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Insurance Ratings Bureau Pilots IBM Blockchain for Automatic Reporting

The American Association of Insurance Services (AAIS) is turning to the IBM Blockchain platform to support a new automated insurance reporting tool, the organization announced Wednesday.

Built on IBM Blockchain using Hyperledger Fabric, the open Insurance Data Link (openIDL) system is aimed to simplify regulatory reporting by allowing insurance carriers to store data on a permissioned blockchain for regulators to view on an as-needed basis, a press release says.

The system would essentially streamline the association’s current mission to consolidate and report its members’ insurance carrier rating data to various state-level Departments of Insurance.

IBM industry academy member Craig Bedell told CoinDesk in an email that AAIS specifically chose IBM Blockchain due to both the open-source nature of Hyperledger Fabric and the enterprise-level platform that the computing giant provides.

At present, AAIS submits either monthly or quarterly reports for each member insurer, depending on state laws. However, the new system, which is currently in a pilot phase, would allow AAIS to deprecate its data reporting role, as carriers would directly store their own data on the blockchain. Regulators would then be able to examine the information at any time, rather than waiting for a report to arrive.

AAIS chief executive Ed Kelly said in the press release that the organization recognizes “the potential for blockchain to streamline the regulatory reporting process for our member carriers, as well as the opportunity to improve security, accessibility and accuracy of data for regulators.”

“Hyperledger Fabric’s support for private and confidential transactions allows insurers to share data with the network, knowing that they own their data and have control over who has access to it,” said IBM Global Insurance Industry global manager Sandip Patel.

“This is an exciting example of how blockchain can bring together an entire ecosystem of users and allow information to be shared in new ways to drive real business results,” he said.

Although in the pilot phase, Bedell said that the platform is already “open for business.” Insurance carriers are already being onboarded and the organizations are working to bring on state Departments of Insurance as well.

IBM image via Shutterstock

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94 Companies Join IBM and Maersk's Blockchain Supply Chain

IBM and shipping giant Maersk have recruited a sturdy crew for their global trade blockchain platform.

Revealed Wednesday, the companies have already signed up more than 90 firms for the platform since it was spun off from Maersk in January. They have also finally given it a name: TradeLens.

Leveraging Maersk’s leviathan-like scale, TradeLens has attracted a wide variety of entities, ranging from dozens of port operators and customs authorities to logistics companies and even rival ocean-going carriers, such as Pacific International Lines, all of whom have been testing the platform.

The pilot stage now complete, TradeLens is available for participation through an early adopter program and is expected to be fully commercially available by the end of this year. 

And to drive home the message that TradeLens is an open and neutral platform, IBM and Maersk have updated their marketing strategy, now describing the project as “joint collaboration” rather than a joint venture.

“At the time of the launch, we wanted to be clear that we were not offering a bespoke Maersk- or IBM-only solution,” Michael White, head of global trade digitization at Maersk, told CoinDesk 

While Maersk and IBM remain the only two shareholders, and both invested in the technology and jointly own the IP, White emphasized it is completely open to ecosystem participants.

“It was never about a joint venture,” he said, although the Maersk press release for the launch described it as such.

But an IBM spokesperson said the original 49/51 percent ownership split will no longer apply under the collaboration model the two are now going to market with, in response to feedback from the industry.

Both IBM and Maersk will sell access to the TradeLens platform. The selling party will contract with the customer and receive all the fees and revenue rather than sharing it with the other partner, the IBM representative added.

This new model allows them to bring the solution to market faster, and be more flexible than the previously planned joint venture model, the spokesperson said.

Common tongue

TradeLens is built on the IBM Blockchain platform, which uses the open source relative of Linux, Hyperledger Fabric, and this presents a possible interplay with other IBM and Hyperledger projects.

“We have architected all of these solutions so that it’s very easy for data to be exchanged between the two different blockchains – take TradeLens and IBM Food Trust for example – if clients were to be inclined,” said Todd Scott, the vice president of global trade at IBM Blockchain.

