A brief history of how IBM has established itself as a leader for innovative blockchain solutions around the world.
The adoption of blockchain technology is slowly taking shape across a multitude of industries. At the forefront of the amalgamation of payment systems and logistics is US tech giant International Business Machines Corporation (IBM), which has established itself as a leader in terms of blockchain-based products and offerings.
The latest developments aim at the logistics sector – but IBM has been keen on blockchain for over 5 years that reveals a slow and steady approach to the adoption of enterprise-scale blockchain solutions.
Exploring the Internet of Things
Their beginnings in the space were focused on research on the capabilities of blockchain. Back in 2014, IBM began a study into the Internet of Things (IoT) which led to a collaboration with Samsung in an effort to overhaul early developments with the IoT. The tech giants agreed to develop the ADEPT project, which stands for Autonomous Decentralized Peer-to-Peer Telemetry.
In essence, the ADEPT Proof-of-Concept explored the possibilities of appliances interacting autonomously with its environment. This was proved by a Samsung washer reordering detergent and service parts as well as calibrating its own power usage.
The project identified three crucial functions of a decentralized system for the IoT – peer-to-peer messaging, distributed file sharing and autonomous device coordination.
The ADEPT PoC used Telehash for messaging, BitTorrent for file sharing and the Ethereum blockchain to coordinate more complex functions requiring contract capabilities. This early PoC provided a powerful insight into the capabilities of IoT and was a major milestone for both IBM and Samsung.
With the apparent success of the project and the realisation of the applications of blockchain, IBM announced that it would invest $3 billion in March 2015 into a new business unit that would solely focus on IoT.
Putting the blockchain in IBM
With working experience using blockchain technology in their IoT project, IBM quickly went to work on creating a blockchain solution aimed at large-scale enterprises.
The realisation of usable blockchain-based applications came to the fore from 2015 onwards. Rumours that IBM was developing its own blockchain-based payment system were eventually confirmed, although it was initially dubbed an experimental project by senior vice president of IBM Research Arvind Krishna.
At the time, Krishna said the company was intrigued by the promise of the technology:
“Blockchain, as a technology, is extremely interesting and intriguing. I want to extend banking to the 3.2 billion people who are going to come into the middle class over the next 15 years. So I need a much lower cost of keeping a ledger. Blockchain offers some intriguing possibilities there.”
The project uses smart contracts to log transactions between different parties to facilitate large transactions across the world. Funds held in escrow are then transferred once contractual obligations have been met.
This payment system eventually became part and parcel of its main blockchain platform, which was launched in April 2015. The IBM Blockchain platform allows the operation of blockchain networks on the IBM cloud. The service was touted to meet exceptional security standards including Federal Information Processing Standards (FIPS 140-2) and Evaluation Assurance Levels (EAL).
The IBM Blockchain platform is fully functional today, utilising the Linux Foundation’s Hyperledger Fabric which IBM contributed to creating.
Overhauling IBM Global Financing
As part of its global offerings, IBM also provides a means for businesses to access finance through its IBM Global Financing platform, mainly for IT hardware, software and services.
As IBM’s focus on blockchain grew, there was a realisation that the the technology could fast-track their financing process in a massive way, especially when it comes to dispute resolution.
Jerry Cuomo, IBM’s vice president of Blockchain Technologies, told Cointelegraph in August 2016 that the project could help ease the time taken to resolve thousands of disputes every year.
“The fact that in any given year we see about 25,000 disputes within the lending network and this ties up cash, in some cases it can be significant cash, $100 million at any given time which could be held up in disputes. It should be made more efficient so a dispute did not take 40 days on average to resolve.”
The proof-of-concept for the project allowed two years worth of transactions on their lending network to be processed in under 10 days.
With its own blockchain platform fully operational, IBM has been able to provide a wide variety of industries with a blockchain-based solution for their specific needs. This in turn has led to a number of noteworthy partnerships around the world.
In June 2016 IBM agreed to work with a Finnish development agency to implement a smart contract application that would track and provide data on shipping containers.
The three year pilot project began in September 2016, aiming to reduce cargo transit times Baltic states of Finland, Sweden, Estonia and Latvia, and is still ongoing.
IBM also opened an Innovation Centre in Singapore in July 2016 to help drive the development of blockchain-based applications in the city. The collaboration with the private sector and government agencies promised to deliver a number of pilot projects for trade, finance and logistics industries.
