Blockchain: Myths and Misconceptions

When new technologies are announced, it always seems that a flood of new thoughts, opinions, misinformation and rumors follow. Such is the case with “blockchain”, the evolving electronic ledger technology. I found evidence of this phenomenon when I attended a major eGovernment seminar in Dubai, UAE, a few weeks ago.

Background:

I recently had the opportunity to travel to and speak at the GCC Smart Cities Conference in Dubai, UAE. The topics varied from best practice policies and procedures to case studies – including discussions of new technologies.

The conference features industry experts and features open forum discussions and it draws enterprise and government leaders from different countries across the Middle East region and from around the world.  It’s a brilliant opportunity to discuss issues and answers with top notch technologists, business leaders and government leaders – both in the open forum format as well as individually between sessions and/or over lunch.

The following subsections describe some of the things that I observed as I attended the conference. 

Misinformation: Blockchain Is Equivalent to Bitcoin

“Blockchain is the same thing as Bitcoin.” This is a false statement. Bitcoin is a cryptocurrency that uses the blockchain protocols, procedures and electronic ledger to conduct transactions. Bitcoin is not a process, blockchain is. Bitcoin is one of many cryptocurrencies that uses blockchain. (See this Clabby Analytics report for an example of another cryptocurrency, Oyster Protocol, that uses blockchain services).

In the Middle East I learned that over the next 20 years, the country of Kuwait is positioning itself to be a major fin/tech hub – and it plans to rely heavily on blockchain to become such. Unfortunately Kuwaiti investors lost millions of dollars when Bitcoin – which uses blockchain as a foundation for the way it runs its cryptocurrency – saw its stock tumble in a massive market correction. This has caused a lot of confusion about blockchain and its associated risks. Accordingly, Kuwait intends to tread softly moving forward – because of a misunderstanding… 

But perhaps this misunderstanding is only regional. For instance, in this week’s Blockchain Unleashed blog by IBM’s Jerry Cuomo, Vice-President of Blockchain Technologies, the blogger says “I rarely get the sorts of questions that confuse bitcoin with the broader applications of blockchain. This is progress!”

Myth: Enterprise Blockchain Is All Hype and No Substance 

Blockchain is all hype and there are not actual working projects yet.” False. Dozens of real-world, in-production examples of blockchain can be found in the open market today

The confusion around the distinction between blockchain and bitcoin isn’t unique to Kuwait. 

In his blog, Cuomo takes a closer look at some of the industry myths and misconceptions that surround blockchain. His conclusion is like mine: “There is solid, provable progress being made in blockchain awareness and implementation.” 

The following are a few examples of real world blockchain deployments:

Batavia is a global trade finance platform based on blockchain and built on the IBM Blockchain Platform. Batvia is being collaboratively developed by a consortium of five banks — UBS, Bank of Montreal (BMO), CaixaBank, Commerzbank and Erste Group. The consortium’s goal is to support the creation of multi-party, cross-border trading with an open ecosystem that can be accessed by all organizations across the world. Overall, Batvia has reduced the average time to settle disputes across both suppliers and partners from 44 days to under 10 days. Those “in-dispute” funds are back to the business in a fourth of the amount of time. This is a great example of the tangible, measurable benefits that can be delivered by blockchain.

IBM offers blockchain as a cloud service. In total, IBM’s blockchain service provides support for over 40 transacting consortia.  These companies are using the IBM Blockchain Platform as a foundation for delivering new value to their customers as well as employees. With a few thousand customers on IBM’s blockchain platform, new ideas and solutions involving blockchain are being developed daily. Some new faces to IBM’s blockchain environment include TrueTickets, Loyyal, Tririga and Integra. 

TrueTickets is a great example of a business deriving value from blockchain, is creating more visibility in an industry where there is a good amount of fraud. Whether it is fake tickets, huge price fluctuations, or even a mishap with an aggressive scalper as a last resort, fans have a long list of grievances in the ticketing industry. With their new strategy, running on the blockchain platform, TrueTickets and other companies can create trustworthy transactions in places where there is a lack of transparency.  

Finally, the IBM Food Trust consortium now has over 12 institutions. Members of the consortium have the ability to trace back tainted food for recalls. In fact, Frank Yannis Vice President of Food Safety and Health at Walmart said, before blockchain it took them over six days to trace food back to its source; now it takes a few seconds.

These consortiums have created and encouraged enterprises to come together to help make their industries more transparent. With blockchain, it is not all about hype, too many organizations seeing real benefits today.

Myth: Enterprise Blockchains Are Always Private Blockchains 

In Jerry Cuomo’s blog he writes It is important to understand the distinction of private versus public, and permissioned versus permissionless. I would agree that enterprise blockchains are always permissioned. I do not agree that enterprise blockchains are always private. They most certainty can be public as well.”

Enterprise blockchain distributed ledger technologies (DLTs), like Hyperledger Fabric, Hyperledger Sawtooth, and Corda rely heavily on permissioned networks. Why? It allows all needed institutions taking part in a transaction to be accounted for. The network knows members or trust anchors by their unique cryptographic identity. This is necessary to eventually pass required audits. 

The decision to make a private or public network is left in the hands of the organization or the governing board of a consortium. “We will soon see the emergence of enterprise blockchain registries to provide a directory of listed consortia — think programmable web for blockchain. The registry listing will describe how institutions can join and use the network’s features, including business obligations and rewards, and the technical application programming interfaces (APIs) to connect to the network.” 

Overall, these blockchain registries will help people understand business consortiums and how their businesses could potentially leverage different capabilities from different networks for different transactions. In the end, not all blockchains for enterprise are, or should be private. 

Myth: Hyperledger Fabric Runs Only on Mainframes

IBM Blockchain Platform, the blockchain cloud service runs on IBM System Z, — but blockchain itself can be run in virtually any architecture. Whether it be another kind of hardware architecture or in the cloud, Hyperledger Fabric peers are close to becoming a standard on cloud. Heck, even offers Oracle offers blockchain services – and they’re not on a mainframe…

IBM’s Blockchain Platform’s Enterprise and Enterprise+ and their respective deployment plans do however dispense Fabric peers to mainframes and run across IBM’s cloud data centers. This allows IBM to ensure the highest degree of security. Whether this is for crypto-key management or resiliency and compliance, as a service provider IBM’s goal is to provide its customers the highest levels of security possible. IBM recently rolled out a Starter Plan, in which uses Intel-based Kubernetes clusters across their worldwide cloud. 

This proves that IBM’s offerings for enterprise customers are not only on the mainframe. However, there is a significant upside to running blockchain on System Z as compared with x86 architecture. Since I am a big proponent of the mainframe, I don’t want to pass up this opportunity to share System Z advantages including (1) Strongest security in the industry (2) Faster overall performance (fastest hardware acceleration, 1.4x – 7x more throughput) (3) Optimized Network – 41% to 82% faster response time (4) Very large memory (5) High-speed bus architecture; and (6) Offered as a cloud service 

Summary Observations 

Many businesses are still formulating blockchain strategies and looking for ways to incorporate blockchain technologies into business processes. By clearing up rumors and myths and painting a clear picture of what blockchain can do for organizations (through use cases and measurable business benefits), I believe we will see more blockchain adoption around the world, and in turn more innovation around blockchain. 

 

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