To help foster this open supply chain ecosystem, TradeLens is pushing its open APIs for shipping as well as work being done with shipping standards bodies such as CEFACT and industry groups such as OpenShipping.org.

“On top of the bedrock of blockchain technology we are working with standards, and also have 125 or so APIs, and we are going to give all that access to the developer community so they can even create additional technologies of their own on top of it, ” said Scott.

However, not everyone will see this as such a great and gregarious invitation to the industry.

“It’s fine for them [IBM and Maersk] to say ‘we are open for everyone to join,’ but all they are really saying is ‘come and use our system,'” said Sean Edwards, chairman of the International Trade and Forfaiting Association.

Edwards, who is also head of legal at Sumitomo Mitsui Banking Corporation Europe, said getting everybody to speak together is not a new problem and the answer, he said, has been to try and create ecosystems like Universal Trade Network (UTN), only they haven’t really got off the ground yet.

Referring to other blockchain solutions aimed specifically at banks to optimize trade finance (which is related to but different than the supply chain processes TradeLens is digitizing), Edwards said the situation may become one where, just as consumers have a multiplicity of passwords and systems that we use, banks and other entities may have to be present on a number of different platforms.

“Either there are common enough standards that all the different underlying technologies can actually speak to each other, or you have initiatives that are so big everybody uses it,” said Edwards, adding:

“I don’t think somebody like Maersk is going to solve that.”

Courting HSBC

And notably, TradeLens is not the only boat in this race.

In addition to the well-established supply chain payments platform TradeShift, which connects over 1.5 million companies across 190 countries, banking giant Citigroup is in stealth with a combined trade finance and supply chain platform which will leverage not only distributed ledger technology (DLT) but also the internet of things (IoT) and artificial intelligence.

Hence, TradeLens is at pains to come across as neutral and therefore appeal to the widest possible audience.

Speaking to potential data privacy concerns for companies that compete with Maersk’s subsidiaries, White said the Maersk side of the collaboration team is a distinct and separate entity with no involvement with the commercial activities of either Maersk Line (the shipping container business) or Damco (the logistics provider).

On top of these Chinese walls, the platform itself features privacy protections, White said. “Sensitive information from other carriers are kept on separate nodes, so Carrier A cannot see Carrier B ‘s information or carrier C’s information,” he said.

Looking ahead, another possible blockchain interoperability play for TradeLens would be some of the trade finance blockchain platforms built on IBM Blockchain and Hyperledger, such as we.trade and Batavia.

Although it’s probably still rather far off in the future, you could imagine an all-encompassing platform, so that if radio frequency identification (RFID) trackers indicate physical proximity to something, a payment can be released or a document signed, or similar.

On the subject of trade finance, IBM said banks were present among the 92 TradeLens pilot partners, but these were not being named. However, CoinDesk learned from a source in the trade finance arena that HSBC has “met with TradeLens a couple of times and agreed to reconnect post-launch.”

And both IBM and Maersk agreed a world of opportunity awaits with regard to bringing trade finance banks, marine insurers and the like on to TradeLens as the platform takes to the waves.

Maersk’s White concluded,

“We have found is there are number of industries and institutions including financial institutions and insurance companies, that are looking to take advantage of this platform.”

Shipping container image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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IBM-Backed Blockchain Trial Takes Aim at Advertising's Middlemen

Online advertising has long seemed a ripe target for blockchain transformation.

Going back to the early days of bitcoin, technologists imagined that cryptocurrency tips would fund content creators so they wouldn’t have to rely on display ads to pay the bills. More recently, marketers have experimented with smart contracts on ethereum to prevent bots from generating fraudulent traffic that bilks advertisers.

Now, a notable partnership involving a blue-chip advertiser and a well-known media brand is testing a private blockchain to see if it can remove some of the adtech intermediaries leeching from their value chain.

Announced today, the ad industry blockchain R&D consortium AdLedger is launching a proof-of-concept with publisher Salon Media and IBM, which is playing a dual role of advertiser and technology provider.

