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Blockchain for 21st Century Businesses

Hyperledger Fabric

Businesses have been tracking financial transactions and the transfer of goods using ledgers for more than half a millennium. Whether the method involves pieces of paper in a binder or interlinked spreadsheets, the concept is the same: Ledgers track credits and debits for myriad line items.

“Anytime any field within the shared ledger is changed, a new snapshot is taken so that you can back up and see what was there previously to track the flow of assets.”
—Brad Brech, IBM Distinguished Engineer

The problem, however, is the traditional ledger system can quickly turn into a version of the elementary school game of “telephone.” Over time, slight discrepancies between different parties’ versions of the ledger can turn into big problems. “Most transactions are still handled with a ledger,” says Chuck Bryan, open source data solution offerings leader at IBM. “Everybody has their own copy of that ledger—banks, insurance companies, etc. You end up with a lot of checks and balances and intermediaries verifying transactions tied to assets from home mortgages to new car purchases with the system we have today.”

The IBM Hyperledger Project will create a seismic shift in that system. The open-source collaborative effort, which is sponsored by the Linux* Foundation, will establish blockchain-based technology that’s ready to meet the needs of modern businesses. “With the IBM Hyperledger Project, we’re making shared-ledger technology ready for businesses so they can use it for the next generation of transactions for any type of asset,” Bryan says.

Blockchain Basics

Rather than each party tracking transactions in separate ledgers, blockchain involves a shared ledger that can be kept up to date in real time. “Anytime any field within the shared ledger is changed, a new snapshot is taken so that you can back up and see what was there previously to track the flow of assets,” explains Brad Brech, IBM Distinguished Engineer. Any participant in the interactive ledger can go back and examine the entire history of the asset—whether it’s money, automobile parts, food ingredients, etc.

“That’s where the term ‘blockchain’ comes from: All those blocks are chained together in a hierarchical or calendar fashion so that you can see the events from start to completion,” Brech says. “This reduces the costs of reconciliation between parties.”

All of the participants agree on the fields in the interactive ledger and who will be able to see which fields. For example, someone shipping memory parts doesn’t really need to know the value or the price that the recipient agreed to pay, or the terms of the sale. They might need to know an insurance estimate of the value, however.

Real Business Applications

Widespread adoption of blockchain technology is a step into the digital economy, according to Bryan. “That sounds like a buzzword that everyone is using, but if everyone isn’t using digital processes, then you’re going to have inefficiencies. When everyone is using digital processes, things are going to move much more efficiently. Any business that has something of value can take advantage of blockchain, so it could be that pervasive,” he says.

Shared ledgers could eradicate supply chain disputes. “Anytime there’s a dispute in a supply chain—‘Oh, I sent that to you,’ ‘Oh, you paid me,’ whatever—it takes a long time for everyone to handle that dispute and figure out where the mistake was made,” Brech says. Widespread adoption of shared ledgers could save businesses substantial time and money.

The ability to quickly track an asset or its components throughout its entire lifespan could prove valuable when tracking provenance following a plane crash, for example. “When a plane does unfortunately crash in the middle of the Indian Ocean, you can trace where the parts came from and potentially find the cause of the accident much sooner,” Bryan says.

It’s not just businesses that stand to benefit; blockchain technology also has potential applications for the farm to table movement. A shared ledger allows consumers, grocers, restaurateurs, etc., to track a single tomato from the field to a prepared dish. “So if an E. coli outbreak occurs, it’s possible to trace it very quickly, which has the potential to save lives,” Bryan says.

Disrupting Business Models

While the potential applications for blockchain technology are limitless, it poses a major disruption to current business models. For instance, banks exchanging foreign currency (e.g., euros to U.S. dollars) could reduce the float time in a transaction from days to minutes with blockchain.

“They’re making money off the float so there’s some barriers for why companies may not want to move,” Bryan says. “It’s going to make it simpler, easier and more cost effective for us as consumers, but unfortunately it’s going to challenge and disrupt companies who are in that business today.”

Making Blockchain Ready for Business

IBM has collaborated with the Linux Foundation and more than 150 other organizations to jointly develop blockchain technology optimized for today’s digital businesses in the IBM Hyperledger Project. The result of that collaboration was the release of Hyperledger Fabric V1.0 in July 2017, which can be downloaded at no cost via Github (bit.ly/2x9Ud4B).

“Hyperledger is the underlying technology. Fabric is in the implementation that IBM and the main consortium has decided to go forward with,” Brech explains. “A couple of other smaller groups are looking at alternative implementations to Fabric, but Fabric is the accepted business blockchain right now.”

Not only is the technology ready for widespread implementation, but also clients can do so with the IBM Power Systems* infrastructure that’s already in their data centers. “When clients are ready to incorporate blockchain technologies into their business, we’ll be ready for them on POWER*, and we will be ready with a leadership platform that incorporates accelerators and hardware assisted security and encryption for them to securely run it on,” Bryan says.

Claire Walling is the managing editor of IBM Systems Magazine, Power Systems edition.

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