In a recent blog post, we explained the rationale around why you need a regulator first strategy and the operations should be developed in parallel with the technical and legal solutions. But what does this actually look like. The answer is with an Ecosystem Operating Model or better yet an Ecosystem Digital Twin.
The distinction between the two is that while the former represents a static snapshot of an ecosystem, the Digital Twin is dynamic, encompassing both the model and operational information. But what does this mean in practical terms? Let’s delve into this concept using an analogy.
The Train Set Analogy
Imagine a model train set representing the railway between London and Bristol. This model, while an approximation, captures essential elements like the rolling stock, stations, and signaling systems. It allows for the identification of capabilities (like replacing worn rail sections), modeling processes (like commissioning new trains), and managing risks (like trains may crash). When scaled accurately, it can also reflect real-time positions of trains and passenger numbers. This combination of the model with real-time telemetry is akin to what we achieve with an Ecosystem Digital Twin – except that all of it is within a computer.
The Structure of a Digital Twin
RegDefy’s Digital Twin is 11 dimensions (listed below), spread across five layers, with Metrics as a parallel component. The layers are:
- Go to market layer: focuses on (1) Offerings.
- People layer: involves (2) Stakeholder Groups and (3) Cultural Artefacts.
- Activity layer: comprises (4) Capabilities and (5) Processes governed by (6) Commitments.
- Implementation layer: contains (7) Apps, (8) Interfaces, (9) Data and (10) Assets.
- Governance layer: centres on (11) Risks.
Each dimension has specific modules relevant to it, such as process steps, runbooks, compliance and risk controls. Describing each organisation using these dimensions ensures a comprehensive articulation of the ecosystem. Again not only a static snapshot but operational data as well e.g. evidence that a process was run on a particular date by a particular team.
Embracing Change and Evolution
For a Digital Twin to be effective, it must also accommodate change. This evolution can manifest in various ways, such as systems being delivered or decommissioned, or business services evolving in the marketplace. Changes can follow a classical “As Is” to “To Be” model or an agile approach with “Now,” “Soon,” and “Later” states. Differences between these states for a particular dimension essentially represent programme requirements for the change programme tasked with moving the organisation from one state to another.
Using this approach means you have a coherent and consistent definition of how the DeFi ecosystem operates, manages its risk and delivers its business services to clients. This articulation forms the kernel of how a regulator understands your ecosystem.