It’s the first proof-of-concept from the consortium, which formed in January with the mission of bringing transparency to the ad supply chain. And, while a trial of a private enterprise blockchain may not seem as radical as bitcoin tipping, it’s a shot across the bow of the many middlemen – up to 15 – that take a cut of ad dollars on their way from the advertiser to the publisher right now.

“Basically what we believe is that the existing protocol was built by those middlemen – and was built to enrich them, for lack of a better term,” Christiana Cacciapuoti, AdLedger’s executive director, told CoinDesk.

As an alternative, the trial aims to show how a media campaign can be done fairly and transparently by using a blockchain to track spending from start to finish and reveal which intermediaries are taking out more value than they are putting in.

But, in addition to demonstrating the potential, it’s also meant to lay foundations for actual products for the ad industry.

As Cacciapuoti explained:

“We are going to come up with rules and standards around a blockchain application and what that should look like, and get some hands-on experience for our members.” 

Those members include well-known ad industry names such as GroupM, IPG Mediabrands, IAB, IBM, iSpot.tv, MAD Network, Publicis Media and TEGNA.

For Salon Media, the trial promises to “not only help publishers like us regain more control over our inventory but will also illuminate where inefficiencies exist within the long and complex supply chain,” said Ryan Nathanson, the publisher’s chief operating officer, in a statement.

“The shared ledger on the blockchain will act as a single source of truth creating indisputable transparency for both the brand itself and the publisher which will aid in greater accuracy during reconciliation as well as make advertiser spend much more efficient,” he added.

Where’d the money go?

The specific problem the partners are tackling is campaign reconciliation – getting everyone on the same page about where advertising dollars are going and avoiding discrepancies.

The UK’s Guardian newspaper exposed the extent of this problem when it bought its own ad inventory using the so-called programmatic process, and then went on to sue Rubicon Project, alleging the online advertising platform had illegally spirited away a large proportion of the spend. 

The lawsuit highlighted how little of the money advertisers think is going to premium publishers actually get there; the Guardian measured this at around 20 cents to 30 cents on the dollar.

The industry has become this opaque and convoluted in spite of, if not as a direct result of, tech advancements.

Cacciapuoti, whose day job is vice president of partnerships and platform operations at adtech firm MAD Network, witnessed in her career the rise of ad networks that would buy publishers’ “remnant” inventory, which was then aggregated into packages that included bottom-of-the-barrel sites rather than premium news as promised.   

The proposed fix was automation.

In 2010, the Interactive Advertising Bureau (IAB) introduced real-time bidding, which meant looking at essentially a type of customer relationship management software called a supply-side platform (SSP) that connected publishers’ inventory with bidders. On the flipside, the advertiser goes to a demand-side platform (DSP) and broadcasts what they want to buy.

Publishers and ad buyers pay SSPs a fee to be connected to the auction process. But discrepancies abound between the amounts of advertising publishers and advertisers think has been delivered.

Lots of third-party companies have sprouted up within the gaps, matching and verifying, as the system has grown in complexity.

As Cacciapuoti put it:

“The joke is, ‘how many companies does it take to serve an ad on a website?'”

The answer can be as many as 15 middlemen from the advertiser to the publisher, she said. And all of these players are taking something out.

For example, the SSP, which is just one of those intermediaries, takes 30 percent of the publisher’s revenue, right off the bat.

Enter blockchain

AdLedger’s hunch is that a blockchain can expose where all of those cuts are being taken and participants can easily see who is taking out more value than they are putting in, while also providing a golden record of how much advertising is being placed.

If it works as expected, the technology will eliminate an average 10 percent discrepancy rate.

“As an advertiser, we know better than anyone that the current digital advertising system is broken,” said Chad Andrews, global solutions leader of advertising at IBM, explaining its participation in the trial.

“We believe that blockchain can help our advertising dollars go further by eliminating unnecessary intermediaries, and combining disparate sources of data … [to produce] immediate metrics,” he said.

The trial will also demonstrate how recording impression-level data to a shared ledger can provide an instant view, instead of 24 hours or 48 hours later, which means advertisers can better optimize campaigns.   

