Blockchain: A Link In Your Long Term IBM i Plan
April 10, 2017 Dan Burger
In general, the IBM i community gets derogatorily tagged with having minimal tolerance for risk. Having little appetite for risk isn’t such a bad thing when the failure rate for implementing a new technology – namely blockchain – in a business environment falls just short of a sure bet. Gartner predicts that 90 percent of the enterprise blockchain projects launched in 2016 and the first half of 2017 will crash and burn within two years.
Sounds like the kind of risk anyone would like to avoid. So why should you care about blockchain? No bandwagon recommendations, but some blockchain awareness could come in handy during your next management meeting.
First of all, there’s a distinction to be made between generic blockchain and IBM Blockchain. The original idea for blockchain was to provide a framework for the peer-to-peer exchange of digital assets (sometimes referred to as cryptocurrencies), known as Bitcoin. There’s no shortage of news, opinions, and confusion about bitcoin, which is an unfortunate distraction to conversations about blockchain and how it can be used in business-to-business exchanges.
What’s important in B2B exchanges is the blockchain capability to provide a permissioned network, with known identities (unknown entities exist in the Bitcoin world causing no small amount of fear and uncertainty), and without the need for cryptocurrencies. Building an expandable, efficient, trusted, distributable ledger so all participants have the same data with all data additions and changes disseminated throughout the network is part of the challenge undertaken by IBM and many other tech companies and big players in certain industry verticals – banking being the most prominent.
A transaction ledger database, shared by all participating parties, records and stores every transaction that occurs in the network. It eliminates the need for third-party payment processors, a development that, when discussed in a roomful of business executives, would draw loud applause. (These payment and transfer services are not free by any means. And they take time, too, as financial institutions play the ponies with our money for the one, two, or three days it takes them to do a transfer; if you want transactions to run faster, they charge a fee. It is a great racket, if you can start a bank.)
The mechanics of the blockchain ecosystem include an automatic public record of all transactions. Algorithmic-fueled computers verify each transaction to confirm the transfer of value and create a historical ledger of all activity. Networked computers, not owned or controlled by any single entity and located throughout the world, process the transactions in real-time.
Like any other system where money changes hands, security and privacy are top priorities. Privacy, auditing, scalability, and interoperability need to be hammered out for each unique blockchain before they reliably deliver on their promises and become widely adopted.
Banks, financial institutions, and leading multi-billion dollar corporations are struggling to deal with various conflicts in the implementation phase of Blockchain stemming from regulatory and security issues, according to a report in The CoinTelegraph titled University of Pennsylvania: Blockchain’s Biggest Challenge is Security.
This kind of news is troublesome, but seems to be taken in stride by the banking and insurance industries that have taken the lead in developing blockchains. There’s also great interest from organizations specializing in supply chain and logistics – managing the flow of goods and related payments with greater speed and less risk. Apparently, the less risk equation needs some tweaking.
Many open source blockchain projects are under way. The IBM Blockchain is just one of them. It’s part of the industry-friendly Linux Foundation Hyperledger Project, a global, open source collaborative effort with the purpose of advancing cross-industry blockchain technologies.
IBM is active in several Hyperledger projects including the development of an architecture for developing blockchain applications (Hyperledger Fabric), development of Web applications for Hyperledger (Blockchain Explorer), and a toolkit for deploying a blockchain-as-a-service (Hyperledger Cello).
Joining IBM in the Hyperledger Project are stakeholders such as Intel, Cisco Systems, VMware, Red Hat, Hitachi, Accenture, JP Morgan Chase, and two dozen other founding members with significant investments and the desire to establish an open blockchain infrastructure.
Of course, any time a group of technology companies come together, there will be efforts made to gain some financial leverage. And, of course, that reality will be downplayed by the promoters. Will those wrinkles be ironed out on the way to creating an underlying blockchain platform? My guess is yes . . . eventually. What technology delivers in terms of speed to market, wrangling over who’s driving the bus has the effect of keeping a foot on the brakes.
Then there’s also that 90 percent failure rate that Gartner predicts for the early adopters. That’s a cold shower no matter who is assigned the blame.
“There are multiple causes for disappointing project outcomes, including rapid rate of technology evolution,” Ray Valdes, vice president and Gartner Fellow, said in an article on the Gartner website titled 7 Strategies to Gain Value From a Doomed Blockchain Project. “However, a primary cause of failure is a fundamental lack of understanding around the basic concept of blockchain technology, which results in a misalignment of its capabilities with the business problem that the enterprise is seeking to solve. Often this means that enterprise projects using – or claiming to use – blockchain technology don’t actually need it to achieve their goal.”
Added to those bumps in the road is the reality that significant technology challenges exist and the majority of blockchain initiatives are in alpha or beta phases.
After all that, what could be the reason IBM i shops should take notice of the IBM Blockchain? It’s not about jumping into an early adopter program. It is about long-term planning considerations. The next-generation systems of record will be operating in a different business environment than what exists today. Today’s IBM i for Business might be integrating into tomorrow’s blockchain for business. IBM’s not saying that directly, but it’s not a stretch of the imagination to connect the current emphasis on support for open source programming on i with the open source environment of IBM Blockchain.
David Furlonger, research vice president and Gartner Fellow, said the implications of blockchain for our society are beyond our imagination.
“We now have a digital capability to represent any form of value that is privately issued – you can become your own banker, insurance agent or foreign exchange teller. I do believe that blockchain is going to fundamentally change the society in which we live. Not tomorrow but within our lifetime,” Furlonger said.