As part of its dealings in Singapore, the company announced a partnership with a local startup that would develop Know Your Customer (KYC) projects using blockchain technology in November 2016.
Another major reason for setting up a base of operations in Singapore is the proximity of the Port of Singapore Authority (PSA) Terminal, which is the world’s biggest container transhipment port. In August 2017, IBM signed a deal with PSA International to test a new blockchain-based supply chain network.
IBM partnered with with Bank of Tokyo-Mitsubishi in September 2016 to explore the possibility of using blockchain-based smart contracts between its business partners. The aim was to automate transactions using the Hyperledger project.
A month later, a $200 million investment into China’s UnionPay Bank’s IoT project also made headlines, as IBM extended its support of blockchain-based developments into the Far East.
Land and sea – partnering with Walmart and Maersk
Blockchain technology is making waves in the logistics and supply chain industries and IBM’s enterprise solutions have attracted some global industry leaders in this particular space.
Firstly, IBM and American retail giant Walmart announced they were working together in October 2016. The retailer was looking to develop a blockchain platform that would allow it to drastically expedite the tracking of any products in its stores, from origin to shipment as well as the current status of the product.
At the time, Walmart’s IT department had to manually search through its database, which could take days to address complaints or issues with products which had been purchased by consumers.
The project was gradually developed and in December 2016, Walmart began a trial to track the distribution of goods in China with the help of the Tsinghua University.
The number of partners grew to incorporate Unilever and Nestle by August 2017, as IBM laid the foundation for its food-tracking blockchain platform. The Food Trust blockchain was formally announced in June 2018, as Walmart and IBM continued their collaboration with a number of other enterprises to begin tracking food supply within their supply chains.
At the same time, Walmart implemented a blockchain-based platform that its suppliers of leafy greens must use to track produce from farms to its stores in September 2018. These suppliers will have a year to implement the software, which uses IBM’s blockchain service. The technology has allowed the company to trace the source of goods in seconds, where conventional methods would have several days.
Frank Yiannas, Walmart's vice president of food safety, told Cointelegraph that decentralised systems would benefit all parties involved in their use:
“We never had the intention of creating a product, all this started with the notion that we want to create a transparent food system. The way forward is decentralised as opposed to a supplier getting into a centralised database and putting data in there and the central authority owning the data. In this blockchain ecosystem, if you get into it and give data, it is your data, you own it.
“No single entity, nor IBM as the tech service provider can monetise or benefit from that data alone.”
While IBM’s solution is the backbone of Walmart’s blockchain system, Yiannas made it clear that they were moving towards a more decentralised network:
“A very important concept is self-governance. We have an advisory committee made of participants in the system right now that are setting up the rules on how it operates. We have permissioning of data, and then in terms of the nodes themselves, this is a work in progress.
“The nodes are within the IBM solution, but there is already work underway to create nodes that are independent of IBM. We’re in the early days of this, those nodes will be decentralised and they won’t be all IBM nodes.”
While all of this was going on, IBM was also busy working on a collaboration with global freight company Maersk to launch a blockchain project to overhaul the logistics and shipping industry in March 2017. This came to fruition in January 2018 when the two companies announced that they would be launching a blockchain-based shipping and supply chain management company.
Finally IBM and Maersk launch their shipping solution, TradeLens, in August 2018. Upon its launch, 94 organisations and 154 million shipping events had already been recorded on the platform.
While most of its work in the blockchain sector has been focused on software, IBM has a long history of manufacturing hardware. With that expertise, they have also dabbled in creating hardware focused on blockchain usability.
In July 2017, IBM launched IBM Z, a blockchain-powered mainframe server that was touted to process more than 12 billion encrypted cloud-based or database transactions in a big move for data encryption technology. The server was said to be able to encrypt data 18 times faster than conventional platforms available at the time.
Less than a year later, IBM stated in its annual 5 in 5 report that devices known as cryptographic anchors would be commonplace in everyday objects.
The company has been developing these devices, which could serve multiple purposes. The most powerful would be a microchip ‘smaller than a grain of salt’ which will be able to monitor, gather, communicate and act on data.
IBM’s work with blockchain has also been implemented in various legal spheres around the world.
In Switzerland, IBM and blockchain startup Proxeus were able to register a business in the country in record time, proving the capabilities of the technology to overhaul conventional processes in digital workflows in April 2018.
