How Blockchain Will Transform Business and Society

The Linux operating system started as a gleam in the eye of a Finnish university student, Linus Torvalds, who simply wanted to find a better way to connect his new PC to his school’s computer system. Now it’s one of the underpinnings of the 21st century economy. Linux is all the proof we need of the power of open source software to change the world.

Today, the Linux Foundation, a nonprofit organization enabling mass innovation through open source, is launching an initiative that could follow a similar trajectory. It’s announcing an open source project to fulfill the tremendous potential of blockchain.

Blockchain is a technology for a new generation of transactional applications that establishes trust, accountability and transparency while streamlining business processes. Think of it as an operating system for interactions. It has the potential to vastly reduce the cost and complexity of getting things done.

It’s essential for blockchain technology to be developed following the open source model so a critical mass of organizations will coalesce around it—and reap its full benefits. Because of the open source rules, participants can trust that the technology will fulfill their needs and conform with industry standards–assuring interoperability between blockchain applications. Also, by sharing the foundational layer, the participants can focus their individual efforts on industry-specific applications, platforms, and hardware systems to support transactions.

We believe that the best path forward for blockchain is for the tech industry, government, and the business community to consolidate their efforts around a single open source blockchain foundation that’s developed and governed in an environment of transparency and cooperation. We also believe that organizations will be best served if they use industry-specific or function-specific extensions of that technology, which are created and governed following the same principles.

For these reasons, we’re throwing our weight behind the Linux Foundation’s open ledger project. Other early commitments have come from Accenture, ANZ Bank, Cisco, Credits, Deutsche Borse, Digital Asset Holdings, DTCC, Fujitsu, IC3, Intel, J.P. Morgan, London Stock Exchange Group, Mitsubishi UFJ Financial Group, R3, State Street, SWIFT, VMware, and Wells Fargo.

In addition to signing on as a charter member, we’re developing an enterprise-grade blockchain software fabric, which is the term the tech industry has chosen to describe this novel architecture. We plan on contributing the fabric to the new project—along with intellectual property related to it. Also, IBM is helping our clients discover what blockchain can do for them and developing commercial products that will serve particular domains or cut across industries.

Blockchain got its start several years ago as a key ingredient of Bitcoin, the crypto currency, but, it turns out, the technology can make a difference whenever valuable assets are transferred from one party to another.

At its essence, blockchain is a distributed ledger shared via a peer-to-peer network. Each participant has a copy of the ledger’s data, and additions or changes to the chain are propagated throughout the network—but only after the parties in the transaction agree on it. This approach enables participants to dispense with a great deal of reviewing and verifying that adds to the cost and time it takes to complete transactions.

There will be many uses for blockchain in business and society. Banks, investment banks, financial marketplaces and insurance companies are pioneers in exploring the possibilities, but the potential uses range far beyond the financials services industry

One of the more intriguing blockchain applications is supply chain management. That’s relevant to nearly every business and government agency.

Executives in charge of an organization’s supply chain must manage relationships with a host of direct suppliers of goods—plus be aware of what’s going on with their suppliers’ suppliers. They have to handle not just the financial transactions, but also plan and manage each step in the process of bringing a product or service to market. So, today, because of all of these separate but related interactions, there’s a tremendous amount of overhead—time delays, pile-on costs, and the potential for mistakes to be made.

Now, imagine supply chains where blockchain is put to work. An aircraft manufacturer, for example, might create a blockchain-based system for holistically managing all of its relationships with suppliers of parts and components. All of the suppliers will share the exact same information about a new aircraft model–every step in the process of planning, designing, assembling, delivering and maintaining it. At the same time, the manufacturer will use other blockchain-based systems for managing the financial relationships and transactions connected to each step.

Thanks to blockchain, trust and accountability are built into supply chains. So are compliance with government regulations and internal rules and processes. The result: reductions in costs and time delays, improved quality, and reduced risks.

Over the past two decades, the Internet has revolutionized many aspects of business and society–making individuals and organizations more productive. Yet the basic mechanics of how people and organizations execute transactions with one another have not been updated for the 21st century. Blockchain could bring to those processes the openness and efficiency we have come to expect in the Internet Era.

Today’s announcement is an important first step toward fulfilling that great promise.

