Blockchain

Inside IBM’s blockchain empire: a breakdown of the mission so far

Quick Take

  • IBM Blockchain General Manager Marie Wieck discusses why IBM has doubled down on DLT, investing in a wide sweep of projects
  • Wieck says blockchain offers the “greatest benefits” in supply chain management (hint: it involves instant mash potato)
  • She also shared the company’s global lobbying efforts, recently prompting the State of Arkansas to introduce a new bill, and working closely with the UAE on blockchain adoption

Nestle; Volkswagen; Walmart; just three of the major brands that have signed up to IBM’s blockchain experiment, now nearly five years old.

Relatively speaking, it’s ancient, “Big Blue” having been the first tech giant to comprehensively commit to the thrills of distributed ledger technology (DLT), proving resistant to the hype cycles and the corporate naysayers. 

Today, IBM Blockchain shows no signs of slowing down, employing around 1,600 people globally and counting; making it the biggest blockchain division among its tech peers. It’s also the biggest financier according to reports, with rough estimates of its annual investment driving upwards of $160 million. In March, the company had as many as 143 pending patents – making it the most active company in blockchain R&D, too.

To illuminate this mass of figures, The Block sat down with IBM Blockchain’s General Manager, Marie Wieck, who discusses how – and why – IBM has gone all-in on blockchain.

Making a business case for enterprise blockchain

No other major tech firm can match IBM when it comes to public endorsements of DLT, with IBM’s avid pursuit of blockchain coming from the top, according to Wieck. CEO Ginni Rometty has even said she believes the technology could have as much impact on transactions as the Internet has had on information.

“We clearly would not invest in new units for new technologies if we didn’t feel committed to the potential benefits of this,” Wieck tells The Block; describing a “potential” seemingly without limit. “To me, there is a fundamental digital transformation occurring in every industry. Today every company is a tech company. It doesn’t matter what service or product you are delivering if you are digitizing your business.”

The end goal for IBM is enhanced transparency and trust for consumers and increased efficiency for companies, noting that seamless data and value transfers are still lacking.

“Where blockchain really is fundamentally different is it allows communication with multiple parties at the same time without that middle man,” Wieck summarises.

IBM hasn’t been short of work either, pitching across industries in a race its competitors have only recently signed up to.

“We’ve had use cases in just about every division and we’re the only player I think really with a full-stack strategy, from open source and community and developer engagement…to help clients get started, to understand it and facilitate their journey.”

What this translates to is a belief by IBM that there’s a multi-billion dollar jackpot to be found in disrupting supply chain management and payment systems. The company is not alone in its expectations; research company Gartner forecast that blockchain technology will add $176 billion of business value by 2025, and more than $3.1 trillion by 2030. But so far, IBM remains coy about whether its blockchain projects are on the right income track, with its financial reports giving no indication how much – if any – its blockchain activities are generating. Wieck also declined to provide specifics on revenue, but did say there’s notable client demand for the projects – meaning it “certainly” contributed to the company’s earnings.

“It’s not just for us but for our clients, and where their journeys are as they consider their own digital transformation…We’ve done over 500 customer engagements [with DLT],” she noted.

A broad sweep

Given its general optimism about the space, IBM has been launching projects across a diverse range of sectors; from finance to music.

Its very first product was tested in-house by the IBM global financing team. This involved putting multi-signature contracts on a ledger to resolve disputes, which Wieck says on average can take over 40 days.

“[Disputes] are usually not simple. I have to go find my signed copy of the contract, pull it out and see what it says, and call my lawyer. You do the same on your side and you call your lawyer. We have conference calls internally and then together and then try to figure where the miscommunication was,” Wieck says.

She explains it’s not about creating smart contracts but rather putting the most common areas of dispute “on a blockchain [for] visible sharing of information,” as well as verifying the contract’s delivery. She says it dropped resolution times to under 10 days.

“Before we took it to our clients we wanted to say, do we think this really has value? And the answer was yes.” 

Elsewhere, IBM is seeking to use blockchain to improve the clearing and settlement of securities trading, in partnership with we.trade. Currently, this process involves recording the change of ownership, requiring a series of databases across parties to maintain the “state” of ownership. But if IBM could remove these stacked layers of databases with a single record, they could in theory unlock massive efficiency gains, DLT advocates say.  

IBM has also signed up six banking clients for its Stellar-based, cross-border payments project, IBM World Wire Service, where it has even ventured into the world of stablecoin partnerships.

