Ibm adapts bitcoin technology for smart contracts

One can now find standardized, specific blockchain apps on a permissioned blockchain platform for the financial sector. Meet LedgerConnect, a dedicated financial blockchain-specific app store launched by the enterprise software leader International Business Corp. C and CLS, a foreign exchange market infrastructure firm. Amid the growing infrastructure of both public and private blockchains, the increasing number of blockchain-based applications provides the necessary support in the development of the distributed ledger technology DLT ecosystem.

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Content:

• Getting a Handle on Blockchain
• IBM Adapts Bitcoin Technology for Smart Contracts
• Blockchain App Store Launched by IBM, Barclays, Citi
• Blockchain 'smart contracts' to disrupt lawyers
• How IBM is using blockchain to transform the potential of enterprise data
• Blockchain smart contracts: Applications, challenges, and future trends
• Blockchain beyond the hype: What is the strategic business value?
• Columbia-IBM Center Supports Breakthrough Research in Blockchain Technology

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Getting a Handle on Blockchain

October 25 minute read By Ingrid Sapona. Comments about blockchain technology being the greatest technological revolution since the advent of the Internet certainly help fuel that view.

More than 40 financial service organizations have invested in blockchain or related start-ups since early Those who remain skeptical may be interested to read that many companies that report investing lots of money in blockchain technology are doing so even though their corporate executives admit they have only a basic understanding of what blockchain is.

A Deloitte survey showed that of more than 3, U. This trends paper will: - describe the basics of blockchain technology, - review its primary features, and - consider some uses specific to the insurance industry. The idea of the blockchain came out of development of Bitcoin, the cryptocurrency launched in Bitcoin is a virtual currency governed by programming rules that run on a decentralized peer-to-peer network, without a central bank.

To many, the notion of a virtual currency is an attractive alternative to some of the more volatile national currencies. Proponents of Bitcoin believe elimination of central bankers from the financial system could prevent such crises in the future. No matter where you stand on Bitcoin, as of January , the total of all issued Bitcoin was about U. Blockchain is simply the technology that underpins Bitcoin.

Blockchain is a technology platform that enables so-called distributed ledgers DLTs, for short. These assets can be anything of value that has, or can be given, a digital representation — money, goods property, documents, or data. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.

But, a number of well-known blockchain platforms and frameworks are particularly popular for example, Hyperledger , Everledger , and Ethereum. At this point, some analysts believe the fact there are different platforms may slow the growth and acceptance of blockchain, as businesses wait to see whether a particular standard will emerge. Much of the power of Blockchain has to do with the fact that applications can be written that run on top of the platform, allowing businesses and groups to use the blockchain to record all manner of things, from static records to dynamic transactions.

These applications can contain complex logic which may interact with off-blockchain applications and transitional enterprise software. General Business Uses for Blockchain. Blockchain technology is useful for a variety of business purposes — both within a company and across industries. In terms of internal uses, the technology can be used to reduce costs by increasing internal efficiency and process simplification. It can also be helpful during audits and when regulators come calling because the technology makes it nearly impossible to tamper with data entered on it.

Blocks on the chain are locked, showing the full history of a transaction. Because the blockchain is decentralize, the distributed ledger eliminates risks that can occur when data is held centrally. Traditional databases typically rely on a database-wide security layer. So, if that layer is breached, the content of the entire database is accessible. A distributed ledger eliminates the need for multiple databases and the errors that arise from maintaining and transferring data among them.

A downside is that the search functionality of a blockchain may not be as good as is currently available with a typical database. The nodes that make up the network of ledgers do not merely maintain a copy of transactions. They are continually synced through a protocol referred to as a consensus. This makes the chain extremely reliable, tamper-resistant and trustworthy.

The state of agreement between blockchain nodes is achieved through the use of consensus algorithms. With no trusted third party to act as intermediary, however, some other way is needed to verify transactions.

The blockchain replaces the trusted third party because the ledger basically acts as a database that contains the payment history of every transaction entered on it and everyone on the network can see the history. Blockchains Can Be Public or Private.

Distributed ledgers can be public or private. Public blockchains are open to anyone. Bitcoin, for example, runs on a public blockchain.

A participant downloads the publicly available software. Though the public key is known to everyone, the identity of the person or entity behind the public address can remain anonymous. The software also generates a private key that only the individual knows. When a person wants to add a transaction to the ledger they do so using their public key their address and they encrypt the message using their private key.

The private key functions kind of like a password or signature to verify the transaction is from them. Private blockchains can be set up by a single company to improve their internal efficiency and to reduce costs.

For example, a company can use a blockchain to authenticate transactions with customers, vendors, and employees. The business can set up the blockchain as a permissioned network , deciding who is allowed to participate and what transactions will be allowed on the ledger.

Private blockchains can also be established by networks of businesses that form a consortium. The consortium can set up a governing authority to determine who may participate. Because private blockchains are permissioned, the participants know who they are transacting with and there are legal frameworks in place to provide recourse.

