A recent article in International Business Times revealed just how committed IBM is to helping industries reinvent themselves using blockchain technology.
Jerry Cuomo, IBM’s vice president of blockchain, favors a blockchain-enabled insurance plan for driverless cars. He also sees an opportunity to move supply chains to the blockchain.
As for improving global supply chains, the change will even be more significant. Cuomo called such projects “moonshots.”
IBM Leads Blockchain Activity
IBM has led efforts to adopt blockchain technology to multiple industries with several newly-revealed initiatives and commitments, CCN reported.
The tech giant has so far taken a focused, incremental approach to blockchain starting with “shadowchain,” an application for the tech giant’s global finance division.
IBM Global Finance (IGF) sends out 2.9 million invoices and works with 4,000 partners in lending about $44 billion annually. The business manages around 25,000 disputes a year that can tie up $100 million at a given time.
“No, I’m not suggesting the moonshot of immediately redoing our global financing, lending system on a blockchain,” Cuomo said. “But we have now employed a shadow chain: my definition of shadowchain is it’s not replacing the primary business process, it’s being used to enrich that business process with a useful function that it currently doesn’t do.”
The shadowchain can record events in the lending process to avoid unneeded delays caused by disputes. The blockchain has enabled dispute resolution to take 10 days instead of 40.
“You can imagine the capital that will free up; there’s 30 days that that money isn’t being tied up,” he said.
Lending Moves To Blockchain
None of the company’s trading partners have been set up on the blockchain, he said, but the lending process is moving to the blockchain. Any global conglomerate with a similar financing profile could tackle this process, he added.
Adapting the blockchain to finance is not a simple matter.
IBM looked at different blockchain fabrics, including Ripple, bitcoin and Ethereum, having done a proof of concepts with clients for each of these.
The company found gaps in being able to execute these blockchains. Some projects had Lesser General Public Licence (LGPL) licensing, making it nearly impossible to work legally with those technologies.
Blockchain’s Unique Challenges
IBM loves Apache and Linux, Cuomo said; the projects use pluggable architectures enabling a company to superimpose its innovation on top. “And we saw that blockchain technology bases were prohibitive in that matter,” he noted.
To address such issues, Cuomo’s team began creating its Open Blockchain eight months ago. He described it as a permissioned blockchain, meaning it was possible to liberally configure permissions to be very open. The Open Blockchain (OBC) supports confidentiality, auditability and privacy.
IBM Team Makes Progress
The team has the ability to plug in consensus algorithms. They have written about three of these inside IBM since open sourcing OBC at the DC Blockchain Summit.
To create meaningful transactions in a complete Turing language (or languages), the team deployed a chaincode notion. This theoretically enables users to create smart contracts in a language of choice. IBM supports the Go language and is working on a second implementation as part of the Hyperledger Project, an open-source blockchain working group overseen by the Linux Foundation.
IBM offered OBC code to the Hyperledger Project, hoping it will join the best ideas of other code contributors such as Intel, Blockstream and Digital Asset Holdings.
IBM hopes to have a single codebase bringing the best of the different ideas, Cuomo said. At that point, the team will deprecate OBC for Hyperledger.
JPMorgan, a Hyperledger member, hosted a code-sprint and hackathon recently to collaborate with the code mix thus far contributed to the project. The task of combining the contributed code, overseen by the technical steering committee, is nearing realization but has not yet arrived.
Diverse Team Works Together
Asked for his view on assimilating disparate codes, Cuomo said he is pleasantly surprised how well the team works together. He said there a lot of real coders and observers who come to the table with opinions on code. He said there are three dominant voices already converging.
“We all know what the endgame needs to be, and that there’s going to have to be give and take,” he said. “There’s the IBM OBC thought and chaincode. I think people love the plugability of the platform. But then Blockstream and Digital Asset Holdings really like the UTXO model, the unspent transaction model that comes from Bitcoin. They like it because it’s been out there and it’s kind of a very simple transaction model.”
One objective of the code-sprint was to develop a chain code plug-in for UTXO, which merges some of the best Blockstream and DAH ideas.
When Hyperledger engineers first gathered, they were surprised to find they used the same database components – LevelDB or RocksDB.
A good day, Cuomo said, looks like one codebase with a lot of energy around it, while a bad day is fragmented.
Also read: IBM goes big on block chain
IBM Teams With R3 CEV
R3 CEV, the distributed ledger banking consortium, is another Hyperledger Project member. R3 CEV’s technical leader is Richard G. Brown, a former IBM banking and enterprise architecture leader. Cuomo said he stays in touch with Brown, who worked with him on Websphere.
One end of R3 speaks banking while another end speaks technology. Cuomo said they are like a universal translator among the banking and blockchain worlds.
Cuomo said R3 has aspirations of providing banking frameworks working on a type of blockchain. “We don’t have those aspirations inside Hyperledger,” he said. The goal at Hyperledger is to serve all industries, not to serve one industry, and provide a foundation for all industries.
R3’s participation will ensure banking can use Hyperledger for a framework. He said the recent challenge of involving a group of startups to determine the scope of a commercial paper application.
Because the R3 CEV came into being around the same time as IBM’s Openledger project, comparisons were unavoidable. CCN observed that IBM is looking to create an open source distributed ledger, unlike R3’s effort. Notably, there are common members of both groups, such as JP Morgan and Wells Fargo.
Building On Top Of Bluemix
IBM sees it as an opportunity to use its new cloud service on top of Bluemix, an IBM cloud platform to accelerate innovation. “We took it as an opportunity to use our new cloud service on top of Bluemix. We built out to their specification of this application, in fact we open-sourced it after we built it, and we sat through their review process.”
Cuomo said 40 banks examined the project, and the team was able to count the number of blockchain blocks the banks created and transferred across one another. The banks also gave the team feedback.
The team got high marks for providing a usable “front end,” Cuomo said. They provide a Node.js application on Bluemix. The result was a nice front end for commercial paper trading, in addition to demonstrating a back end that worked well.
While some vendors could provide a nice front end and others a detailed back end, the IBM team could show “both sides of the same coin,” Cuomo said.
Featured image from Shutterstock.Get Exclusive Crypto Analysis by Professional Traders and Investors on Hacked.com. Sign up now and get the first month for free. Click here.