I’ve always had an attraction to high-performance transaction systems… Much of my experience has been honed around years of development on the WebSphere platform.

So, I’ve become quite curious as to where the next innovation in transaction processing will coming from. Of late, with all the excitement around mobile, cloud and analytics some might think that innovation around systems of record have been left for dead. You know, first there were mainframe systems (IMS/CICS), producing legendary transaction systems like Sabre. Followed by distributed transaction systems (WebSphere/Oracle) producing internet-based commerce sites/apps, that we can’t imagine living without today… and then… and then… there was nothing?

I share the views of Arvind Krishna, our head of Research. Something very special is happening around Blockchain. If I were to bet, I would say the next innovation around transaction process is going to happen around the concepts of Blockchain.

And we are not sitting around waiting. Here are our thoughts…

Bitcoin: Blockchain is most famously used as the technology under Bitcoin and was introduced by Bitcoin’s inventor Satoshi Nakamoto to record transactions without the need for banks or any central authority. All transfers of Bitcoin are announced to the currency’s network of users, and Bitcoin miners are rewarded with newly generated coins for bundling those transactions into specially formatted records called blocks. New blocks need to satisfy certain mathematical properties when taken in conjunction with those already generated, and the complete historic transaction record is known as the blockchain. Here is a useful graphic to show you how it works… Click on the pic to get a closer view.

bitcoin-infographic_5029189c9cbaf_w1500

Blockchain: More Specifically, Blockchain is a distributed ledger, shared via a peer-to-peer network that maintains an ever-expanding list of data records. Bittorent (or even Napster) are a good examples of peer-to-peer networks for file sharing… But in this case, there is basically one file, the ledger, which looks a bit like an append-only database transaction log. Each participant in the Blockchain network has a copy of the ledger’s data, and additions to the chain are propagated throughout the network. This way, all participants in an interaction have an up-to-date ledger that reflects the most recent transactions or changes.

Usage: While Blockchain was made famous by Bitcoin, we feel that it can be broadly applied to applications that go far beyond cryptocurrency. For example, Companies could store transactions with suppliers around the globe in a shared blockchain, rather than manually exchanging data from separate databases. For instance, Car rental agencies could use smart contracts that automatically allow rentals when; your proof of licence (Government agency), lease terms (Bank) and insurance information (Insurance co) are confirmed through a blockchain record. When all of these three agreements are out there on the chain, we form the final agreement, which is, the car is yours and you now own it for the period of time described by the terms of the contract.

Non-Usage: Given the novelty of Blockchain, there is temptation to use it liberally. However, Blockchain does not make sense for many applications, where a simple database would suffice. John Wolpert and team have developed a simple flowchart that helps a user to decide when to use blockchain and when not to. Click on the pic to get a closer view.

HowToDecideWhenToUseBlockchain

Blockchain for Business: As we study applications of Blockchain, it is becoming apparent that Blockchain does not have some of the characteristics required by business. For instance, Blockchains are public networks, even though member identities are protected under a private key, a user could “snoop” on the network and deduce transaction patterns of members.

Let’s say every Monday morning, a member, represented by public “key A” transacts with public “key B”. Looking on the chain, a user might observer that they too are transacting with public “key B” and might be able to deduce something from that. In regulated industries, this type of observation may not be allowed.

Hence, we are working to add properties to make Blockchain more suitable for business with trust, privacy, confidentiality and auditability all being front and center.

Openness: The peer to peer nature of Blockchain calls for interoperability and openness. If Blockchain is going to be adopted for a broad range of business applications, the open way, is the only way. We are gathering a community of like minded organizations that share our “Blockchain for Business” point of view. We are also building a code-base that specifically addresses the characteristics of a Blockchain for business. As Arvind Krishna pointed out in his blog, we are going to donate that code, under an open source license, in a few months.

Why IBM: We have deep expertise in transaction processing, distributed computing, security, cryptography and a long history of bringing communities together and legitimizing open source. To make Blockchain ready for business we will bring our technology prowess as well as be the stewards for the open community around Blockchain similar to what we’ve done collaboratively with the Openstack, CloudFoundry and Node.js foundations.

My curiosity has pulled me back into topics related to high performance transactions systems. Blockchain for business is an interesting concept and we are giving it a run. I guess you can say, I am Back on the Chain Gang.

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