Every entity that joins then plays a role as a node on the blockchain. Such blockchains are ideally suited to situations where different parties all need to rely on the same information — such as in insurance, which involves brokers, underwriters, claims handlers, and so on.

Indeed, many believe that blockchains established by consortia of insurance industry players are the best starting point for introduction of blockchain within the industry. One of the features of blockchain is that it allows disintermediation, which means transactions can be completed without the use of intermediaries. As Paul Meeusen of Swiss Re sees it, automating the administrative tasks currently done by counterparties could be a threat to them, but automating such processes could also be looked at as a way to allow the counterparties to focus on value-added advisory products.

Because the blockchain on which Bitcoin originated was created as an open source platform like the Internet , developers are free to build all manner of applications to run on the blockchain. Dapp are applications computer code that run on a blockchain but are not controlled by any individual or central entity. The Ethereum blockchain platform , for example, was designed specifically to enable developers to build and deploy Dapp. Think about all the intermediary services that exist across hundreds of different industries.

From obvious services like loans provided by banks to intermediary services rarely thought about by most people like title registries, voting systems, regulatory compliance and much more. So-called smart contracts are a prime example of the kind of application that can be run on a blockchain.

They are basically contracts digitally programmed so they are self-executing. Once a smart contract provision is triggered, the smart contract works with the blockchain to enforce the contract across all counterparties. With a self-executing smart contract, the risk of human error is minimized and speed and efficiency is increased.

When running on the blockchain a smart contract becomes like a self-operating computer program that automatically executes when specific conditions are met. Because smart contracts run on the blockchain, they run exactly as programmed without any possibility of censorship, downtime, fraud or third party interference.

Smart contracts have the potential to reduce costs associated with compliance, recordkeeping and manual intervention. According to Capgemini Consulting, use of smart contracts in the personal auto insurance industry could save U. Say, for example, a traveller purchases flight cancellation insurance. If it was, the insurance is triggered and payment would automatically be processed without the insured having to file a claim.

A German company Etherisc did a blockchain experiment in September related to flight delay insurance. Participants travelling to a conference in Singapore were allowed to purchase flight delay insurance that would payout automatically if the flight was delayed or cancelled.

A Dapp was digitally notified and it automatically processed the payout without any manual verification. For example, there are issues of data protection and privacy if the transaction involves personal data.

Despite the potential legal and programming issues to be ironed out, many believe these hurdles are surmountable with the right professionals working on it. Clyde Code specializes in creating smart contracts and ensuring they function as intended — both from a technical and legal perspective.

One of the more intriguing examples Clyde Code talks about is how a smart contract could be used for cargo insurance. The scenario they describe relates to a ship owner that has installed sensors on cargo containers that track, in real-time, where the containers are. The insurance could change in real-time based on the exact location of the cargo. So, for example, if the ship is traversing an area where piracy is rampant, the rate could change for the period the cargo is traveling through dangerous waters.

There are a number of different governance and possible regulatory issues related to blockchain. If the blockchain is permissioned such as one used by a consortium , rules regarding participation are needed. Who sets those rules must also be decided. As well, participants would have to sign an agreement setting out rights and obligations related to things like non-disclosure, privacy, and dispute resolution.

The agreement may also specify, for example, that participants must ensure they comply with know your client-type legal requirements and anti-money laundering laws. In terms of legal concerns, blockchain networks could give rise to competition and anti-trust concerns. There could be an argument that the adoption of technical standards prevents participation by competitors, as well as the potential for the exchange of commercially sensitive information between competitors participating in the network.

An IBM survey of financial institutions in 16 countries found that regulatory constraints are the biggest barrier to implementing blockchain today. Though some caution against regulators acting too quickly and therefore stifling innovation, some believe that regulation that supports the use of blockchain will lead to wider adoption of it. But, in the banking industry, which has shown more interest in adopting blockchain technology than the insurance industry, regulators are already working with major banks to develop regulatory frameworks.

Insurance Applications In this section we discuss the Blockchain Insurance Initiative referred to as the B3i and survey the following specific examples of how blockchain would be particularly useful in the insurance context:. The B3i consortium started in October In early the consortium added 10 new members, and in September they added more, bringing the total up to more than three dozen.

The group was specifically established to explore the potential use of blockchain in the insurance industry. The goal was to create a prototype covering the core functionalities required to enable a distributed smart contract management system for Property Cat XoL Excess of Loss contracts.

The consortium chose to initially focus on reinsurance because they thought it would be easier to develop consensus on common standards for business-to-business products, rather than a product aimed at consumers because such insurance can vary greatly in different jurisdictions. In September the B3i consortium released a full functional beta version of a joint distributed ledger for reinsurance transactions and shared details of its vision and the business case.

Participation on the beta ledger is permissioned, but the consortium is welcoming all insurance industry participants insurers, brokers and reinsurers to join the testing program and play in the sandbox environment created for testing. The consortium members are functioning under a memorandum of understanding whereby the members share costs and resources.

