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Blockchain’s Potential Extends Beyond the Financial Industry

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Many have heard about the cryptocurrency bitcoin, but few are familiar with its underlying technology, blockchain. Thanks to IBM and other companies, that’s about to change.

As Gennaro Cuomo, IBM Fellow and vice president of blockchain technology, explains, blockchain has the potential to dramatically change how organizations of all sorts conduct interactions with one another, easing the pain of more traditional company-to-company communications, such as EDI.

IBM Systems Magazine (ISM): Can you give us a little background on bitcoin and blockchain?
Gennaro Cuomo (GC):
A real need to communicate about blockchain exists because we have misinformation out there where people are focused on only the cryptocurrency. However, blockchain has potential in more industries than just finance.

Bitcoin is an interesting phenomenon; it’s a global network for cryptocurrency that uses blockchain. This made the blockchain design pattern popular, and we believe other uses of that design pattern exist for a range of business applications. It takes many of the ideas of bitcoin, specifically the notion of a distributed ledger and a system where transactions are validated by a community of users as a way to provide checks and balances. Of course, the community of users is an important aspect of blockchain, with everyone in the network having an exact replica of the ledger at any time and participating to ensure the transactions are properly recorded on the ledger. The visibility of the transactions will vary based on the implementation of blockchain.

This is an interesting design pattern. It’s made popular by its use in bitcoins, but we’d like to make it popular for business applications, such as supply chain and post-trade settlement—the things that run our economy but also things we haven’t even imagined yet. Blockchain could help provide a unique view on business processes between multiple participants that hasn’t been attempted before.

We appreciate the folks who imagined blockchain and its use in bitcoins. Those folks sit on the shoulders of giants. In computer sciences over the past 20 years, pivotal changes have occurred around distributed computing and topography. That was leveraged to create blockchain under bitcoin, and we too are standing on their shoulders but also drawing upon new insight.

ISM: Such as?
GC:
The notion in bitcoin is an anonymous network, so by design, the folks participating in the bitcoin network are not known. If blockchain is applied to a variety of business applications, the businesses involved will want to have some insight as to who is part of their network, so we’ve introduced the notion of a permission blockchain versus an anonymous blockchain. It’s still a blockchain, but management of participants in the network is different. We use a certificate authority to issue certificates to members coming into the blockchain. Think of it as a members-only club where you’re invited to come in; it could be permissioned liberally or selectively.

Some users might be able to issue transactions, but only a few might be able to validate them. There might be a global timekeeper to ensure they’re stamped properly and agreed upon on in the order of the transaction. Some members will have permission to run the transactions, and many will get the chance to vote on the validity. So, we have a notion of a permission blockchain that starts to change the game and make it more acceptable to a broader business audience, most of which is working in regulated industries. This makes permissions and control important. Privacy, confidentiality, auditability—these aren’t in the blockchain implementation under bitcoin.

ISM: Is this part of the blockchain software fabric?
GC:
It is. About a year ago, we kicked the tires of all the major open-source blockchain projects and did proof of concept with customers on the bitcoin blockchain network. We got to understand both the art of blockchain and what we can do to make it more applicable to business, but it was difficult having conversations about many of these blockchain technology projects. As a result, we thought it would really help the conversation to actually create one. About a year ago, a group of IBMers came together and, from the ground up, built a permission blockchain that had privacy, confidentiality and auditability front and center in the design while still holding up the principles of a blockchain, including the distributed ledger.

We then went to the Linux* Foundation because we believe the only way a blockchain will be widely adopted is if it’s done in the open, given the nature of blockchain and its cryptographic-heavy peer-to-peer interactions. Industry regulators will need full transparency into this technology; an open way is the only way. We found that other like-minded companies had approached the foundation about applying blockchain to a broad set of business scenarios. We met a lot of them and decided to work together with the Linux Foundation to start the Hyperledger Project. We donated to the project about 44,000 lines of code we built over the last few months for blockchain for business as well as the IT rights that went along with it and the patent we filed for it.

Jim Utsler, IBM Systems Magazine senior writer, has been covering the technology field for more than a decade. Jim can be reached at jjutsler@provide.net.


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