During the same month, IBM was also part of a ‘world-first’ as global insurance brokerage and risk management firm Marsh announced a blockchain solution for proof of insurance.
The online advertising space is also in state of flux, as the industry looks to cut out fraud and provide more transparency to advertisers on internet platforms. To this end, IBM began working with Salon Media in April 2018 to develop a proof-of-concept for the digital advertising space that will try address advertising fraud in the space.‘The Campaign Reconciliation Project’ is a blockchain-based platform that hopes to remove the need for intermediaries between advertisers, publishers and consumers. The project will use smart contracts to track various details of ad campaigns that will be immutable and transparent.
IBM’s global solutions leader of advertising Chad Andrews told about possible impact to the advertising sector:
“With a Blockchain backed peer-to-peer network, achieving transparency in the digital advertising supply chain is possible. But, ensuring its success will require the entire industry, including advertisers, ad tech providers, publishers and agencies to coalesce around a shared, auditable version of truth. Such a pact would facilitate a groundbreaking level of transparency across auditing, reconciliation, fraud detection, discrepancy management and payments.”
Following that, IBM began working with software developer Mediaocean to launch a blockchain-based tracking system for digital media transactions in June 2018. The project aims to reduce advertising fraud in the sector.
The prospective uses of blockchain technology could also benefit the precious metals and jewelry trade. To this end, IBM is once again working with a number of industry players to develop a platform to track and authenticate the origins of diamonds and jewelry.
Governmental and banking improvements
IBM’s work in the space has not gone unnoticed by governmental agencies either. Thus Australia entered into a $740 million deal with the company in July 2018 in exchange for blockchain-based data security services. The main focus of this project will be providing blockchain, automation and AI software to Australian government departments.
The company is also working with the Riyadh Municipality in Saudi Arabia to help develop a blockchain strategy that will streamline governmental processes in the area.
There are also recent reports of a collaboration between IBM and the Central Bank of Azerbaijan. It is understood that a five-year program has been agreed upon to digitally transform the country’s economy, with a focus on blockchain technology.
IBM also released two reports on blockchain towards the end of 2016 that suggested a boom in the amount of banks, financial institutions and business using blockchain in 2017.
The reports, labelled “Leading the Pack in Blockchain Banking: Trailblazers Set the Pace” and “Blockchain Rewires Financial Markets: Trailblazers Take the Lead,” suggested that blockchain adoption would be led by a need to incorporate services and platforms into one single channel.
As such, it was said that 15% of banks that took part in the study said they would have deployed commercial blockchain solutions during the year.
Having embraced and driven blockchain development over the past five years, IBM is laying the foundations to further its efforts in the space. The company’s CEO, Virginia Rometty, announced in May 2018 that IBM planned to create 1800 new jobs in the blockchain, AI and IoT space.
To further that cause, IBM moved its Blockchain World Wire (BWW) payment network out of beta testing in September. The project aims to be a rival to Ripple’s international payment solutions, using Stellar’s blockchain to process transactions between banks in near real-time.
IBM has also put pressure on the American congress to begin funding blockchain solutions in a series of discussions with MIT and members of congress in September.
The company also filed a patent for a blockchain configuration proof-of-work algorithm in April focused on IoT, that would address security concerns in these types of networks.
The latest big announcement coming out of IBM is the launch of its very-own food tracking blockchain platform in October. Food Trust underwent 18 months of extensive testing before its launch in collaboration with Nestle SA, Dole Food Co., Driscoll’s Inc., Golden State Foods, Kroger Co., McCormick and Co., McLane Co., Tyson Foods Inc. and UnileverNV.
Over the past year and a half, millions of food products have been tracked using the blockchain system.
IBM’s work in the blockchain sector was also recognised towards the end of 2017, as a report from market research firm Juniper Research rated the company as the most successful in deploying blockchain solutions. The report was based on a survey that factored in four hundred top-level executives around the world.
In September 2018, IBM was ranked second in the world behind Chinese tech giant Alibaba as the company with the most patents filed for blockchain-related projects.
According to this report, IBM has created 89 blockchain patents, a staggering number for in a space that has only been in existence for nine years since the inception of Bitcoin.
While other tech giants like Microsoft and Amazon are also making moves in the space, IBM has set an impressive pace to catch. All of this bodes well for the adoption and development of blockchain technology in the years to come.