IEEE Spectrum October, 2017 - 44

Blockchain World

Before long, many more financial products may move to blockchains. Proponents have dreamed up countless ways the technology
could improve the financial industry, by allowing real-time auditing,
enabling regulators to halt illegal transactions, or empowering investors to trade without a broker or an exchange.
But some experts say that most of the time a blockchain doesn't
offer much value beyond a traditional database or a basic messaging service. Applying it too broadly, or expecting too much, they say,
will only lead to disappointment.
"I've watched a lot of proof of concepts that haven't really gone
anywhere," says Jerry Cuomo, IBM's vice president of blockchain
technologies. He estimates IBM has worked on blockchain projects
for 400 companies in the past few years. So far, barely a dozen of
those have moved into production.
Corporate enthusiasm for blockchains ramped up in 2016 and generated a swarm of press releases, but little is known about how most of
those early projects fared. "To be honest, we don't have much data publicly about the health of these PoCs," Ian Lee, a director with Citibank's
venture investment division, told the audience at Consensus, an annual
blockchain conference held in May.
Still, the mood at Consensus was jubilant-the prices of several leading cryptocurrencies had swollen that quarter.
The emcee, flanked by backup dancers
dressed in gold, opened the conference
with a song to celebrate that growth.
Meanwhile, financial companies are
running up against some very real constraints in their own blockchain bets.
PEOPLE
Developers are still figuring out how to
Richard
make simple applications, write smart
Gendel Brown
contracts that are defensible in court,
and keep their employers out of trouble
In 2015, the world's
with regulators. To help, several consorlargest banks dived
tiums and companies are trying to set
headfirst into the
standards, create open-source software
blockchain craze
tools, or develop platforms that can plug
and formed a
into any blockchain.
consortium called
Startups such as Axoni and Chain are
R3. Richard Gendel
writing industry-friendly code bases
Brown, R3's chief
that clients can adorn with special applitechnical officer,
cations (called DApps for "decentralused its financial
ized applications"), typically executed
brainpower to
through smart contracts, to run across
create Corda,
many servers. With custom-built applia distributed
cation program interfaces and software
ledger designed
development kits, clients can adapt
specifically
these DApps for their own purposes
for financial
and integrate them with legacy systems.
agreements.
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IBM and Microsoft have jumped into the fray with
a suite of services to create specific projects running
on permissioned blockchains. Microsoft has developed a middleware that provides features such as
a digital key vault and identity management and
works with any blockchain that Microsoft deems
enterprise grade-Ethereum, for instance.
At IBM, most projects are based on Hyperledger
Fabric, a distributed ledger with smart contracts
written in the programming language Go. Fabric
also allows companies to subdivide a ledger into
sections, which IBM's Cuomo likens to Slack channels, in order to broadcast transactions only to
participants on the same channel.
A number of efforts are also under way to develop
permissioned offshoots, or forks, of Ethereum.
These forks are open source and infused with
corporate-friendly features that the public chains
lack, such as the ability to broadcast a transaction
only to the parties involved, which is similar to
what Fabric offers. Depending on how forks are
configured, participants can use ethers to pay for
transactions or special tokens based on ethers that
are accepted only on a specific fork-a type of digital Monopoly money.
The Enterprise Ethereum Alliance, a consortium of businesses interested in blockchains, has
adopted J.P. Morgan's open-source Quorum framework as its basis. Another group, known as R3, has
a separate blockchain-inspired project called Corda
that is more like Fabric, in that it mainly functions
as a distributed ledger.
In general, though, blockchain development is
still a jumbled mix of techniques and tools. Even
though financial firms have invested millions of
dollars into the pursuit, there is still no widely
accepted reference architecture or standards for
a blockchain-based network. "Every vendor is
kind of creating their own version," says Palatnick.
This disparate approach can make it difficult to
compare features such as security. Jesse McWaters
of the World Economic Forum, who coordinated a
recent report on blockchain technology in finance,
says developers must find a way to conduct security
audits on all blockchain networks, so the industry
and public can feel confident in their use.
With those growing pains in mind, Laurence
Leblond, head of operations for Unigestion, a financial services company based in Geneva, is proILLUSTRATION BY

Nicholas Little

https://hyperledger-fabric.readthedocs.io/en/latest/ https://hyperledger-fabric.readthedocs.io/en/latest/ https://www.twitter.com/jerrycuomo?lang=en http://www.citi.com/ventures/bioLee.html http://www.coindesk.com/events/consensus-2017/ https://www.entethalliance.org/ https://www.jpmorgan.com/country/US/EN/Quorum http://www.r3cev.com/ http://www.r3cev.com/blog/2016/4/4/introducing-r3-corda-a-distributed-ledger-designed-for-financial-services https://www.chain.com/ https://www.weforum.org/agenda/authors/jesse-mcwaters http://www3.weforum.org/docs/WEF_The_future_of_financial_infrastructure.pdf https://www.linkedin.com/in/laurence-leblond-caia-92b808/ https://www.linkedin.com/in/laurence-leblond-caia-92b808/ http://SPECTRUM.IEEE.ORG

Table of Contents for the Digital Edition of IEEE Spectrum October, 2017