After six months managing private equity deals with IBM’s blockchain platform, Northern Trust has an encouraging report about the technology’s viability for enterprises — though perhaps less so for its scalability.
The platform has been working well, said Arijit Das, applications manager for enterprise tech at Northern Trust. “It is doing everything we hoped it would do,” he said. “We’ve got fund management on the blockchain.”
He noted that private equity transactions tend to be high-value but low-volume. “For that use case, it performs extremely well,” Das said.
What remains to be seen is how well the technology spawned by bitcoin can perform with more frequent transactions — especially considering the bitcoin community’s recent struggles to scale the network.
IBM is announcing Tuesday the general availability of its blockchain platform, a toolkit of sorts for enterprises that want to create and operate distributed ledgers. If this sounds familiar, it’s because the vendor introduced the product about a year ago. Northern Trust revealed in February it was using the technology — not in pilot, but in production. A group of Canadian banks announced in March they were using it to upgrade their digital identity project.
Big Blue’s blockchain is built on the Linux Foundation's open-source Hyperledger Fabric v1.0. It’s a permissioned blockchain designed for enterprises and intended to run on zLinux mainframes, either in IBM’s cloud or on premise. It’s meant to provide privacy, security, resilience and fault tolerance.
Other enterprise blockchains abound, including R3’s Corda, JPMorgan Chase’s Quorum, Digital Asset Holding’s Global Synchronization Log and other iterations of the Hyperledger protocol. (Microsoft also announced last week the Coco Framework, which provides security and governance controls for existing blockchain nodes.)
“All those have their strengths and all have good offerings,” Das said. “The thing about Hyperledger that prompted us to choose it is it’s designed with the enterprise in mind. Right off the bat, it was designed as a permissioned, private ledger, as opposed to some of the other technologies that grew up around public ledger. So it was a private, permissioned blockchain that brought with it many facets of user and identity management.”
IBM also announced Tuesday that a consortium of food companies is using its blockchain to trace contaminated food back to its source.
“Food safety is just one of those applications that makes use of the core capabilities of blockchain, in this case provenance and immutability — being able to track assets through some life cycle, and to be able to tag those assets with attributes in a way that they can’t be changed retroactively,” said Jesse Lund, global vice president of blockchain and distributed ledger markets at IBM. Lund was a Wells Fargo executive for two decades, most recently as head of innovation labs, until IBM recruited him in January.
There are many similar use cases in financial services, such as trade and transaction clearing and settlement, he said.
“At its core essence, blockchain is a distributed computing and data sharing platform that lets participants quickly establish transactional business networks without a lot of the complexity that goes into the data sharing activities banks do today,” Lund said. “It facilitates a transactional trust relationship between two or more organizations, and it does that through the use of cryptography and distributed computing and consensus algorithms.”
The security of the IBM blockchain comes from secure key management, Lund said.
“All the blockchain solutions and distributed ledger technologies out there are based on cryptography,” he explained. “The integration of cryptography requires key management. So the security integrity of the entire solution rests on the ability of organizations and the network or platform itself to securely manage keys and the governance process that surrounds the development of the software and the platform where the software will actually run. Those are two things we started in the beginning and are bringing to market with this release.”
The IBM Blockchain also comes with a configuration tool for developers called Hyperledger Composer. Composer has a graphical user interface that lets programmers start from templates and create basic blockchain networks between participating peers quickly, Lund said.
“You could have a new network up and running that issues a token that represents a real-life asset on a network between participants in a matter of minutes,” Lund said.
While public attention has turned back to the original use case for blockchains — bitcoin and other digital currencies, booming once again — Lund said enterprise blockchain use is on the verge of a breakthrough.
“I think in the fourth quarter of this year we’ll start seeing the tipping point for financial services,” he said.
The reason it’s taken so long is the risk profile and mentality of banks, Lund said.
“My observation in having worked at a bank for a long time is they’re not early adopters, by nature of the industry and needing to be conscientious followers of new and emerging technologies, which makes sense given their profile for privacy and security,” he said. “They’re inherently conservative organizations. As consumers that have a bank account, we want our banks to take that posture. But I do think the competitive threats to banks in the fintech space are pushing them along.”