Posted by: Stephen Hamm

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Garry Hasler

I’ve been involved with bitcoin for a number of months now on a personal level only and I understand the great potential of the blockchain being used in many many different industries and applications. Its great to see IBM joining in with this great technology which will not only revolutionize the financial industry but many others as well.


Dr. Markus Thies

I hope IBM is not trying to invent a new blockchain technology without looking what is already available in the crypto market.
Indeed, the concept of colored coins/mosaic is exactly what the supply chain requires to have.
Please check with the vast crypto currency community and try to embrace the open source software.


George Doerre

The follow-on business/policy opportunities to widespread blockchain adoption may be as transformative as the adoption itself. In ensuring the cyber-integrity of individual transactions/contracts through aggregation and a hash-code created from that aggregation, the possibilities for high-value enterprise-level analytics on that aggregated data appear almost endless.

To grasp this, momentarily think of the aggregate data as being unencrypted. Analytics could assess statute/policy conformance, commercial trends and econometric insight, individual and collective transactions/streams, and fraud of multiple types. Yet, with blockchain, the unit-level data itself is protectable by the most secure encryption available – simply because, at that level, the unencrypted data only needs to be known to the (generally) two involved parties. This enables – for the perhaps the first time – a means for “governance-process-based” decryption of data. While there is no cyber-based “back door”, the data itself is inherently indestructible. Parties using the blockchain could be made responsible for storing their cyber-keys – using any means they choose – so they could be produced later, if subpoenaed. Even then, a mutually-trusted 3rd party might perform the actual decryption, subsequently destroying their copy of any cyber-key, so that its integrity is maintained.

With this, one of the highest-value opportunities outside of banking may be medical insurance payments, and end-end…supply chain management…of high-value a/o controlled/prescribed pharmaceuticals. Beyond that, the…supply chain integrity…for anything implanted in a human body could be ensured at every level, from basic materials and components used, to production date/context, to maintenance-level procedures.


Michael Gray

Very informational read! This technology sounds very promising. Glad to see IBM is taking a leadership role and supporting open source as a base. Look forward to learning more!


Jason P Keeler

This is an exciting initiative that looks to disrupt business by pioneering a new generation of transactional applications.


Peter Williams

I look forward to this as an enabler for smarter cities – enabling devices to interact while maintaining a record of which device “said” what to which other device and when.


Stephen Rogers

I agree that there are many use cases for supply chain to benefit from Blockchain technology and there is a small group of us working on developing some initial use cases so that we can be a leader in the application and a reference for our sellers.


Lewis @ Custom Fittings

Great to see IBM throwing their considerable weight behind blockchain. Very promising stuff.


Luis Custodio

Game Changer. Our leadership approach, using the Linux Foundation and focusing on an industry standard, is spot on. Super exciting.


Pete Stevenson

No doubt this is game changing technology! Great to see the Linux Foundation is launching this initiative and IBM is taking a leadership role. Go Team IBM!


Joe Kesselman

I hope “IBM taking a leadership role” means being among the first to have a fully compliant and robust implementation available for our platforms/applications/customer… If there’s anything I can do to help make that happen, let me know.

(Note: I’ve been saying for years that SMTP is now too Simple a Mail Protocol to survive the spam and phishing and similar abuses now being heaped on it. Perhaps the first widespread application of Blockchain ought to be a Robust MTP, with enough authentication and tracking to ensure abuses can be blocked.)


richard Wright

The use of block chain is already being reviewed with our Watson Partner for wealth Management who has utilized our Alchemy API’s with AI built into the model for risk management/compliance.
Interested to learn more about how we can leverage this today as our conversations have been with open source vendors like Monegraph Inc.


Arnold Simson

IBM invented the Cypher Block Chaining (CBC) technique in 1976. It has been used in cryptographic systems ever since, but at the data level – i.e. a cryptographic chain of data blocks. Blockchain is the application of the CBC concept to business documents – a cryptographic chain of business documents. This idea can be applied to any type of business documents. I am sure there are many other concepts that this can be applied to.


Jun Hui Liu

Exciting news, Blockchain technology can guarantee high security, Internet Era is coming.


Christian Nowak

I have been reading about blockchains for a while now, but still havn’t found a reasonably understandable bit of documentation on what it is and how it works.
While I am happy that IBM takes on to this now, as it might be one of the bigger things to come, it would still like to be ableto understand what it is in order to find out what it can do for my clients’ business and applications.
Does anybody in this community / blog have a good link to a documentation, that explains the nuts and bolts of this technology. is it a protokol, a set of APIS, a datamodel ???

many thanks for your good leads on this…


Timothy Chou

Suggestions to have various sub-community for further discussion or ideas exchanges.

