s underlying hashgraph consensus algorithm; other obstacles found in Ethereum, such as network forks, are overcome by its global governance structure. HTS reduces the total cost of issuance and management, improves transaction settlement time from hours to seconds, and ensures overall stability for network participants with its no-fork guarantee — all on a public network governed by leading global organizations. Preventing forks through governance alleviates concerns by custodians, banks, and other ecosystem participants around stability and having to track duplicate assets across multiple networks. Additionally, HTS offers built-in compliance configurations, including KYC verification and freeze, token supply management, and more, in order to meet anticipated regulatory requirements.

“Innovation is a key strand in our business strategy. As our business focuses on developing and nurturing innovations that add significant value to our clients through our Law & Innovation program, it is fantastic to see this solution spun out into the thriving digital asset space for the next stage of its growth and development,” said Jean-Pierre Douglas-Henry, Managing Director of Sustainability and Resilience at DLA Piper.

For transactions sensitive in nature and requiring additional privacy through encryption, HCS combines public networks' trust with the privacy of permissioned blockchain frameworks. HCS interoperates with Hyperledger Fabric on the Scintilla platform, enabling verifiable timestamps, decentralized fair ordering, and privacy for sensitive transactions. An example is in the case of an initial public offering (IPO), where certain disclosures cannot be made public but still must be trusted and auditable by specific parties or regulatory authorities.

The Scintilla platform by DLA Piper and powered by Hedera enables asset issuers and investors to quickly and inexpensively transact. Scintilla makes it cheaper, faster, and easier to raise capital and manage investment than ever before.