Blockchain needs Linux-style open community to succeed in the enterprise, says IBM CTO

A growing number of banks, startups, and service providers are investigating how to use blockchain technology to streamline business processes, rather than its original role as the distributed ledger for bitcoin. See also: what is Blockchain?

But replicating the openness of Linux and OpenStack communities will be key to the success of the blockchain within the enterprise, according to IBM Middleware CTO Jerry Cuomo.

IBM recently revealed that it is working on its own blockchain system that it plans to release as open source code in future, as it seeks to spur wider adoption and cement its place with the emerging technology. And according to IBM Fellow Cuomo, adopting the approach taken by open source communities in the past will be key to its success among the wider businesses.

“Blockchain has to take a page out of the book of OpenStack and some of the communities like that,” Cuomo, told Computerworld UK.

“Right now when you look at [open source blockchain startups such as] Ethereum – these are LGPL [Lesser General Public License] based licences, which means that if you are to use it and use derivative works you have to give it back to the owner. That may hinder businesses’ ability to do things with it.”

He added: "For any kind of blockchain technology to prevail it has to be open: it has to be built around a community where this is a governance model, similar to the governance model with OpenStack Cloud Foundry, Docker and Linux."

While concerns around the use of cryptocurrencies among businesses continue, at least in some areas, more and more attention is being directed at the potential for the blockchain database to transform transaction and authentication processes.

Some of the first use cases outside of bitcoin have been targeted at financial services. (See also: Why banks are betting on the blockchain - not bitcoin - to transform the financial sector)

According to Spanish bank Santander, blockchain technology could save the financial sector tens of billions of dollars a year by streamlining processes. But there is discussion that blockchain distributed ledgers could be used to authenticate anything from online voting to purchasing of digital music.

However, use of the blockchain is still in its infancy and organisations are generally looking at proof of concepts [PoCs].

Enterprise-friendly blockchain?

Cuomo says that IBM's blockchain work is seeking to create a more enterprise-friendly version of the technology that can spur wider adoption of the technology, and make it "more suitable for business".

"We have looked at all of the major open source projects out there and have done PoCs with all of them including the bitcoin mainnet, doing what they call Sidechains and building out PoCs for customers on that," he says,

"What we notice is that these are interesting technologies, but they are built on an implementation of blockchain that assumes some things that we are not so comfortable with, and we don’t think that businesses – especially regulated businesses – will be comfortable.

"We are addressing those things. We are actually building out capabilities that make blockchain more suitable for business."

For example this means creating private blockchain networks that can be used internally or between financial institutions - an approach taken by a number of others, including Swiss bank UBS. In comparison bitcoin and other cryptocurrencies tend to rely public ledgers.

"We believe that at some level membership must be known. I don’t want to say it is ‘member’s only’ but you kind of have to be invited and you have to be assigned a role to come into the network," Cuomo says.

"We can let you to come in as a guest, we can ask you to come in as a transactor, or as a validator. But there is some sort of certificate authority that in a knowing way hands out."

Its researchers have also created "modulating pubilc keys" that can cover the tracks of a company transacting on a blockchain network to provide better security and privacy.

"However, we can still audit," explains Cuomo, "so that we can go back if we had to and follow the [user] activity, so that you can prove to a regulator that you are doing business the right way."

If it is possible to convince businesses that there is a safe and secure way to use blockchain databases, then there is plenty of potential in corporate uses, he says. This could mean creating a record of ownership across a network of companies - such as from a car manufacturer, to to dealership, to end customer - or within a large company.

"We believe that a blockchain for business allows companies to create business network [based on the technology]. There need not just be one uber business network, there may be a domain specific business network, just one big worldwide retailer having a procurement network might be enough to warrant an open network for procurers within that world."

Banks take aim at the blockchain

IBM is not the only company attempting to bring together some of the many attempts to harness the potential of blockchain technology.

Nine of the biggest banks in the world recently signed an agreement to develop blockchain use cases within the financial sector with US firm R3. (See also: Blockchain standards deal a step towards wider adoption of the bitcoin tech)

Cuomo says IBM would like to work with the collective of banks and R3. "I hope the R3 folks join up and collaborate with us or vice versa."

Clearly moves to create standards around the blockchain are already underway - with or without IBM - and a host of startup businesses have already been engaging with enterprise customers to investigate how they can use the technology.

However, Cuomo believes that some sort of consensus among the community will be important for the technology as it progresses and develops.

"At some point we hope that we can all do what is right with the industry, because the industry is not being served with four, five or six things that roughly do the same thing," he says.

"There is probably room for one or two – but probably if it goes beyond that we are doing the industry a disservice."


Copyright © 2015 IDG Communications, Inc.

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