CSDonDLT: EVM-Based Private Blockchain for European Capital Markets Infrastructure

OVERVIEW

As an EU-authorized central securities depository with over 30 years of experience, KDPW is pioneering the modernization of European capital markets. To actively explore the potential of Distributed Ledger Technology (DLT) within a highly regulated framework, KDPW initiated the CSDonDLT project. Their vision was to deliberately design a safe, controlled testing-ground to enhance operational efficiency and minimize systemic risks in the Over-The-Counter (OTC) market, all while preserving the crucial role of professional intermediaries like banks and investment firms. Chosen as their technical execution partner, 7bulls designed an infrastructure based on a private blockchain network powered by the EVM. By utilizing the open-source Hyperledger Besu (HLB) platform, the solution materialized KDPW's mandate: bridging traditional finance compliance with decentralized finance (TradFi & DeFi) operational efficiency.

Crucially, driven by KDPW's deep grounding in capital market realities, the system avoided the tokenization of real-world assets; instead, it maintained the native dematerialized status of securities, ensuring strict, uncompromising compliance with EU and Polish legal frameworks.

THE ARCHITECTURE & CHALLENGE

Operating as a cornerstone of the national financial market, KDPW laid out uncompromising standards for stability and security. The engineering challenge for 7bulls required deploying a DLT ecosystem capable of matching KDPW's strict Recovery Time Objective (RTO) and Recovery Point Objective (RPO) metrics for existing national infrastructure.

Key Engineering Pillars:‍

• Consensus & Availability: To guarantee the fault tolerance demanded by a market institution of KDPW's scale, we implemented the Quorum-based Byzantine Fault Tolerance (QBFT) consensus algorithm, operating on a Proof of Authority (PoA) model. We deployed a validation cluster comprising six HLB nodes distributed across three independent data centers.
• Smart Contract Engineering: To manage individual securities (ISINs) dynamically, we utilized the Factory-Child pattern and Beacon Proxy contracts based on the ERC-1822 standard. This architecture empowers KDPW to seamlessly update contract logic across thousands of instances without requiring data migration, ensuring long-term operational resilience.
• Security Access Control: Meeting KDPW's rigorous regulatory mandates, we enforced robust Role-Based Access Control (RBAC) managed via Hardware Security Modules (HSMs) for central CSD operations. For investor operations, the system leveraged EIP-712 signatures for transaction authorization, ensuring cryptographic security within a self-custody wallet model.

Technical Highlight: By pairing a sophisticated off-chain to on-chain Whitelist architecture (WL_SAA and WL_ISIN) with a decentralized EVM core, we achieved strict off-chain identity isolation for retail investors while preserving total cryptographic auditability for the CSD.