Blockchain Lures IBM, Wells Fargo for Transaction Networkby and
Linux Foundation pulls together titans to advance technology
Will `transform the way business transactions are conducted'
Blockchain, the bitcoin-linked software ledger that’s touted as a way to speed up and simplify how transactions are recorded, just won the backing of finance and technology titans including IBM, Wells Fargo & Co. and London Stock Exchange Group Plc.
Working with the Linux Foundation, which advocates developing open-source software, the group aims to create a public network that lets blockchain applications built on top of it communicate with each other. IBM is contributing tens of thousands of lines of existing code to the project, as well as dedicated developers and intellectual property, according to a statement.
The open-source software will enable others to “transform the way business transactions are conducted,” according to the statement Thursday.
Blockchain is the software that makes bitcoin possible, providing an immutable and transparent means of recording each time the digital currency is transferred from one person to another. The world of finance has taken notice, with a gold rush of startups saying their blockchain-related technologies can process virtually any kind of trade or money transfer in minutes instead of current times measured in days.
“As with any early-stage, highly-complex technology that demonstrates the ability to change the way we live our lives and conduct business, blockchain demands a cross-industry, open source collaboration to advance the technology for all,” Jim Zemlin, executive director at the Linux Foundation, said in the statement.
Other participants include major parts of the financial system’s infrastructure: Swift, the network that banks around the world use to notify each other of financial transactions, and CLS, the largest cash-settlement system in the $5.3 trillion currency market.
Cisco Systems Inc., Intel Corp., Mitsubishi UFJ Financial Group Inc., State Street Corp. and Accenture Plc are also members, as is the Initiative for Cryptocurrencies and Contracts, a joint-effort of faculty at Cornell University, Cornell Tech and the University of California at Berkeley. Digital Asset Holdings LLC, which is led by former JPMorgan Chase & Co. executive Blythe Masters, is contributing code, developer resources and its Hyperledger brand name.
This isn’t the first blockchain consortium. R3, a startup headed by former ICAP Plc executive David Rutter, has signed up more than 20 banks including Bank of America Corp., Citigroup Inc., Deutsche Bank AG, Morgan Stanley, Societe Generale SA, Barclays Plc, Goldman Sachs Group Inc. and JPMorgan. R3 is studying how trading of securities, derivatives and loans can be overhauled by using distributed ledger and blockchain technology.
R3 and JPMorgan have also committed to contributing to the Hyperledger project, according to the statement.
With a digital ledger, as long as banks or exchanges, all of whom are known to each other, verify that one company has the funds or assets to transact with another company, the settlement and clearing time is reduced to seconds. Fundamental to that prospect, however, is that various digital ledger applications can connect and communicate with each other. That’s the aim of the new consortium, according to Zemlin.
“Distributed ledger systems today are being built in a variety of industries but to realize the promise of this emerging technology, an open source and collaborative development strategy that supports multiple players in multiple industries is required,” he said in the statement.
The best-known blockchain is the one that powers bitcoin. While it relies on anonymous users to verify and maintain its history of every bitcoin transaction, banks and financial institutions are exploring the technology to see if it can allow known users to interact. That’s because regulated financial institutions must abide by regulations to prevent money laundering and know-your-customer rules.
A group of IBM engineers has been building the technology to contribute to the open-source project for the past year. The company said it’s separately working with about 40 financial clients to test existing blockchain platforms.
“A broad, cross-industry and open source approach is critical to advance the potential for blockchain and make it mainstream,” Arvind Krishna, senior vice president at IBM Research, said in the statement. “Even beyond building out standards, creating common code will allow organizations to focus on creating industry-specific applications that enhance the value of this technology.”