Small and medium-sized enterprises often look for ways to raise capital outside of traditional bank loans. One option is bonds; however, their issuance and management are administratively, financially and organizationally demanding for smaller companies. The company must find investors, build trust, ensure administration and manage the entire life cycle of the bond. Large companies can afford extensive campaigns and thus have easier access to investors. However, a similar procedure is often too expensive for small and medium-sized enterprises.
The current situation is also complicated for investors themselves. Today, they have to search for smaller bond issues individually, assess them separately and often divide their investments among many different issuers. A unified digital environment could allow them to navigate the offer more clearly and purchase bonds on a larger scale more easily, similar to what we know today with shares.
Based on the need to simplify the entire process, the DEUSS project was created, which aims to create a digital environment in which companies could issue digitized bonds and investors could more easily search for, evaluate and purchase them. The platform is intended to cover the entire European Union market and offer a more uniform approach to bonds regardless of their country of issue. In addition, thanks to the use of blockchain, the entire life cycle of bonds will be auditable.
Blockchain as a tool for trust
One of the key components of the project is the use of the existing European blockchain infrastructure EBSI (European Blockchain Services Infrastructure). Blockchain is intended to serve as the technical basis for the tokenization of bonds and the auditability of the entire process within the platform.
Blockchain is often associated mainly with cryptocurrencies, but it can also be used for other purposes. Within the DEUSS project, it is intended to function primarily as a tool for trust. It allows recording that a specific digitized bond actually exists, who it belongs to and what the history of its transfers is. This information is thus traceable and verifiable thanks to blockchain.
All bond movements on the blockchain are handled by so-called smart contracts, which are programs running on the blockchain. “In the DEUSS system, they ensure the function of an imaginary bond marketplace: they record individual bonds and their quantities in the relevant blockchain accounts, manage the life cycle of issues and enforce rules for authorized transfers, custody and settlement of trades,” describes Ing. Jan Trávníček from the Knowledge Management Center of the Czech Technical University, who acts as the lead frontend developer and UX designer in the project.
Another advantage of the blockchain is that all records are stored on multiple devices at once, in so-called nodes, which store a complete database of all transactions. If someone on the blockchain tried to change the records retrospectively, the data would then not correspond to the database stored in the individual nodes and it would be clear that a fraud attempt had taken place. The EBSI infrastructure is operated on 20 nodes in different EU countries, which limits dependence on one technical point or one country. This increases threat resistance and record traceability.
The DEUSS Project as a Technical Challenge
In the context of the financial market, trust is absolutely essential. From this point of view, the use of blockchain is a natural choice. On the other hand, however, the blockchain is open to anyone to read, which means that every member of the network can read your entire transaction history. In the field of finance, however, this is sensitive data that needs to be protected. “The biggest development challenge was the integration of blockchain into the highly regulated financial market in the EU. Due to data protection and legislative processes, we had to build a very robust infrastructure based on web technologies around the blockchain to make everything legal and usable,” explains Ing. Albert Švehla from the Knowledge Management Center of the Faculty of Engineering and Technology of the Czech Technical University, who is the technical director of the project.
While the financial sector is very conservative and strictly regulated, blockchain technologies work with different principles and bring a new level of complexity to the system. Therefore, the developers had to deal not only with the programming itself, but also with the analysis of legal and regulatory restrictions, data security, identity management, process traceability and reliability of communication between individual parts of the platform.
In fact, the DEUSS project is not just one application, but a complex ecosystem divided into five applications. These are supposed to manage different parts of the entire process, from registration and verification of individual entities through financial scoring and payment management to platform supervision. The developers had to take into account high requirements for security, inter-application communication and the user environment.
The applications will be used by different groups of people, from small and medium-sized enterprises seeking financing, through professional and retail investors to administrators who will ensure supervision of the entire ecosystem. However, each of them has different needs; however, the applications must be understandable for everyone. “Therefore, we placed great emphasis not only on the technical side of the solution, but also on user-friendliness and the design of user interfaces to meet the standards of modern financial applications,” says Ing. Jan Trávníček, who directly designed the user interfaces.
From development to production
In addition to the development itself, the team from the Faculty of Electrical Engineering, Czech Technical University, also gained valuable experience in coordinating an international team consisting of academic institutions and industrial partners, where it was necessary to harmonize technical, business and legal requirements into one functional solution. In the technical implementation of the project, the Faculty of Electrical Engineering, Czech Technical University, cooperated with the Brno University of Technology and the Slovak University of Technology in Bratislava, which were mainly engaged in the development of smart contracts, while the team from the Knowledge Management Center of the Faculty of Electrical Engineering, Czech Technical University, was responsible for technical analysis, development outside the blockchain and then its integration into the system, thanks to which it can be further worked with.
“A very valuable experience for us was the integration of the blockchain itself and working with this sometimes very low-level system. In addition to the development of smart contracts, we also learned to work with the asynchrony of the system and the transfer of one entity from a classic database to the blockchain, which is also related to the change of data sources,” describes Ing. Luboš Harašta from CZM FEE CTU, who worked as the lead blockchain developer on the project.
The DEUSS project was launched in 2024 and is now in the final phase of development. The smart contracts that will form the future backbone of the platform have recently successfully passed a security audit and the entire project was presented at the INATBA conferences in Brussels and the 30th Annual Government Roundtable in Greece. Over 200 small and medium-sized enterprises are already planning to participate in the project and try to obtain financing through the platform.
Although the project is coming to an end and the platform is approaching production, the team from the Knowledge Management Center of FEE CTU will spend another two years with it, providing the necessary support to future operators and institutions that will connect to the platform. Moreover, the entire team is very motivated to successfully finalize the project after two years of development and launch the platform in production.
The DEUSS project is funded by the Ministry of Industry and Trade as part of the National Recovery Plan and is based on the European project for DLT financing of small and medium-sized enterprises to overcome the crisis.