For instance, roughly categorize the bellow pilot companies into sectors. If possible, IBMers can participate in use cases development and share ideas or use cases for pilot cases engagement according to individual experiences in various industry sector.

Banking sector : ANZ Bank, Credits, Deutsche Borse, Digital Asset Holdings, Mitsubishi UFJ Financial Group (more than banking)

Finance sector (clearing & settlement ) : DTCC, J.P. Morgan, London Stock Exchange Group, State Street (global custodial bank),

Hope to see business realization earlier after more practitioner’s participation under strict confidential disciplines.
SWIFT, VMware, and Wells Fargo.

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[…] reportedly a leader on the Open Ledger Initiative, announced its support with a gushing blog post on the potential of the blockchain to change the way we do things. It’s not just about making […]

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[…] reportedly a leader on the Open Ledger Initiative, announced its support with a gushing blog post on the potential of the blockchain to change the way we do things. It’s not just about making […]

[…] reportedly a leader on the Open Ledger Initiative, announced its support with a gushing blog post on the potential of the blockchain to change the way we do things. It’s not just about making […]


Inhi

Great and exciting move by IBM given the significance of ecosystems for transparent information exchange. The technology and economics are available for organizations to take advantage of it.

[…] reportedly a leader on the Open Ledger Initiative, announced its support with a gushing blog post on the potential of the blockchain to change the way we do things. It’s not just about making […]

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jklu

Lets see if I get this right ?
We streamline business by putting everything out in the open. If that is the solution why are companies not publishing their current ledgers then ? No need to wait for block chain.

Government regulations built into supply chains thanks to block chain.
So regulations are never open to interpretation and politicians write BPMN 2.0 instead of law texts ?

[…] reportedly a leader on the Open Ledger Initiative, announced its support with a gushing blog post on the potential of the blockchain to change the way we do things. It’s not just about making […]

[…] reportedly a leader on the Open Ledger Initiative, announced its support with a gushing blog post on the potential of the blockchain to change the way we do things. It’s not just about making […]

[…] reportedly a leader on the Open Ledger Initiative, announced its support with a gushing blog post on the potential of the blockchain to change the way we do things. It’s not just about making […]


Holger Smolinski

Blockchain has definitely the potential to redefine business relationships based on mutuality and confidentiality. It is worth for IBM to engage in this technology and bringing its inherited knowledge in regard to security and reliability into this field of application. There might be a bright future of mutually fair business transactions – at least for those who are interested in fair business models and who additionally can protect their network against fraudulent modifications of the blockchain.

[…] How Blockchain Will Transform Business and Society – IBM Think Blog (Arvind Krishna) – “It’s essential for blockchain technology to be developed following the open source model so a critical mass of organizations will coalesce around it—and reap its full benefits.” […]


ZTB

What happened to IBM’s B2B initiative?
Thanks

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Manoj

Exciting information.. truly fabric for the new world!


Prasanna Dixit J

This technology will take in the challenges that cross policies, law and goods that cross the border and simplifies the closed co-ordindate between the interested parties


Krishma

Great post. Thanks for sharing. Only thing that intrigues me here, is that this needs to be managed by a governing body in terms of infrastructure as well as general governance. Are we saying that IBM cloud infrastructure will be helping out here and blockchain services would be offered as cloud based services?


Dr. Michael P. Haydock

I think this is an awesome technology – instantly fast transactions for real assets outside of just monetary assets. Will transform supply chains.


Ed Lidster D.C.Sc

Why are they reinventing the wheel when Etherium and Ripple are already out there? Seems like a vast waste of money. Dumb.

[…] why we have joined the Linux Foundation’s open source Hyperledger Project, which has the goal of helping organizations of all kinds build secure blockchains. We have offered […]


Jacek Wojcieszynski

How far or how close are you going to be to Ethereum project described in Yellow paper by dr. G. Wood? What will be a consensus mechanism in your solution? Are you going to support Solidity language for a smart contracts?

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Stefanos

Here is a helpful video, explaining “Blockchain” with simple terms.
https://www.youtube.com/watch?v=WiRFuHXHBhk

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