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Computing innovator and industry giant IBM has been researching vigorously for the last couple of years for a method to commercialize and harness the potential of blockchain technology through its enterprise version of Hyperledger Fabric, known as IBM Blockchain. After years of experimentation, IBM has outlined five “blockchain for good principles” which illustrate how transparent and trusted enterprise blockchains can benefit not only organizations, but society as a whole.

The impact of blockchain technology

IBM outlines the fact that “technology never exists in a vacuum”, and that this is especially true for innovative tech which has the potential to reshape the world. Similar to quantum computing and artificial intelligence, blockchain can be used to promote progress and add real world value, but at the same time, it can be exploited and misused. With respect to this issue, the technology is already being used in various ways to improve people’s lives. Estonia often described as a genuine digital society, uses blockchain to ensure data integrity in governmental services and healthcare. IBM also points out that the technology has been successfully employed by food retailers to improve produce tracking and combat salmonella outbreaks. On the other hand, blockchain has been used in elaborate pump and dump ICO schemes as well as a medium to exchange illegal goods. The balance between innovative technology and facilitator of illegal activities rests entirely on people and organizations which help develop the technology and bring it to the market. “Good technology is a product of more than just sheer ingenuity; it is a reflection of the will to do the right thing. If blockchain is to move beyond the technological fringe and into the mainstream, to underpin the nexus of a more trusting and transparent world, we must, as innovators, remain committed to a set of ideals”, believes IBM.

The five Blockchain Principles

During their years of research, IBM concluded that in order to build an enterprise blockchain that stands for good, people and companies to need to respect five key principles:

• Open is better

• Permissioned doesn’t mean private

• Governance is a team sport

• Common standards are common sense

• Privacy is paramount

In an interview with Forbes, Jerry Cuomo, Vice President of Blockchain Technology at IBM, underlined how the five principles came to be: “It’s important to understand the power of technology. When IBM’s CEO, Ginni Rometty, began commenting on data rights with respect to data analytics, we became inspired on the blockchain side. Over the past 3 years, we have worked with many clients and have gained perspectives that have driven these principles. There are ways to use blockchain technology that are critical and would lead to good outcomes, but let’s make sure we don’t leave that to guess work. That is how these 5 principles came about and it’s our responsibility to abide by them wisely and share them with others”.

Open is better

According to IBM, blockchain networks need to accommodate diverse communities of open source contributors and organizations to stimulate innovation and increase the overall quality of code. IBM suggests that developers should rely more often on open source frameworks with defined approaches for sharing contribution because when done properly, open development accelerates the rate in which technology matures and reduces costs while pushing for innovation. Cuomo explained that “The open is better principle is carried across many aspects of what we do at IBM. Open is always better when it comes to the cloud, artificial intelligence or the Internet of Things, but it has especially interesting implications when looked at from a blockchain context. We have always been an ‘open by design’ company, but we think carrying that principle to blockchain is fundamental to our strategy”.

IBM gives as an example the Hyperledger Project, which operates under the Linux Foundation, an ecosystem for enterprise blockchain software with a strong and diverse community of code contributors. Efforts are already made in this direction. April 2019 has witnessed the creation of the International Association of Trusted Blockchain Applications (INATBA) which aims to bring together industry startups, small and medium enterprises, regulators and standard setting bodies in order to facilitate the adoption of blockchain and distributed ledger technology (DLT) into the mainstream. Members include IBM, Accenture, Deutsche Telekom, IOTA Foundation, Ripple Labs, SWIFT, Barclays, ConsenSys, Sovrin Foundation. Modex has been recently accepted as a full member.

Permissioned doesn’t mean private

IBM underlines the fact that anonymous public blockchains are not suitable for most enterprise-grade applications, especially in heavily regulated industries. Every organization needs to know with whom they are conducting business and ensure that no illegal activities are done over the network. As a result, enterprise blockchains need to be designed around the principle of trusted and permissioned access. Keep in mind that permissioned does not automatically mean private. The platform can be open to anyone who wants to register and cryptographically validate their identity. A common set of identity standards can enable access across multiple blockchain networks with the same credentials.

This concept is already being used by some platforms. Sovrin, a digital identity management network, and Stellar, a decentralized global payment platform use a type of public blockchain that requires permission to join the network. Similarly, TradeLens is a supply chain management platform built on top of Hyperledger Fabric which employs a permissioned blockchain that enables participants to see the identity of their network peers.

Commenting on this principle, Cuomo stated: “Blockchain is about trust. For instance, we trust businesses because of the rules they follow. But rules also have accountability, meaning you have to know which businesses are participating in certain systems. There are types of blockchains that are anonymous like Bitcoin and Ethereum, and there are types of blockchains like Hyperledger Fabric and several others that are permissioned. Permissioned is important because it insists that members of the network are known to the network. Permissions are balanced with privacy so blockchains that follow these principles have privacy capabilities that allow members to transact confidentially”.

Governance is a team sport

To ensure that power isn’t concentrated in a single point and to answer the needs of network participants according to each unique use case, IBM considers that the best course of action is to design enterprise blockchains to have a distributed and transparent model of government. Enterprises should gravitate towards platforms which have inbuilt privacy and permissioning features, capable to automatically provide a democratic type of organization, with clear cut rules and guidelines available to every participant.

Tests done by IBM suggest that a trusted governance model requires at least three dedicated trust anchors, tasked with running network nodes and validating transactions. Also, the governance framework should take into consideration the network’s funding model and determine the method of financing: membership fees, ledger operators, or a combination between the two. To illustrate its point, IBM gives as an example the Verfied:Me identity network from Canada which has appointed several major Canadian banks as trust anchors to host nodes and validate transactions.

Common standards are common sense

According to IBM, enterprise blockchains need to be designed based on a set of common standards with interoperability in mind, to help support future-proof networks, prevent vendor lock-in and promote a sturdy ecosystem of innovators. Notably, this also entails the interoperability of cloud platforms. At the moment, a major shortcoming of a blockchain network is its inability to communicate with another blockchain. Currently, blockchain networks exist in siloes, but there is a strong desire an in commonly accepted between blockchain aficionados that the technology will evolve to support a network of networks. The first step in this direction is to make blockchain visible to one another through a registry, such as Hacera Unbounded. Furthermore, blockchains should define and publish their data models and policies for change according to industry standards, and if possible, to build them on industry standards, or by leveraging APIs with permissioned access.

Privacy is paramount

The last principle highlights the fact that blockchain technology, by definition, distributes data introduced in the network over a wide array of nodes, which can pose a real threat to individual and corporate data if not done properly. To combat this issue, IBM suggests that participants in an enterprise blockchain should be empowered to control who can access their data and under what circumstances. Moreover, while the blockchain network isn’t owned by any participant, the rights to the data introduced into the network should always belong to its creator, and any APIs should extend the same permissioned access. Furthermore, the computing giant underlines the fact that blockchain networks should comply with privacy legislation and regulation, such as the General Data Protection Regulation (GDPR). In most cases, this means that any personal data should be kept off-chain.

With respect to this issue, IBM gives IBM Food Trust as an example, a blockchain network dedicated to ensuring food safety, freshness and sustainability which enables big players like Walmart, Carrefour and Driscoll to leverage shared data to streamline supply chain operations while safeguarding proprietary information.

Summing it up

To conclude, blockchain technology has come a long way since its inception in 2008, and open source initiatives such as Hyperledger Fabric, Enterprise Ethereum Alliance and international organizations such as INATBA are providing an environment that facilitates further development in the field. The principles highlighted by IBM demonstrate that if used properly, blockchain technology can be a viable foundation for enterprises.