After the proof-of-concept is complete, the consortium will produce a white paper which will delve into how the technology performed, right down into the weeds of consensus algorithms (AdLedger is using the open-source Hyperledger Fabric, which is based partly on code contributed by IBM), and what should be allowed to be done off-chain versus what has to be done on the blockchain.

Cacciapuoti acknowledged that while blockchain has got some people excited, there’s also a degree of “banner blindness” in the industry to yet another buzzword. It’s also a difficult concept to grasp even for B2B players.

As she told CoinDesk:

“I think the vast majority of our members, while they are really smart leaders in their spaces, have no idea what blockchain is.”

Junk mail image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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IBM-Maersk Blockchain Project Adds Logistics Provider Agility

Agility, a global third-party logistics provider, has joined IBM and Maersk’s blockchain collaboration, the companies announced Tuesday.

As previously reported by CoinDesk, IBM and Maersk revealed their global trade digitization platform, built on the Hyperledger Fabric 1.0 blockchain, in January. DuPont, Dow Chemical, Tetra Pak, the U.S. Customs and Border Protection and others piloted an early version of the project.

The latest participant, Agility will share and receive information about individual shipment events through the blockchain in hopes of reducing the massive cost of administration and documentation – which reportedly accounts for one-fifth of the world’s total $1.8 trillion annual shipping costs.

“Blockchain technology is going to make shipping cheaper, safer and more reliable. As early adopters, companies like Agility can help Maersk and IBM understand the needs of shippers and develop standards that will make trade more efficient,” Essa Al-Saleh, CEO of Agility Global Integrated Logistics, told American Shipper.

Al-Saleh said that blockchain technology can streamline shipping by showing the status of documents like customs forms and bills of lading, thus helping to reduce the time it takes for shipments to clear inspections. Migrating shipping information onto the blockchain could also help facilitate more comprehensive risk analysis.

Other blockchain-based shipping initiatives are underway, including those relating to trade finance, product provenance, and the consolidation of administrative processes. However, as American Shipper points out, the emergence of a multiplicity of projects may be detrimental in the end, as they risk developing simultaneously, but separately, potentially created a fractured system much like the existing one.

Shipping container image via Shutterstock

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Shipping Blockchain: Maersk Spin-Off Aims to Commercialize Trade Platform

Global shipping giant Maersk wants to wrap the world in a blockchain.

With access to a shared, trusted record of transactions, Maersk executives say, the world’s shipping companies would save money and be able to better compete on enhanced services. And the company has developed a blockchain using IBM’s Hyperledger Fabric open-source software to do just that.

Yet one roadblock still remains: finding a way to sell a collaborative system to a bunch of competitors.

So Denmark-based Maersk and IBM have decided that by spinning off the project into a standalone entity, they might have more success in attracting Maersk’s rivals to the solution.

Announced today, the yet-to-be-named joint venture is awaiting final regulatory approval, but the idea is that a well-rounded advisory board (which is still being established) would help ensure transparency and a level playing field among participants.

Unlike a typical startup situation, though, the technology behind the venture has already been widely tested, with pilot users including some of the largest companies in the world.

DuPont, Dow Chemical and the food packager and processor Tetra Pak have already experimented with an early version of the platform. Plus, custom agencies in the Netherlands and U.S., and ports in Rotterdam and Houston, have all taken part as well.

According to the joint venture’s CEO, Michael White, the new entity is essential given the variety of potentially competing counterparties involved.

“This is not a bespoke Maersk system,” White, who was previously the president of Maersk Line in North America, told CoinDesk, adding:

“This is going to be an industry-wide, open platform solution for all ecosystem participants.”

Prime participation

Within six months of receiving regulatory approval, White expects the company to make its services available for wider use.

Among those interested in using the entity’s blockchain solution are General Motors, Procter & Gamble and Agility Logistics, with additional participation from customs and government agencies from Singapore, Peru and China.

Also, the global terminal operators of APM Terminals in New Jersey and PSA International in Singapore are slated to use the platform to boost collaboration between their users and improve the way they organize their terminals.

