21 October 2017
Carlo R.W. De Meijer

Blockchain Observations

Carlo R.W. De Meijer - MIFSA

49Posts 523,105Views 0Comments

IBM: International Blockchain Model of the future?

29 September 2017  |  14628 views  |  1

According to a recent Juniper Research study “Blockchain Enterprise Survey”, IBM is seen as the number one provider of blockchain to business, well ahead of its competitors. These results are based on a survey of 400 business users from organisations actively considering, or in the process of deploying blockchain technology. Of the surveyed  43% ranked IBM first, followed by Microsoft (20%) and Accenture.

IBM is better positioned than competitors  as far as its blockchain credentials are concerned. The study noted that IBM’s high-profile research development efforts and use of Hyperledger “helped push it to the number one spot”. IBM has been making considerable steps forward not only by research. Also with the development of a great number of projects aimed at broadening the scope of distributed ledger technology to include industries other than the financial services, including asset tracking, logistics, healthcare and the music industry. 

Though this blog will especially focus on IBM, I will start showing the main differences between its main rival, Microsoft and that of IBM in their blockchain approach.


IBM versus Microsoft: different approaches

IBM and Microsoft are now intensively working to become the dominant commercial blockchain-as-a-service (BaaS) platform. They are positioning themselves in the middle of a “frenzy” of blockchain projects and partnerships.

While Microsoft has been adding blockchain modules to its cloud platform Azure already since 2015, IBM launched the first commercial application of blockchain named IBM Blockchain just in March this year. Both systems seem similar on the surface: modular, operate in the cloud, based on open-source code, with massive ecosystems. Both are decentralized ledgers that can be used to manage and validate almost any type of transactions.  

Different visions
But on closer inspection it is clear they have different visions for blockchain technology. Both are They thereby are taking decidedly different paths. These two big tech corporates  are backing competing standards, whereby  IBM supports Hyperledger while Microsoft is pushing Ethereum. The main differences however relate to the openness of the type of blockchain they are promoting and to the governance.

Openness
Of the two, the code underlying Microsoft's deployment is more public. As such, it has a larger developer base and more potential for interoperability. But when potential issues are found in the code, they quickly become public knowledge. While Microsoft’s BaaS is designed to work with a range of protocols, it has shown a preference for the Ethereum blockchain. Most of its recent partnership announcements are with startups that use Ethereum as their base.

Microsoft is a founding member of the Enterprise Ethereum Alliance (EEA)), recently set up to explore business adaptations of the public blockchain. It includes 30 technology and financial services partners including JPMorgan Chase and Intel that plan to build a blockchain based on Ethereum (see my Blog: Enterprise Ethereum Alliance: a blockchain challenger? 21 May 2017).

IBM, on the other hand, has so far largely stayed away from public blockchains. Its BaaS service is based on Hyperledger’s Fabric codebase, of which IBM wrote a large part. It is a private blockchain even though it is still open source, used by known and trusted partners on an invitation-only basis. The underlying code in IBM's BaaS offering is more restrictive, which makes for a smaller developer base and reduced interoperability potential, but issues are not as openly disclosed.

Governance
The difference however goes deeper, then just public versus private. The main difference is in the governance.

Microsoft are handing over control of their code to the Ethereum Foundation, so it's risky on their part. Ethereum is developed by the Ethereum Foundation, of which Microsoft is not a member. This is a risk factor in that the Foundation could decide to change the underlying code, without Microsoft’s input. (The EEA does not influence the Ethereum codebase.)

IBM is a member of the Hyperledger consortium, an open source collaborative effort to advance blockchain technology as an enterprise-class, cross-industry open standard for distributed ledgers. The technology is what is called the Hyperledger Fabric: a standards-based foundational layer upon which other blockchain applications can be built. IBM contributed their own cryptography and smart contract code.  Hyperledger’s codebases are governed by a steering committee, of which IBM is a member, and an important one. (Microsoft is not a member of the Hyperledger consortium.) The committee could decide to make changes to Fabric, but not without IBM’s consent and contribution.


