By Bill Moran and Rich Ptak
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Image courtesy of IBM, Inc.
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A big question for many enterprises is “Should we be looking at blockchain?”. IBM has undertaken significant efforts to assure the answer to that is “Yes”. This includes leveraging an extensive ecosystem and numerous blockchain network engagements. IBM will help enterprises of all sorts to identify, develop and deliver specific commercial value through blockchain networks. Here’s what’s happening.
Blockchain evolution |
While it may make sense to experiment with a new technology early-on, often such activity is best confined to a sandbox for experimental projects. One can waste significant time and money on a technology too immature or expensive to ever reach production. The Wall Street Journal reports that many premature blockchain projects are abandoned. We suspect many of these are more experimental and Proof-of-Concept trials that accomplish their intended goal of education about a new technology.
The problems, as well as the success of bitcoin and other cryptocurrencies, suggested to us that blockchain must be taken seriously. The question is whether that holds true for most organizations. And, what should they do about it. Other relevant questions include: Who is using blockchain and how? How difficult is it to implement this technology? What compatibility issues are there? How much will it cost? Where can I get guidance on business issues and technical problems? We examine IBM’s blockchain activities with those questions in mind.
IBM and Blockchain
We begin at the Feb. 25 meeting of the National Governor’s Association. IBM CEO, Gini Rometty, was interviewed by Gov. Sandoval of Nevada in front of the attending governors. Gov. Sandoval asked Ms. Rometty which technologies the governors needed to know about. Her response was important for several reasons. The interview was enlightening, particularly so regarding blockchain. It demonstrates IBM Corporation’s support and commitment to technology. IBM’s good track record of delivering on their promises adds significant credibility to the technology. Let’s begin.
In response to the governor’s question, Ms. Rometty named AI (artificial intelligence) and blockchain. Many were aware of AI, most knew little or nothing about blockchain. We leave AI for a separate discussion. She did a very credible job of providing a high-level[2] description of blockchain and its potential importance. She described the critical differentiation between blockchain, in general, and cryptocurrencies, such as Bitcoin. Bad publicity[3] around cryptocurrencies makes this distinction extremely important.
The distinction between “permissioned” commercial blockchain, Hyperledger Fabric, and “non-permissioned” cryptocurrencies, such as Bitcoin is important. Open source Hyperledger is the key project in blockchain development. It is a “permissioned” blockchain, i.e. changes, contract approval, even participation is only permitted to specific entities. Bitcoin and Ethereum are permission-less, i.e. anyone can join and act. As Ms. Rometty pointed out, it allows anonymous (participants are known but broadly unrestricted in actions) participation[4], while the open source Hyperledger blockchain requires all participants to be known to each other. This helps to assure security making it easier to establish trust among the users.
Before leaving the subject of IBM’s discussion of blockchain, we must mention a blockchain presentation[5] made by Marie Wieck, IBM’s General Manager of Blockchain, at Northwestern University. Ms. Wieck demonstrates a strong grasp of blockchain fundamentals in her presentation. She also discussed details about customer cases and the IBM offering and strategy. She easily answered all questions in a very crisp manner. She provided a very good overview of worldwide governmental acceptance including details on how Estonia is exploring the use of blockchain for voting. Overall, we think that her presentation was very enlightening. We recommend watching it for insight into IBM’s offerings and strategy.
IBM realized that successful commercial development of blockchain could not be a single vendor effort. It required an ecosystem of vendors, enterprises and interested users. Therefore, IBM invested heavily to build and advance the open source Hyperledger project and community. Initially, IBM led in the creation of this project. Their influence continues, but a growing membership (over 200 members, 20 playing key roles) means others now contribute a majority of the new code.
Blockchain has a solid open source foundation. Comparing open source blockchain acceptance with open source Linux is a good guide. While It is possible to build a complete Linux system from open source components, most companies use a commercial version, e.g. Red Hat or SUSE Linux. It is quicker and cheaper to use a vendor-integrated and tested solution than to assemble/test one yourself. Fortunately, vendor blockchain platforms are becoming available.
Blockchain for business
IBM Blockchain Platform is the foundation of IBM’s blockchain for business offerings. It is a plug-and-play, open source-based foundation based on Hyperledger Fabric for blockchain implementations. It runs applications written in general-purpose languages. IBM has rapidly incorporated Hyperledger enhancements into their own platform. IBM has provided timelines for this development along with details of their enhancements.