According to IBM Global Industry senior vice president Bridget van Kralingen, the venture is part of a bigger effort by the supply chain ecosystem to capitalize on “untapped” resources.

“Our joint venture with Maersk means we can now speed adoption of this exciting technology with the millions of organizations who play vital roles in one of the most complex and important networks in the world, the global supply chain,” she said in a statement.

The spin-off is the latest development by Maersk since it completed its first live blockchain trades in May and revealed a pilot project in Singapore in August.

In September, Maersk also outlined plans to deploy a maritime insurance product using blockchain.

According to White, the first two services the new company will offer are being designed to provide end-to-end shipping information and to digitize and automate trade paperwork.

“Being able to run a global business more efficiently is important,” White said, concluding:

“The opportunity that the customers see in helping to identify and close key gaps in real-time access to events and to document availability is real. It’s palpable.”

Maersk cargo ship image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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The Last Hurdle: Liquidity Alliance Closes in on Distributed Ledger Launch

A world of frictionless commerce relies heavily on lenders being able to trust they’ll be repaid – or if not, that they’ll get something else in return.

But this “something else” – collateral – isn’t nearly as easy to move as the money itself.

To solve this problem, a group of international depositories and stock exchanges called the Liquidity Alliance united this year to launch LA Ledger, a blockchain solution designed to do to collateral what bitcoin did for value transfer. Now, having completed the proof-of-concept, the group is ready to launch a commercial product with only one thing left in its way: regulatory approval.

While the participants have been in conversation with regulators since Q2 of last year, last week, the group transitioned from “informal conversations” to a “more formal presentation” with regulators, according to Liquidity Alliance member and chief commercial officer for post-trade services at TMX Group Brian Gelfand.

Specifically, the blockchain built using the open-source Hyperledger Fabric is designed to break down borders between pools of collateral trapped within national systems by migrating traditional collateral from a central escrow to a distributed blockchain.

And the technology has proved beneficial.

“The technical solution is very elegant,” said Steve Everett, general manager of collateral management at Strate, which is also part of Liquidity Alliance. “We are meeting with the regulators … and nine out of ten of the questions – because the solution is so elegant – are more on the legal and regulatory front.”

While many proofs-of-concept have languished on the shelf since the early days of blockchain enthusiasm, Liquidity Alliance’s latest push signifies a growing momentum behind central securities depositories (CSDs) seeing their work come to fruition.

Philippe Seyll, the co-CEO of Luxembourg’s CSD Clearstream and a member of the initiative, told CoinDesk:

“The proof-of-concept will remain a proof-of-concept if we don’t get the blessing of the regulators.”

Collateral questions

This step of engaging regulators should not be taken lightly.

Each of LA Ledger’s CSD and stock exchange participants – which also includes The Canadian Depository for Securities Limited, Norway’s VPS and Deutsche Börse in Germany – are subject to different local regulations, as well as regional regulations that transcend country boundaries.

Learning how each member can be compliant with different controls while using the same blockchain is of utmost importance, Gelfand said, adding:

“One of the keystones of this whole exercise is you’re dealing with regulated entities … and this mechanism has to work and be approved in each of the jurisdictions in which we operate.”

It can be quite complex.

For example, among the unknowns is how lenders can “realize” (the gain or loss resulting from a sale of an asset) collateral that has been tokenized on a blockchain.

Traditionally, collateral consists of digital accounts of ownership for homes, cars and commercial property, whereby if a borrower defaults, a complicated series of processes are initiated that result in the collateral being forfeited to the lender.

But on a blockchain, where each of those processes are compressed into a single smart contract with the collateral represented as a token, it’s possible that certain delays meant to protect borrowers (something regulators will be particularly interested in monitoring) could be undone.

Continuing distribution

In spite of the progress being made with regulators, however, the customers of multiple LA Ledger participants have expressed concern that the true value of a pool of collateral won’t be achieved if only a handful of countries participate.

