How IBM wants to bring blockchain from Bitcoin to your data center

At its InterConnect conference in Las Vegas this week, IBM is announcing new features for its open source cloud-hosted blockchain service in an attempt to bring this distributed database technology from its initial use of powering Bitcoin to a broader market, including the financial services industry.

Blockchain is a distributed database that maintains a continually growing list of records that can be verified using hashing techniques. Vendors such as IBM and Microsoft are attempting to commercialize it by offering customers a platform for hosting their own implementations. Analysts say the market to do so is just emerging.

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IBM has supported blockchain implementations for more than a year, but this week the company is announcing a beta version 1.0 of its service, which is based off the open source Hyperledger Fabric – a Linux Foundation project. It’s available in IBM’s Bluemix Cloud. IBM says Hyperledger can process up to 1,000 transactions per second.

Also new in the 1.0 version are a series of tools that IBM says will make it easier to manage blockchain implementations. These include policies for administrators to set up blockchain networks, assign roles and levels of visibility, manage membership and enforce compliance.

IBM is also launching a Fabric Composer, which is a platform for making APIs that integrate with the hosted blockchain service. The idea is that IBM would host the secure, cloud-based infrastructure that blockchain implementations would run on.

Forrester Research Principal Analyst Martha Bennett says these are “significant” steps toward adding enterprise functionality to this technology, but “there are many steps that need to follow.”

Despite the significant amount of hype around blockchain, Gartner Research Director Rajesh Kandaswamy says the market is still in its earliest stages. “It’s a really interesting market because there is so much potential,” he says. “At the same time, there’s this disconnect between the work that’s in trials and proof of concept versus what is going on in production.”

Defining blockchain

Blockchain implementations have a handful of defining characteristics, Bennett says: It’s a write-once and append-only system (meaning records in the database cannot be changed, records can only be added to the ledger); it’s distributed and at least partially replicated in multiple locations; it’s crypto-secured through a public or private key infrastructure and it uses hashes.

The hash functionality is particularly important, Bennett notes. “Each individual transaction is hashed into the chain, and each block, which contains a bunch of transactions, is also hashed, which links it to the previous block,” she explains. “The moment anyone tries to change a transaction, everyone who has access to the chain would know immediately that it’s been tampered with because the hash wouldn’t match.”

This creates a platform where multiple parties can share data, but all have proof that past records have not been changed. “It’s quite a remarkable platform, but it’s in the very, very early stages of maturity,” she says. The fact that IBM has commercialized the 1.0 version of Hyperledger fabric in Bluemix and introduced some management tools are good steps, she says.

Kandaswamy cites Gartner estimates that blockchain could produce $176 billion in business value-add by 2025. Most of the initial blockchain trails have been in the financial services industry, but he says use cases are expanding, especially in the area of supply chain management for retailers, manufacturers or any company that needs to track a product life cycle in a secure way with multiple parties.

IBM cites a customer in Beijing it’s been working with named Energy-Blockchain Labs, which created a carbon credit asset management system based on IBM’s blockchain offering. Other customers IBM cites include startup Everledger, Bank of Tokyo-Mitsubishi UFJ and Northern Trust.

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