IBM Adapts Bitcoin Technology for Smart Contracts

The concept of a distributed ledger was invented as the underlying technology of the public or permissionless Bitcoin cryptocurrency network. But the adoption and further adaptation of it for use in the private or permissioned environments is what I consider to be of practical consequence and hence only such private blockchain systems will be the focus of this talk. Computer companies like IBM, Intel, Oracle, Baidu and Microsoft, and many key players in different vertical industry segments have recognized the applicability of blockchains in environments other than cryptocurrencies. IBM did some pioneering work by architecting and implementing Fabric, and then open sourcing it.

Blockchain App Store Launched by IBM, Barclays, Citi

Blockchain, the underlying infrastructure behind cryptocurrencies, is likely among the most transformative technological innovations of our age, with promising use cases for many industries. In a nutshell, blockchain is an open and censorship-resistant database model, secured by encryption and decentralization. Blockchain records information in blocks on a shared ledger, storing a synchronized copy of it on all the systems participating in the network, hence assuring its immutability. Blockchain can be a game-changing technology for multiple sectors, especially for the supply chain industry. Increasing globalization has created more complex distribution processes than ever, creating new challenges in supply chain management. Blockchain infrastructure can be applied to create more transparency and automation in supply chain processes on a global scale. As a result, two UK-based hospitals have started experimenting with blockchain technology — which they were previously using to track chemotherapy drugs — to monitor and track the supply chain of vaccines. Vaccine shipments are equipped with internal temperature sensors, and a rise above the minimum threshold temperature will automatically create an entry in the blockchain, removing the affected dose from the supply chain.

Blockchain 'smart contracts' to disrupt lawyers

Highly capable connected technology has emerged in recent years and is on track to disrupt the traditional pharmaceutical industry. A smart contract is a tool that automatically executes the agreed upon terms, while simultaneously facilitating business and decreasing risk. Promising increased accuracy, transparency, and security, smart contracts and blockchain technology are the next steps in the evolution of secure data transaction. Companies in the pharmaceutical industry, and their supply chains, will be forced to adapt their operations to keep up with these generational changes in order to competitively deliver services and treatments in the future. Currently, serialization and track and trace requirements are the predominant industry practices, but their execution is manual and disjointed.

How IBM is using blockchain to transform the potential of enterprise data

The quickest adopters have been in the software, fintech and logistics industries. BaaS has become so popular, in fact, that some of the largest tech companies in the world — including IBM, Microsoft and Oracle — all have divisions dedicated to the integration and evangelism of BaaS. For many companies, pairing cloud services with BaaS could be enormously valuable. The personalized flexibility of BaaS technology allows businesses to combat pain points by tailoring integrations. Here are 18 Blockchain-as-a-Service companies that integrate these game-changing ledgers into everyday tech. It also provides an admin platform that gives users an in-depth and real-time look into their data.

Blockchain smart contracts: Applications, challenges, and future trends

Try out PMC Labs and tell us what you think. Learn More. In recent years, the rapid development of blockchain technology and cryptocurrencies has influenced the financial industry by creating a new crypto-economy. Then, next-generation decentralized applications without involving a trusted third-party have emerged thanks to the appearance of smart contracts, which are computer protocols designed to facilitate, verify, and enforce automatically the negotiation and agreement among multiple untrustworthy parties. Despite the bright side of smart contracts, several concerns continue to undermine their adoption, such as security threats, vulnerabilities, and legal issues.

Blockchain beyond the hype: What is the strategic business value?

A rival blockchain and virtual currency to bitcoin, Ethereum allows for the programming of "smart contracts", or computer code which facilitates or enforces a set of rules. Ethereum was first described by the programmer Vitalik Buterin in late ; the first full public version of the platform was released in February. Commercial lawyers are watching the arrival of Ethereum closely given the potential for smart contracts in the future to disintermediate their highly lucrative role in drafting and exchanging paper contracts.

Columbia-IBM Center Supports Breakthrough Research in Blockchain Technology

RELATED VIDEO: Using Blockchain Technology To Manage Supply Chains: How Smart Contracts Can Transform Supply Chains

An award-winning team of journalists, designers, and videographers who tell brand stories through Fast Company's distinctive lens. The future of innovation and technology in government for the greater good. Leaders who are shaping the future of business in creative ways. New workplaces, new food sources, new medicine--even an entirely new economic system. 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.

Blockchain is the way ahead, but true Blockchain is decentralised and intrinsically linked to a rewards mechanism. The idea was to create blocks of information in a transaction cycle and allow third parties — crypto miners - to verify any changes to the transaction or contract process, and offer a rewards mechanism. But with Blockchain being linked to the speculation behind cryptocurrency, corporates are more than happy to delink the technology from cryptocurrency. By doing so, they are defeating the very purpose of a decentralised approach to verifying transactions and enforcing contracts with utmost transparency. It launched a couple of Blockchain-based services at AWS Re:Invent based on a centralised smart contract system with AWS acting as the verifying layer but with no link to the crypto rewards mechanism. Amazon-managed Blockchain is a fully managed service that makes it easy to create and manage scalable Blockchain networks using the popular open source frameworks Hyperledger Fabric and Ethereum to be launched next year.

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