IBM and blockchain

As an early member of the Hyperledger Project (already in 2015), IBM is dedicated to supporting the development of openly-governed blockchains. IBM has been pushing the use of The Hyperledger Fabric distributed ledger for commercial applications for its IBM offerings. As a result IBM’s blockchain offerings are based on both the Linux Foundation’s Hyperledger Project technology and IBM security and cloud technology.

Currently, IBM, with more than 600 people full-time working on blockchain, has three primary goals in its blockchain strategy: to increase the speed of blockchain operations, thus meeting enterprise requirements; to develop platforms for enabling enterprise governance models; to enable private networks.

  • IBM Blockchain

IBM officially launched its enterprise blockchain-as-a-service offering fore enterprises, named IBM Blockchain, in March this year. IBM Blockchain is the first managed service for Hyperledger Fabric, making it fast and easy to build, run and govern business networks while ensuring high levels of security, privacy, and performance.  Developers will be able to build and host blockchain networks on the IBM Cloud, which can potentially transact at rates of more than 1,000 transactions per second.

IBM has applied decades of experience running the world's largest transaction systems for banks, airlines, governments and retailers, to build the most secure blockchain services for the enterprise.” IBM's Marie Wieck

  • IBM blockchain governance tools

IBM also launched the first commercially available blockchain governance tools, and new open-source developer tools that automate the steps it takes to build with the Hyperledger Fabric within days (instead of weeks). The governance tools enable companies to set up a blockchain network and assign roles and levels of visibility from a single dashboard. Network members can set rules, manage membership, and enforce network compliance once the network is up and running.

IBM projects and partnerships

IBM is trying to position itself at the forefront of the “heated” competition for practical uses of blockchain technology. IBM  has more than 400 blockchain projects going at the moment. The company is working with clients across financial services, logistics and shipping, supply chains, IoT, risk management, digital rights management , healthcare and others to implement blockchain applications. Most of these projects work with IBM Blockchain, which is based on the IBM Cloud, and governed by Hyperledger Fabric.

2017 has been busy for IBM up till now. In the July – September period IBM announced a number of new interesting collaborative projects with companies to develop blockchain solutions. Such as the cooperation with car parts manufacturer ZF to build a blockchain-based payments system called Car eWallet. Also interesting (from a competition point of view) is the cooperation between IBM, (blockchain competitor) Microsoft and GS1 to leverage GS1 Standards in their enterprise blockchain applications for supply chain clients.

Some recent examples

UBS, ZF (payments for cars - September)
IBM, UBS and car parts manufacturer ZF are working together to build a blockchain-based payments system called Car eWallet, that automatically collects fees for things such as parking, tolls and power charging. The payment system is based on IBM's blockchain technology, which would allow mobility operators to create fast and secure automatic transactions in a variety of situations. Their Car eWallet will act as a digital assistant, enabling secure and convenient payments on the go.

"The world of mobility is quickly evolving with self-driving vehicles, electric cars and new mobility services having quickly evolved from visionary concepts into reality. Time of great change requires transformational solutions.” "Together with UBS and ZF, we are engineering a new mobility platform to redefine how, when and where traditional transactions occur." Dirk Wollschlaeger, GM, IBM Global automotive, aerospace and defence

They plan to test the technology in the first quarter of ​ 2018 and could offer it to customers later that year. In the future, the platform will not only be used for parking and tolls, but also car sharing, electric charging and delivery services.

GS1, Microsoft (leverage standards - September)
GS1®, the global business communications standards organisation, announced a collaboration with IBM and Microsoft to leverage GS1 Standards in their enterprise blockchain applications for supply chain clients. GS1’s global standards for identification and structured data may enable blockchain network users to scale enterprise adoption and maintain a single, “shared version of the truth” about supply chain and logistics events - increasing data integrity and trust between parties, and reducing data duplication and reconciliation.