During a joint session held by Liquidity Alliance members Deutsche Börse and VPS last month, a few of their large bank clients were given a deep dive into how the platform operates. While the clients came to the same conclusion as Strate’s Everett – saying the technology was sound – they wanted to see more CSDs involved in order to reach “critical mass,” according to VPS executive vice president Sveinung Dyrdal.

Drydal and Deutsche Börse’s senior vice president Gerd Hartung both agreed that adding more members would be key to the blockchain platform’s ultimate success.

Dyrdal concluded with optimism, though, saying:

“I’m quite sure we will see CSDs that would like to explore the opportunity of renewing their core by using new technology.”

Sibos panel image via Michael del Castillo for CoinDesk (Left to right: Philippe Seyll, Gerd Hartung, Brian Gelfand, Sveinung Dyrdal, Steve Everett)

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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Making Boring Sexy: NSD Sees Booming Interest for Blockchain Bonds

Russia’s largest clearing and settlement company has issued its first-ever live bond using blockchain, and already, issuers and brokers are wanting in on the action.

Initiated three weeks ago, the National Securities Depository (NSD) reproduced the financial instrument, a $10 million bond for shares in Russian telecom giant MegaFon, using smart contracts and the open-source Hyperledger Fabric blockchain. The bond is now expected to mature in about nine weeks (or three months after it was issued).

In an exclusive interview with CoinDesk, the NSD’s head of decentralized solutions, Alexander Yakovlev, detailed what he characterized as the surprising demand for a trial he said is making “boring” paper bonds sexy. Following the formal announcement, the NSD has received 30 requests to repurpose the smart contract to issue other bonds.

Yakovlev said:

“Issuers or brokers think blockchain can help transform these boring commercial bonds into some other product, because it will look different and taste different, so it’s different.”

While the NSD hasn’t recouped the money it put into the R&D just yet, Yakovley positioned the solution as one that will future-proof their processes for a time when clients demand the faster settlement times and enhanced transparency of a blockchain solution.

Copy and paste?

Built in coordination with the Russian central bank and in consultation with the NSD’s legal and operations teams, the bond was intended to help create a new workflow for how such an issuance could be done in compliance with regulations.

And repurposing might very well be possible.

The MegaFon bond, which allowed the company to sell its shares to Raiffeisenbank Russia (a subsidiary of Raiffeisenbank International), was developed by California-based Altoros using smart contracts on the Hyperledger Fabric implementation.

At this early stage, the smart contract is a relatively simple bilateral agreement between the bank and MegaFon. Going forward, though, Altoros’ head of blockchain practice, Oleg Abdrashitov, told CoinDesk that the “blueprint” could be used for more complicated derivatives sales that rely on third-party data supplied via a blockchain “oracle.”

Abdrashitov said:

“What they’re asking now – new banks – is not only to participate in the same commercial paper issue, in the same use case, but they’re asking whether they can reuse the same nodes and the same network, to build their own smart contracts for some other products and some other businesses.”

Publicity built in

But there’s more behind this demand than the routine promise for faster, cheaper and more transparent financial transactions.

While the NSD’s blockchain developers have long touted these benefits as appealing to international investors, the real driving force behind the demand, according to NSD director Artem Duvanov, is the built-in publicity that comes with blockchain experimentation.

In interview, Duvanov echoed comments made on stage at Sibos last week by NSD CIO Sergey Putyatinskiy, who joked that blockchain’s ability to generate headlines could also disrupt public relations agencies.

According to Duvanev, stock issuers and brokers evaluating the cost of a marketing campaign to attract interest to investment opportunities are increasingly deciding that it’s cheaper to issue something real on a blockchain to attract attention.

The result, Duvanev hopes, could be an entirely new revenue stream for value-added services built around blockchain-based assets.

He said:

“What is now offered is just some basic service. You can use us to issue and settle, but that’s a really basic service. We can do it more convenient, more digitized, and to include it in a bigger service, that we would definitely charge money for.”

Red heels image via Shutterstock

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Blockchain History? IBM Ventures Is Close to Making Its First Industry Investment

The venture arm of one of the most recognizable names in the tech industry hasn’t yet put its money where its mouth is on blockchain – but that may be about to change.

