Will Blockchain Technology Transform Transactions?
Ask some people, and 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 all has major impliacations 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.
"Every financial institution in the world has some sort of internal R&D effort aimed at understanding how the Blockchain will effect their business...The core of the blockchain technology is a shared database with a consensus model that removes unnecessary intermediaries and, therefore, creates efficiencies..."
The Forbes article also explores many startups working in the blockchain space. "Hartford Connecticut based Tierion has an interesting expansion on the immutability of the blockchain," it reports. "Their site offers ‘datastores’, cloud storage where you can put all sorts of things, and they post receipts for the content in them to the Bitcoin blockchain. The receipt contains a pointer to the datastore, the date and time it was created, and a cryptographically secure checksum, so edits to the content can be detected."
"Blockchain company Gem, which just raised $7 million to expand its enterprise platform, has been working with different stakeholders in the healthcare industry to evaluate the need for blockchain technology. Micah Winkelspecht, CEO of Gem, shared with us that, similar to the financial industry, there are multiple stakeholders in healthcare that need to be considered when designing a blockchain application. He claims that true innovation by blockchains will occur where they connect independent parties to a cohesive, shared-write repository."
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.
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."