Open Source Blockchain Technology Moves from Theory to Practice
As we've reported, if you ask some people, they'll tell you that the concept of the Blockchain is as dramatic as the creation of the Internet. Recently, I covered the news that a group of top technology and finance companies including IBM, Wells Fargo and the London Stock Exchange Group, are partnering and working with The Linux Foundation to advance blockchain technology, which is central to how many businesses process transactions.
The Linux Foundation announced that the project will develop an enterprise grade, open source distributed ledger framework and developers wil be invited to focus on building industry-specific applications, platforms and hardware systems to support business transactions. This has major implications for financial institutions and even the PayPals and Apple Pays of the world, but it could also lead to a wave of new startups, healthcare transformation, and more. Now, banks and other financial institutions are completing real world tests of blockchain technology.
As The Wall Street Journal reports:
"Eleven banks successfully tested a private blockchain, exchanging multiple tokens among offices in North America, Europe and Asia over five days, the R3CEV LLC consortium said Wednesday...The test, conducted Jan. 11 to Jan. 15, allowed the banks to connect to a private distributed ledger built on open-source blockchain technology from Ethereum and hosted on a Microsoft Corp.’s Azure cloud. The tokens, or software code representing a theoretical asset, passed between nodes set up by the banks and R3 with no problems, a spokesman for the consortium said in an email. The data about the tokens was intact and the validity of each transaction verified “instantaneously” by all nodes, he said...R3 is a consortium of 42 banks working to design and apply distributed ledger technologies to global financial markets."
Nasdaq and Barclays are also exploring blockchain technology, and Business Insider reports on MasterCard's stance:
"One of the top executives at MasterCard told Business Insider in an interview on the sidelines of the World Economic Forum in Davos, Switzerland, that the company was "very, very interested" in the technology. But he added that MasterCard was being more cautious than its market counterparts, as it didn't want to be "blindsided" if anything went wrong."
The Open Ledger Initiative (OLI), overseen by The Linux Foundation, is a blockchain effort that has far reaching implications. Here is what IBM has to say:
"Blockchain is a technology for a new generation of transactional applications that establishes trust, accountability and transparency while streamlining business processes. Think of it as an operating system for interactions. It has the potential to vastly reduce the cost and complexity of getting things done. It’s essential for blockchain technology to be developed following the open source model so a critical mass of organizations will coalesce around it—and reap its full benefits."
"Blockchain got its start several years ago as a key ingredient of Bitcoin, the crypto currency, but, it turns out, the technology can make a difference whenever valuable assets are transferred from one party to another. At its essence, blockchain is a distributed ledger shared via a peer-to-peer network. Each participant has a copy of the ledger’s data, and additions or changes to the chain are propagated throughout the network—but only after the parties in the transaction agree on it. This approach enables participants to dispense with a great deal of reviewing and verifying that adds to the cost and time it takes to complete transactions."
The Linux Foundation's effort has a surprising amount of backers, given its youth. Early commitments have come from Accenture, ANZ Bank, Cisco, CLS, Credits, Deutsche Börse, Digital Asset Holdings, DTCC, Fujitsu Limited, IC3, IBM, Intel, J.P. Morgan, London Stock Exchange Group, Mitsubishi UFJ Financial Group (MUFG), R3, State Street, SWIFT, VMware and Wells Fargo.
IBM has said it will contribute tens of thousands of lines of its existing codebase and its corresponding intellectual property to this open source community. Digital Asset is contributing the Hyperledger mark, which will be used as the project name, as well as enterprise grade code and developer resources. R3 is contributing a new financial transaction architectural framework designed to specifically meet the requirements of its global bank members and other financial institutions.
"One of the more intriguing blockchain applications is supply chain management. That’s relevant to nearly every business and government agency," adds the IBM post. "Imagine supply chains where blockchain is put to work. An aircraft manufacturer, for example, might create a blockchain-based system for holistically managing all of its relationships with suppliers of parts and components. All of the suppliers will share the exact same information about a new aircraft model–every step in the process of planning, designing, assembling, delivering and maintaining it. At the same time, the manufacturer will use other blockchain-based systems for managing the financial relationships and transactions connected to each step. Thanks to blockchain, trust and accountability are built into supply chains."