While global tech giant IBM has so far focused mostly on investing employee time and energy into the emerging technology, it’s only just now gearing up to take an equity stake in an industry startup. In what will no doubt be taken as a sign of the blockchain industry’s maturity, for IBM Ventures, investing cash is finally becoming more attractive.

And with several hurdles removed from the investment firm’s strategy – including, most notably, the need for the rounds to be Series B or higher – IBM Ventures has got its eyes on candidates.

Christoph Auer-Welsbach, a partner at the firm, told CoinDesk:

“From a time perspective, the time already is right.”

Auer-Welsbach went on to shine a light on who the companies may be, hinting that the blockchain startups he’s been watching are in the supply chain management and compliance verticals.

Investing in blockchain

In short, a cash investment in a blockchain company is square in IBM Venture’s sights, but there are several conditions that now need to be met. For starters, IBM’s investments are expected to occur within 18 months to five years of the company’s maturity – the widespread adoption of its product – and further, investments are limited to purveyors of business-to-business products.

This last criteria is one of the reasons IBM has eschewed cryptocurrency applications, said Auer-Welsbach.

He told CoinDesk:

“Most companies in the space are in the cryptocurrency field, which we don’t see from a B2B perspective as the ultimate angle for us to add value.”

Plus, IBM’s main priority continues to be to creating critical mass around its blockchain platforms (IBM Blockchain Platform and Hyperledger Fabric), and this trumps generating revenue on any investments.

In order for a company to attract Auer-Welsbach’s attention, then, it has to have a proven, repeatably successful business model, with multiple clients, making it better suited for the kinds of interaction that create a strong sense of community around a platform.

For example, IBM Ventures recently opened up its coffers as the lead investor of a $15 million round in Lightbend, an open-source platform for users of the Scala machine-learning language that already has multiple corporate customers.

Building the fabric

But because there aren’t many blockchain companies at that level, Hyperledger Fabric remains IBM’s pride and joy for cultivating its work with the blockchain industry.

Within Hyperledger Fabric, groups of like-minded firms often develop into more formalized consortia – such as the global trade digitization effort led by shipping giant Maersk and a food safety effort spearheaded by Walmart.

In interview with CoinDesk, the general manager of IBM’s blockchain unit, Marie Wieck, elaborated on Auer-Welsbach’s notion that the company wants to develop more such communities.

Specifically, Wieck said that IBM’s internal investment in cloud computing could be seen as the “plumbing layer” of blockchain ecosystems, while outside IBM, getting institutional investors like Boldstart VC to back companies building enterprise solutions on Hyperledger Fabric is key to its mission.

In his work with Fabric, Auer-Welsbach is on the lookout for services that can be implemented with only minimal consulting, and platforms that can be adjusted for new industries with just a few “little tweaks here and there.”

He concluded:

“That’s the time when I would say this is really interesting to us to invest in.”

Natural history museum image via Shutterstock

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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Inside the Blockchain Factory: How IBM's Distributed Ledger Work Went Global

For one of the world’s largest tech companies, “small” is a relative term.

So when IBM, a tech conglomerate that boasts 380,000 employees, says it has a “small” team working on blockchain, by startup standards, it’s anything but.

Far from just building a garage and staffing it with a few engineers, IBM has created IBM Garage, a fully fledged product for companies that want access to its expertise, itself just one way it is seeking to operationalize its team of 1,500 blockchain professionals now operating out of a dozen offices.

Perhaps more impressively, all those moving parts are choreographed by one person: Marie Wieck, a 20-year veteran of IBM and the general manager of its newly created blockchain unit.

In an exclusive interview with CoinDesk, Wieck explained what it takes to build distributed networks using both its proprietary IBM Blockchain Platform and the open-source Hyperledger Fabric, which her firm helped pioneer. For companies looking to gain access to one of those networks, build their own network or compete against IBM, the step-by-step description provides a rare glimpse into how the $135 billion company conducts its blockchain business.

Speaking from her office at IBM’s Watson headquarters in downtown Manhattan (one half of what is internally referred to as “Blockchain North”), Wieck painted a picture of a distributed team that in many ways mirrors a blockchain in its design.

