Why the Blockchain Initiative Coud Be Transformational for the Economy
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.
There has been some good analysis on the announcement in the past few days, including how it may affect Bitcoin and the economy in the coming years.
The Open Ledger Initiative (OLI), 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.
BM 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."