What’s stopping blockchain from becoming a more pervasive technology in financial services? If you think it has something to do with the technology behind blockchain, you’re partially wrong — it’s the nature of the solution that is causing the barrier. For a blockchain-based solution to work successfully, it requires multiple entities to come together in a symbiotic relationship and agree on common principles, operating model and governance. Furthermore, blockchain-based solutions require the vision and leadership of one organization to convene the ecosystem in a common blockchain-based network. Then it requires each enterprise member to acknowledge their core competencies and compete in the market by defending or enhancing them. It also requires all the organizations to acknowledge the value that their ecosystem provides when they come together to conduct business.
However, this meeting of the minds is not happening at a fast pace because many organizations continue to explore blockchain as an intrinsic opportunity by focusing on themselves. The first question many companies ask themselves is, “What is in it for me?” And the second question is, “How much competitive advantage is going to be lost by working together?” This leads to many organizations becoming wary of forming or coming together in a collaborative structure like a consortium. This siloed thinking can no longer exist if blockchain initiatives are going to be successful.
Blockchain at its core is a collaborative solution designed to provide comprehensive business and technology solutions for companies to collaborate and co-exist to help reduce friction and infraction among themselves while carrying out their economic activities. IBM is at the forefront of acting as a catalyst to convene industry consortiums in financial services. And with other like-minded technology service providers, we find ourselves in an excellent position to help lead the industry in bringing companies together to build the platform on which economic activities can be conducted with new and innovative sets of rules and processes.
The collaboration on a proof of concept between IBM and CLS for LedgerConnect is a great example of companies coming together to help build a better solution for rest of the industry with blockchain. LedgerConnect, a blockchain-based marketplace, can enable banks to allow side firms, FinTechs and software vendors to deploy, share and consume services using blockchain distributed ledger technology (DLT). This platform brings together both providers and consumers of financial services on the same platform while helping to reduce friction, provide greater accessibility to a ready market and allow innovations to happen at a faster pace. LedgerConnect marketplace technology can help merge technology gaps, solve interoperability issues among companies and provide a more cost-effective marketplace platform for companies to sell their services to financial services firms.
The collaboration between IBM and CLS is laying the foundation for a blockchain-based platform where service providers can use the platform to quickly build DLT-based solutions for easy access and consumption in the marketplace. The collaboration uses the core competencies of technology from IBM and the business expertise of CLS to build a blockchain-based marketplace to allow many symbiotic service providers to build DLT-based solutions. These solutions can be used by multiple financial services firms to carry out their economic activities. Companies looking to build similar consortiums must have a joint vision, a meeting of the minds, and commitment and desire to change the game. We think these are necessary ingredients to make transformative changes in how financial services firms procure and consume solutions from their service providers.
Another example of collaboration is the we.trade blockchain platform, which is now live across 11 European countries. Powered by The Linux Foundation’sHyperledger Fabric, we.trade is making use of smart contracts to improve transparency for open account trade transactions. This collaboration involves multiple banks as banks decided to collaborate for the greater benefits of the industry. Collaboration between member banks allows we.trade to conduct bank-to-bank business faster, with greater transparency and greater risk management. The collaboration also creates a new center of gravity in the economic exchange of value where other non-members are motivated to join the consortium for greater access to the market. It is allowing we.trade to demonstrate that such consortiums are viable for conducting trade finance activities on blockchain.
The successes we’ve seen so far is propelling we.trade to expand their influence, go after new markets and launch new business models that weren’t possible earlier. These banks came together in overcoming their individualistic position, lack of data sharing and are finding new ways to help themselves compete for greater economic advantage.
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Why is interoperability important in blockchain? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world. Answer by IBM Blockchain, providing blockchain solutions, services and expertise, on Quora: Jerry Cuomo, IBM Fellow and Vice President Blockchain Technologies: Why is interoperability important in blockchain? […]