Accelerating Blockchain Transformation

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In March of 2016, I testified on the revolutionary nature of blockchains before the U.S. House of Representatives’ Energy and Commerce Subcommittee on Commerce, Manufacturing & Trade. Since that time, blockchains have continued garnering interest across multiple industries from banking to health care, and have been explored for quite a few additional use cases.

IBM has recognized that effective public sector support combined with investments in research and development and the promotion of open-source solutions is essential to empowering regulated organizations to realize the full transformative benefit of blockchain technology. Permissioned blockchains can provide value to customers through their ability to establish consensus between parties, provenance of assets, immutability of ledgers, and finality of transactions. These benefits will be the greatest for permissioned blockchains built on top of open-source platforms such as the Hyperledger Fabric.

Blockchains have tremendous potential to allow organizations to improve existing processes, and open new business models. A recent study published by the IBM Institute for Business Value found that 15% of banking organizations expect to have a commercial blockchain solution in 2017, far faster than expected. Of this group, 7 out of 10 see blockchain as a means to bring down the barriers to creating new business models and accessing new markets.

And let’s not forget blockchain’s nature as a disruptive technology. 91% of all banking organizations surveyed plan to invest in blockchains for deposit taking by 2018, attempting to defend an area where they see disruption just over the horizon.

IBM has taken these lessons to heart. Our Global Financing Unit, which facilitates credit among 4,000-plus suppliers and partners worldwide, and handles 2.9M invoices a year, is using blockchain technology to reduce dispute times from over 40 days to under 10 days, and free up about USD 100 million in capital that is otherwise tied up at any given time.

It’s not just banks either – according to another recently published study by the IBM Institute for Business Value, a full 14% of ‘Trailblazer’ financial market institutions also are racing to harness the power of blockchains to eradicate friction in processes and leverage cost, immutability and transparency benefits with solutions at scale in 2017. Financial markets will be among the first to come together and utilize the permissioned blockchain as a true platform across their ecosystem participants, including buy and sell side firms, blockchain technology firms and trade associations.

Financial markets institutions are investing heavily in blockchain, prioritizing areas where new conventions are imminent and regulatory compliance costs can be reduced, and have delayed growth and innovation opportunities. Interestingly, clearing and settlements is one area where investments are significant, and was ranked in the top three opportunities for blockchain benefits and new business models. Additionally, financial markets anticipate potential new revenue streams in monetizing reference data, an area that is attracting a lot of new blockchain initiatives.

The public sector should take key actions to ensure that blockchains can be enabled to revolutionize business processes for the 21st century. Early public sector involvement will positively influence the business standards, relevant technologies and protocols by which the broader ecosystem will operate. I believe that governments can best support this movement through four avenues of engagement:

1.  Become an early adopter of blockchain technologies

The IBV is currently studying how blockchain solutions are developing in the public sector. Government organizations can demonstrate the value of blockchains by participating in specific pilot projects, perhaps built around elections, financial transactions, or records management, just to name a few.

2.  Invest in research in the public and private sector

Governments should invest in efforts to develop blockchain projects for both public and private sector implementations. Blockchain solutions will benefit from government investment in establishing scalability, trust, consistency and effectiveness.

3.  Adopt a pro-growth, pro-innovation approach to regulation

Governments should strike a thoughtful balance between guiding appropriate use and the need to not stifle the advancement of a technology that could be every bit as revolutionary as the internet itself. Joint public and private sector dialogue is essential to creating appropriate and effective protocols and policies around the innovative solutions that arise.

4.  Set standards for security and privacy

The security and privacy of the data in business networks has never been under greater threat from unauthorized access. Governments should work with leading technology experts to leverage the inherent strengths and understand the vulnerabilities of blockchain, and define standards to ensure the integrity of data is prioritized.

Proactive public sector involvement can ensure open solutions are developed to support transparency, accuracy, and efficiency across business networks. As a result of this effective collaboration, participants will see friction across their business processes diminish while new markets emerge.

Click here for more on IBM’s view of ways governments can advance the adoption of blockchain platforms.

If you will be attending Money20/20 in Las Vegas, swing by my panel session on Sunday, October 23rd at 4:10pm PT.

Visit our page to learn more about IBM at Money20/20!

Vice President, Blockchain Technologies

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