Not to be outdone, IBM has joined the fray of the financial sector in their quest to tame blockchain processing to transform the way they do business. IBM teamed up with the Japan Exchange Group (JPX) to conduct proof-of-concept tests using markets with low transaction volume.
The tests will use technology developed by Linux’s Hyperledger Project, which will establish an open-source communication protocol standard that can be implemented for blockchain users. This is the same project that J.P. Morgan Chase is involved with to see if blockchain can be used to streamline certain loan and trading practices.
Though the J.P Morgan contingent of this testing consortium is looking strictly at applications in the financial sector, IBM and the Open Ledger Project foresee blockchain technology in a much bigger picture.
Fortune magazine reports that an IBM fellow working on the project, sees the distributed ledger as something that can offer businesses privacy, confidentiality and accountability. The way the Open Ledger Project is approaching this issue is nearly the exact opposite of how the Bitcoin blockchain works.
The Bitcoin blockchain allows anyone to do the mining that generates a Bitcoin transaction. The miner needs to have no previous connection any ledger that he mines. In the Open Ledger Project, a company that implements a blockchain ledger can establish rules that dictate not only who can generate transactions, but also who can authenticate them.
IBM and the Open Ledger Project envision blockchain technology with an unlimited number of uses. It can be used by a car lot, for example. The blockchain could include everything needed by the new car buyer, and since the technology is exceptionally fast, by the time the buyer drives the car off the lot, the car could be titled, insurance updated, and all of the money needed to perform these transactions could be moved into the appropriate accounts. As an added bonus, once the IBM is committed to the project and has contributed over 40,000 lines of code as well as engineers to build the technology to the point that it can enjoy widespread use. It is currently working with over 40 financial clients to test the blockchain platforms that are being developed. The biggest hurdles are communication and security.
With blockchain technology, settlement of financial instruments would take seconds instead of weeks. Also involved in the testing are Cisco Systems Inc., Intel Corp., Mitsubishi UFJ Financial Group Inc., State Street Corp. and Accenture Plc. Swift, the network banks use globally for financial transaction notification and CLS, the largest cash settlement system, are also interested and involved.
Everyone involved agrees that if the transformation is to take place, it must involve all of the players that could possibly be involved and must be a cross-industry and open-source collaboration. Open-source is the key because of the interrelationships between all of the players. If any of the software were proprietary, the one who owns it could ring the financial sector to its knees.