In the future, everything from cars, houses, land titles, stocks, and even online music may be bought and sold instantly, securely, and without the need of an intermediary. Votes and contracts will be recorded in a distributed and public, yet tamper-proof manner. In a recent research paper by Ovum and ACI Worldwide that looked at 227 financial institutions, it was found that a majority had passed the proof-of-concept phase and had either deployed or were close to deployment of internal blockchain-based systems.
In Asia Pacific, IBM is working actively with clients from a variety of industries on such pilot implementations and proof of technology projects. The following article shares our point of view as it relates to insights gained, specifically on a relatively unexplored aspect of the blockchain discussion, namely the impact of the infrastructure deployment model on the continued success of a blockchain implementation.
Blockchain and real-world challenges
In a very insightful position paper, SWIFT recently explored implementation considerations for distributed ledger technologies reflecting on several real-world challenges. One such critical consideration in choosing the right infrastructure for a blockchain implementation is scalability. The recent exit of the U.K. from the European Union has wreaked havoc in financial markets around the globe and caused massive unplanned transactions peaks in systems ranging from mobile banking to stock trading. A globally connected, distributed ledger will only accentuate such market dynamics in the future and hence will need to sustain unforeseen transaction spikes without causing significantly increased latencies, or worse, system outages. If customers are expecting instant exchanges, latency and system outages may seriously impact brand reputations.
In our work we have found that extreme levels of scalability and elasticity will be key in coping with unforeseen transactions peaks, as well as the computationally heavy hashing and cryptography algorithms essential to any blockchain implementation. Blockchain enables developers to quickly develop secure distributed ledgers that can be used to exchange almost anything of value. Now with production deployments on the horizon, operational considerations will take center stage - particularly interoperability of emerging blockchain implementations with existing core systems. In addition, the compatibility between multiple versions of a distributed ledger will become crucial.
Security in the new era of instantaneous transactions
While the blockchain architecture has been designed from the ground up to provide extremely high levels of security and resiliency especially in regards to tampering with records, a distributed ledger system is still prone to a fraudulent transaction being injected via an associated system. A single breach in the SWIFT financial network led to a loss of $81 million from the Bangladesh central bank account at the New York Federal Reserve in February. The attack was carried out via a highly secure, 'permissioned' network. Similarly, fraudulent transactions could be injected in a distributed ledger through an associate system.
Sign up for CIO Asia eNewsletters.