“What attracts many organisations to blockchain technology is the possibility of sharing data across corporate boundaries while maintaining a high degree of rigor and accuracy.” “We hope to make this possibility a reality for businesses by working with dedicated technology and industry partners—and together promoting a common business language.” Robert Beideman, Vice President – Retail, GS1

China Construction Bank (Asia) (bancassurance - September)
IBM is working with China Construction Bank (CCB) on a blockchain-powered bancassurance project in Hong Kong.  IBM’s blockchain platform will give CCB (Asia) and other parties a shared view of required policy data in real-time, reducing the need for time-consuming status checks, and enabling CCB (Asia) and its partner insurers to deliver their services more efficiently. The system is currently being tested by the bank and it insurance partners and could go live during the fourth quarter.

"After the successful launch of this blockchain-enabled bancassurance project, we plan to extend our experience to other insurance partners in order to optimise our overall bancassurance business." Guo Zhipeng, deputy chief executive, CCB (Asia)

Food giants (trace food supply chain management - August)
IBM has announced a blockchain collaboration with food giants including Nestle, Unilever and Walmart (Dole, Driscoll’s, Golden State Foods, Kroger, McCormick and Company, McLane Co., and Tyson Foods are the other partners ) in an effort to provide better visibility into the global food supply chain. It would enable food suppliers to source information about the origin, condition and movement of food, and to trace contaminated produce in almost real-time.

"Blockchain technology enables a new era of end-to-end transparency in the global food system – equivalent to shining a light on food ecosystem participants that will further promote responsible actions and behaviors," Frank Yiannas, vice president for food safety at Walmart

Sony (education record platform - August)
IBM is cooperating with Sony Global Education — a subsidiary of Sony, providing global educational services — with the objective to develop a learning and education record platform for students implementing blockchain technology. It is designed to prevent fraud in educational records and provide students with a learning history solution. The learning platform will give both the teachers and the students a digital, trusted record showing their accomplishments, which can be — thanks to the nature of blockchain technology — easily verified by future employers or educational institutions. Sony Global Education will sell the new blockchain-based student education records platform to both educational organisations such as universities and companies. The solution is due to launch in 2018. 

PIL, PSA (supply chain business and trade finance - August)
Ocean carrier Pacific International Lines (PIL), Singapore-based terminal operator PSA International (PSA) and IBM Singapore have agreed to utilize blockchain technology for supply chain business network innovations. The goal of the trial is to automate the flow of documents between trading partners, providing transparency and security along the way. The three parties have entered into a Memorandum of Understanding (MOU) and will work together to explore a proof of concept (POC) using blockchain technologies and "to develop solutions that translate into fraud and error reduction, as well as cost savings" for trade finance solutions. 
"Blockchain has the potential to reduce inefficiencies and gaps within the supply chain, promote more cost-efficient transactions and facilitate the continued growth in world trade. PSA looks forward to working alongside its partners in supporting this initiative and we will contribute our expertise and knowledge in managing ports and advancing supply chains,"  Tan Chong Meng, group CEO of PSA.

ANZ/Westpac (bank guarantee for property leasing - July)
Another case is the cooperation of IBM, Westpac, ANZ and retail centres in Australia. They announced the completion of a blockchain trial aimed at digitizing the bank guarantee process for commercial property leasing. The group reported it was able to successfully apply distributed ledger technology (DLT) to eliminate the need for current paper-based bank guarantee documents, which had been an “extremely labour intensive process” before. In addition the trial also addressed other inefficiencies in the current bank guarantee process, including the challenges in tracking and reporting of a guarantee's status through multiple changes.