Separately, IBM is interested in identity solutions, becoming a steward for the Sorvin network to allow people to store their IDs, such as driver’s licences, on a blockchain. Elsewhere, IBM’s Open Music Initiative aims to lend artists a helping hand in copyright identification.

“They have created a creative passport that is using blockchain for identity among musicians so that they can start self-certifying their own musical content and it ties into the work we’re doing with…the Open Music Initiative,” Wieck says.

Blockchain doesn’t just benefit companies she says, but entire cities. For instance, IBM is assisting Dubai implement its goal of “total digitization of government services” by 2021 via blockchain adoption. According to Wieck, due to the United Arab Emirates’ large expat community and trade agenda, blockchain can be key to improving paper-based processes and facilitating “faster engagement for citizens.”

“We’ve been working with several of the government agencies on how they are using that in their own pilots,” she added, with IBM-backed Hyperledger one of the platforms in its sandbox.

The golden ticket

Still, IBM has been most active in boosting blockchain uses across different supply chains. 

“[Blockchain offers] provenance for traceability back to the source and the lifecycle of an asset. That could be physical goods. That could be digital goods. That could be music. It could be video. It could be titled. It could be software assets, as well as physical goods.”

The broad mission is to digitize all global trade via TradeLens, IBM’s blockchain-enabled digital shipping solution.

So far, IBM’s star product is a food-tracking blockchain, being tested by over 90 clients. The IBM Food Trust Network aims to foster transparency in the food industry by documenting the supply chain via a blockchain. Among its sign-ups is French giant Carrefour, which has put on a number of goods on the blockchain – including instant potato mash.

“You can just use the packaging code off of the box and do a trace through blockchain and get where were all the potatoes sourced…I did a test run with the team and there were five different regions all in France where this particular package had gotten its potatoes and how does it tie to their sustainability initiative. So that has been very interesting,” Wieck says.

Elsewhere, car giant Volkswagen has also put mineral supply on IBM Blockchain Platform to support responsible materials sourcing. American retailer Albertsons also joined the network. 

Wieck did not comment on the potential limits for transparency even in blockchain-based supply chains.

Regulation, regulation, regulation

Despite businesses signing up, Wieck says the vision won’t come to fruition without fostering education. As a result, the company is promoting blockchain worldwide and pulling its weight lobbying for clear regulation in the space.

“There’s a lot going on where we are also helping to participate in the legislative view because that’s a big driver that is slowing adoption. There’s regulatory uncertainty and how different states consider it.”

IBM’s involvement includes a pro-blockchain initiative in Arkansas, which resulted in the state passing a bill supporting blockchain on April 16. Part of IBM’s contribution involved “working with the universities and the state government on how to encourage and improve usage.” IBM is also part of the wider blockchain congressional caucus in Washington, D.C.

While Wieck notes lobbying is “definitely not” a large part of the company’s budget, its efforts stretch even outside the U.S. For instance, in the European Union, it is pushing smart contract traction as it did in Arkansas. 

“We’re present in 127 countries so we bring blockchain team wherever needed, and bring in clients to talk to politicians to show them use cases…We’re mostly doing education on ‘what is blockchain, how does this play out,'” she said.

The technology 

The company’s blockchain evolution began with a brief foray building on the Ethereum blockchain, before supporting and adopting the Hyperledger Fabric network. Interestingly, this is the opposite of Microsoft’s trajectory, which began with a native DLT network, Azure Blockchain, and recently announced it would test its decentralised network on the Bitcoin blockchain.

And IBM is still building.

“We’re in beta on version two already. So we’re in our next generation with a lot of new capabilities that tie to our blockchain anywhere strategy of running in a multi-cloud environment and meeting the data and the users wherever they have chosen to operate.” Wieck said.

Finally, Wieck explains that with every new solution comes a new set of challenges, and that she’s not surprised by the pace of adoption.

“How do you govern? How do you decide privacy? How do you decide who joins? Is this a democratic vote?… It creates a number of things around governance, privacy, confidentiality that are new challenges to solve. Those, candidly, are the reasons that I think we haven’t seen as fast an adoption. The technology works. That’s not the issue. The issue is how to adapt processes and governance to this new model where you can have simultaneous sharing of information with a broad community.”

But don’t worry about all that, Wieck says, who stressed she “want[s] people to talk about the value and not about the technology.”

In fairness, IBM is certainly following its own advice there.

Carol Gaszcz contributed to this report