She told CoinDesk:

“We’re trying to keep as co-located as possible with the teams working together so we can really focus on the speed to market that we want to see.”

Blockchain North

While her job now is buzzing back and forth between the Manhattan location and the Thomas J. Watson Research Center in Yorktown Heights, New York (the other half of Blockchain North), Wieck first started working with IBM back in 1997 when she joined as a founding member of the company’s nascent internet unit.

As part of this team, she began a career of finding business use cases for cutting-edge technology that would eventually include XML, web services and mobile, preparing her in many ways for her current task of helping IBM’s clients with blockchain.

The “solution work” of this process – as Wieck calls it – is centered around Blockchain North, the assembly line mechanism of the project, where staff help clients around the world build applications using the IBM Blockchain Platform.

Due in large part to the open-source code at the core of IBM’s blockchain strategy, one which lets clients build on their own distributed ledgers as well, Wieck frequently doesn’t get involved until the clients – or potential clients – are already well advanced in their work.

As for work on that open-source platform, and the IBM Blockchain Platform itself, that largely takes place 511 miles south.

Blockchain South

IBM Research Triangle Park

Known as “Blockchain South,” the Research Triangle Park offices in Raleigh, North Carolina, are home to what Wieck calls IBM’s “platform work.”

This is where the IBM Blockchain Platform – unveiled for enterprises last month – has been developed for the past three years. The platform is designed to be an end-to-end or “full-cycle” solution where developers and managers can experiment with the technology, building it and testing it either by the hour or via subscriptions.

This platform is the machinery that in part cranks out the solutions in Blockchain North. But “platform work” also has another meaning at Blockchain South.

For builders around the world with a more adventurous bent, this is also where they can go to hire help on projects that bypass IBM’s proprietary platform and go straight to its open-source core: Hyperledger Fabric.

While Fabric comprises about one-third the total code used in the proprietary IBM Blockchain Platform, anyone can build on it – even if what they want to create is a direct competitor to IBM.

“Whatever they need to do at the technical level to operate or to build a blockchain network, we would like to see continuing to expand in that platform,” said Wieck.

Littleton, Massachusetts

IBM Mass Lab - Littleton campus

IBM’s newest blockchain offices are located at the IBM Mass Lab in Littleton, Massachussets.

Originally opened in January 2010 as what was then touted by IBM as the largest software development lab in North America, the location now serves as a satellite location of sorts for Blockchain North.

But instead of being focused on solutions work generally, the location is helping develop what Wieck calls “solution accelerators,” or frequently used widgets such as the provenance engine required by many of IBM’s clients to track items.

Crucially, however, this is also the base operations for another kind of solution: governance.

Based on the lessons learned from other implementations, IBM uses the Littleton branch to help companies write software to onboard new members, develop consensus mechanisms so they can find ways to agree, and if things go wrong, kick bad actors off the network.

Or as Wieck put it:

“How to actually operate a network at scale.”

In the garage

IBM Bluemix Soho

Arguably the most startup-like component of IBM’s blockchain work, Wieck also oversees nine “Bluemix Garages” scattered around the world, in New York City, Toronto, San Francisco, London, Nice, Tokyo, Singapore, Austin and Melbourne.

Initially launched in 2014, the collaborative locations are similar to WeWork facilities, but with startups hand-selected to receive support from IBM.

Gradually, those locations are being adapted to accommodate increasing demand by blockchain companies. Most recently, this July, the BlueMix Garage in the Soho area of New York (pictured above) expanded to include support for blockchain services.

At these disparate locations, and in any real garages where people build on the open-source technology Wieck helped develop, she said the basic principles that form IBM’s blockchain networks first take root.

“To me, it’s kind of like a mall,” she said, concluding:

“You may have the anchor tenants, but you don’t stay in a mall unless the food court is good, there’s good movies playing. You want all of those value-added services around that network.”

Globe image via Shutterstock; IBM office images via Michael del Castillo for CoinDesk

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