"An update of the decades-old process for issuing, tracking and claiming on guarantees is long overdue. With approximately 11,500 retailers across Australia and New Zealand, who use guarantees to support rental obligations, manual tracking of guarantees has been an extremely cumbersome and labour intensive process” Mark Bloom, chief financial officer at Scentre Group

Digital Trade Chain (international trade finance for SMEs - July)
Moreover, IBM was chosen to provide and host a new blockchain-based international trading system for a consortium of 9 European banks, the Digital Trade Chain. The platform is aimed to enhance the trade finance process for small- and medium- sized corporations. DTC will be built on IBM’s blockchain platform of choice, Hyperledger Fabric (See my recent blog: The Digital Trade Chain: the Blockchain train is rolling, July 17, 2017).

“In working with hundreds of clients around the world on a diverse range of blockchain projects, trade finance has emerged as one of the strongest use cases for the technology.” Marie Wieck, IBM Blockchain’s general manager

London Stock Exchange, Borsa Italiana (access credit for SMEs - July)
IBM also teamed up for a securities data project with Borsa Italiana, the Italian subsidiary of the London Stock Exchange Group (LSEG). Borsa Italiana , will use IBM Blockchain to help European SMEs access credit and link into digitising certificate data. Using the blockchain technology, Borsa Italiana is hoping to change how unlisted companies in Europe can exchange and bring greater transparency around shareholder data and, at the same time, expand their access to credit.

"With a more digitized, streamlined and transparent process enabled by the blockchain solution, various parties -- including issuers, regulators and investors - will have increased insight into company information," said IBM.


Future

Jupiner Research showed that the big players in the blockchain arena are IBM, Microsoft and Accenture. Given their prominence it is expected that when blockchain goes mainstream they will take the larger pieces of the blockchain cake. Thereby they will experience increased competition between each other. On the other hand many existing small(ler) blockchain suppliers will not survive or merge with the bigger players (as we also have seen in The Internet). .

Main question is: will IBM be able to defend its number one position? If the company continues to create the best open source software for private blockchains (not public) that makes it easy for businesses and consumers to actually implement all of blockchain's possibilities, the answer is yes!  In that case IBM Blockchain could remain in pole position and become the leading International Blockchain Model!

TagsBlockchainPost-trade & ops

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 02 October, 2017, 16:24

Phew feels like I've just read a long IBM press release!

On a side note, virtually every Blockchain service I've come across so far - including the ones described in this post - seems do'able even in non-BC architecture. In fact, some of them have been done on centralized database architecture long ago e.g. RFID-based supply chain tracking, car wallet, etc. Love to know your thoughts on why Blockchain?

JFYI, whenever I’ve asked this question in the past, I’ve got canned responses like BC is secure, tamperproof, etc. Maybe it’s only me but I find it hard to believe that non-BC systems have been breached and tampered with all these years. Therefore, I’d much appreciate if your response can go beyond listing these boilerplate benefits of Blockchain. 

2 thumb ups! 2 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Latest posts from Carlo R.W.

R3CEV Corda Platform: the blockchain app store

19 October 2017  |  3549 views  |  0 comments | recomends Recommends 0 TagsBlockchainPost-trade & ops

Accenture and blockchain: the accent on security issues

09 October 2017  |  9679 views  |  0 comments | recomends Recommends 0 TagsBlockchainPost-trade & ops

IBM: International Blockchain Model of the future?

29 September 2017  |  14628 views  |  1 comments | recomends Recommends 0 TagsBlockchainPost-trade & ops

Regulation of ICOs: the end or beginning of a healthy market?

17 September 2017  |  6323 views  |  0 comments | recomends Recommends 0 TagsBlockchainPost-trade & ops

UBS and the Utility Settlement Coin

03 September 2017  |  10650 views  |  0 comments | recomends Recommends 0 TagsBlockchainPost-trade & ops

Carlo R.W.'s profile

job title Senior Economist
location Maarrssen
member since 2016
Summary profile See full profile »
Independent financial services advisor

Carlo R.W.'s expertise

Member since 2016
21 posts0 comments
What Carlo R.W. reads

Who's commenting on Carlo R.W.'s posts

Ketharaman Swaminathan
Keith Stonell
John Candido
David Birch
Charmaine Oak
Arjeh Van Oijen
Andy Agnew