Blockchain: Trust, Transformation & Public Policy

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By Jean-Marc Leclerc, Government and Regulatory Affairs Executive, IBM Europe 

Blockchain is accelerating beyond the hype into the daily reality of citizens and businesses across the world. A recent survey of almost 3,000 global C-suite executives found that 33 percent of organizations, on average, across all industries and regions are already considering or actively engaged with blockchains.

A reminder of blockchain: it’s a shared digital ledger for recording the history of transactions. When used for business, these transactions are verified by a network of participants and can only be added to the ledger when the participants have consensus. Transactions cannot be altered, and all participants see the same version of the truth. Using blockchain saves costs – but more importantly increases security, transparency, traceability, accuracy and data integrity.

IBM EU policy executive Jean-Marc Leclerc

At IBM we believe that blockchain will do for trusted transactions what the internet did for the free flow of information.  As we embark on a data-driven era, it is imperative that organizations that collect, store, manage or process data have an obligation to handle it responsibly. We recently published “Data Responsibility@IBM”: a declaration of our practises and beliefs around data privacy and security. blockchain, with its focus on security and transparency, has an important role to play in building trust in the data-driven era.

From its beginnings intertwined with bitcoin, blockchain is now starting to transform a whole spectrum of organisations.

Food contamination is a huge problem – 400,000 people around the world die every year from foodborne illness. And with the advent of global supply chains, it’s very difficult to trace contaminated food back to the source. We’re working with 9 major food companies – including Unilever and Nestle – helping them apply Blockchain to rapidly trace the source of a contaminated product so that it can be quickly removed from the shelf.

The ocean freight industry accounts for 90% of goods in global trade yet transport remains highly dependent on a flood of paper that is never digitised.  One shipment of goods between two ports can require sign-off from 30 different organisations. A lost form or late approval can leave a container stuck in port. IBM and Maersk are collaborating on blockchain to help manage and track the paper trail of tens of millions of shipping containers globally by digitizing the supply chain process. This will not only minimise delays, it will reduce fraud, reduce error, minimise waste, and improve inventory management.

But blockchain is not just for big business. The Netherlands Vehicle Authority (RDW) worked with IBM to develop a pilot project using blockchain to tackle the aftermath of e-bike theft. All e-bikes registered in the bike blockchain are equipped with a smart lock. If stolen, the owner can immediately check, where the bike was last locked up. The app can instantly report the theft to the police, who then verify the details and produce an automatically generated warranty. The blockchain informs the insurer whether the bike was locked when stolen. The victim of the e-bike theft soon learns whether their insurance company will honour the claim. Depending on the insurance policy, the insurer might dispatch a taxi for the bike owner or proved a replacement bike. All this can be achieved without human intervention or any paperwork.

The market has seen a flurry of blockchain developments, creating choice, but also confusion, and the risks and costs of making early bad decisions could set back adoption. IBM believes that an enterprise-ready blockchain platform should have the following five attributes:

  • Open governance: How will the blockchain platform handle change? What happens when there’s a problem that needs resolution? The selected code base helps establish clear, open processes for making changes, updates and enhancements.
  • Confidentiality: To safeguard sensitive information, there needs to be control over who participates within a Blockchain network. Blockchain with permissioned membership helps ensure that you know those who are part of your network because you approve their participation.
  • Modularity: A platform that can accommodate various regional regulations, industry standards and technical needs is necessary. For one network, a single party might set the rules for the whole network. For another network, a more democratic, consensus-based approach may be used.
  • Developer tools: Tools are needed to simplify and accelerate the process of modeling the business network. This modeling process includes assets, participants, access controls and transactions. In addition, it should be possible to integrate non-blockchain applications without a massive development effort.
  • Security: Protecting sensitive data is a critical, baseline requirement—you can’t transact and exchange assets at an enterprise level without adequate security. In addition to requiring permission to join a blockchain and maintaining the confidentiality of transactions, an enterprise-ready blockchain platform should encrypt data, maintain an audit-trail pedigree for all transactions and protect the environment from malware.

Having assessed these attributes, IBM, along with more than 160 other leading organisations, is working with The Linux Foundation’s Hyperledger Fabric framework, to deliver the required capabilities for enterprise blockchain. IBM’s implementation, the IBM Blockchain, adds a greater layer of security, with pervasive encryption, ensuring that the data, at rest or moving around the network, is always protected.

When it comes to regulating blockchain, we at IBM have a very clear opinion. Before governments put forward legislation, decision-makers must first educate themselves about the technology and, even better, explore blockchain for Government applications such as procurement, land registration, welfare, or citizen identity. It is important to understand that the technology is nascent, and pre-emptive regulation may risk stifling its development. A better approach would be to develop guidelines and adapt current rules to facilitate blockchain adoption.

The EU has taken a positive approach so far. One initiative is the future EU Blockchain Observatory that will monitor the development of the technology. We look forward to supporting the Observatory as it takes shape.

As we step into a future where blockchain will feature in many of our transactions, there is much discovery ahead for all of us. We relish the thought of further debate and discussion on blockchain’s development throughout the EU.

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Media Contact:
Anita Kelly
anita.kelly@ketchum.com

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