IBM offers the Blockchain Platform and a full range of consulting services. An entry-level version of IBM’s platform, suitable for learning and initial development is free. A more advanced version is accessible with pricing based on usage. An enterprise version is available for a monthly fee based on the number of blockchain participants. Of course, to derive the total external cost you need to get estimates on the cost of any consulting services that you expect to need, as well as the product cost.
IBM has been involved in numerous use cases either in or nearing production (2017 – Blockchain Pilot Projects). Early use cases concentrated primarily, but not exclusively, on transactional activities, i.e. farm-to-table produce tracking, financial transfers, healthcare and transportation. Efforts are underway in many other market segments. These provide insights into how blockchain could apply to many situations. The use case involving the tracking of diamonds in their entire cycle from mining to retail sales is now in production, handling millions of dollars of diamonds.[6]
IBM has been involved in numerous use cases either in or nearing production (2017 – Blockchain Pilot Projects). Early use cases concentrated primarily, but not exclusively, on transactional activities, i.e. farm-to-table produce tracking, financial transfers, healthcare and transportation. Efforts are underway in many other market segments. These provide insights into how blockchain could apply to many situations. The use case involving the tracking of diamonds in their entire cycle from mining to retail sales is now in production, handling millions of dollars of diamonds.[6]
IBM says blockchain performance and overhead in production situations have not been an issue in any of their early use cases. Still, we advise looking closely at these during evaluations.
What to do
Blockchain technology has serious potential. An old rule of thumb advised never work with a 1.0 release; wait for the field-tested .1 release with fixes applied. Both IBM and pure open source blockchain versions will pass that test in 2018.
It is time to investigate blockchain, and, especially, Hyperledger technology, on your own or with a partner. IBM would be a reasonable partner in such efforts. They have demonstrated commitment while acquiring extensive experience and expertise at all stages, including application. They can provide support and products covering both technical and business issues, including business process issues. The last is significant as many blockchains have the potential to drive new business process models. Those beginning blockchain efforts will obviously benefit from help with such potential pitfalls.
The IBM Blockchain Platform is supported by a large, diverse, and active community ranging from educational institutions to commercial enterprises. The community members are involved in developing and applying blockchain networks in a variety of areas. These will only continue to grow.
We believe the real game changer lies in the blockchain protocol. That is what allows blockchain users to establish trust through code – digitization that allows trusted transactions to directly take place between multiple parties. All are authenticated by mass collaboration and driven by collective self-interests, rather than by external entities. The real challenge for many blockchains going forward may not be technical, but rather the extended negotiations required to set up a network of trusted collaborators usually when the Blockchain involves multiple organizations.
If trust and transactions are important to your business, there is a high probability blockchain can provide benefits or competitive advantages. Don’t get left behind as competitors implement this technology; make learning about blockchain a priority. We suggest a modest initial project. Do pick one that can deliver a measurable business enhancement for your enterprise.
The IBM Blockchain Platform is supported by a large, diverse, and active community ranging from educational institutions to commercial enterprises. The community members are involved in developing and applying blockchain networks in a variety of areas. These will only continue to grow.
We believe the real game changer lies in the blockchain protocol. That is what allows blockchain users to establish trust through code – digitization that allows trusted transactions to directly take place between multiple parties. All are authenticated by mass collaboration and driven by collective self-interests, rather than by external entities. The real challenge for many blockchains going forward may not be technical, but rather the extended negotiations required to set up a network of trusted collaborators usually when the Blockchain involves multiple organizations.
If trust and transactions are important to your business, there is a high probability blockchain can provide benefits or competitive advantages. Don’t get left behind as competitors implement this technology; make learning about blockchain a priority. We suggest a modest initial project. Do pick one that can deliver a measurable business enhancement for your enterprise.
[2] See a full replay at: https://www.c-span.org/person/?virginiarometty. The discussion is worth watching. It includes discussion of IBM blockchain projects and IBM programs for training people in new technologies.
[3] See the following article in the NY Times for a good example of what we mean. https://www.nytimes.com/2018/02/25/business/cryptocurrency-women-blockchain-bros.html
[4] Gini Rometty made this point in her presentation.
[5] http://www.mccormick.northwestern.edu/news/articles/2018/03/ibm-marie-wieck-on-blockchain-beyond-bitcoin.html, while the audio does not pick up the audience questions, you can often guess the question listening to Ms. Wieck’s answer.
[6] See https://www.coindesk.com/everledger-blockchain-tech-fight-diamond-theft/, Everledger is an early use of blockchain to reduce diamond industry insurance losses; a key implementation goal for production blockchains.
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