IBM’s blockchain strategy: The devil will be in the details (+ video)

Editor’s note: In the second part of an in-depth examination of IBM’s blockchain strategy, Technology Business Research Analyst Geoff Woollacott examines crucial governance details. (Read part one in WTW’s arcuive)

HAMPTON, N.H. – As with most new initiatives, the devil is in the details, and IBM articulated the emerging business models its customers say they prefer and that IBM has focused on accommodating through its composable IP assets. A major success factor for ecosystem development will be how ecosystem participants will be viewed as either autocratic or democratic.

The emerging ecosystem models include:

 Sponsored — or autocratic — ecosystems typically have one major enterprise establishing guidelines and making upfront investments in determining the proper procedures and protocols. Two use case examples of this type of ecosystem development are Walmart (NYSE: WMT) and CLS Group.

As a dominant retailer, Walmart has taken the lead in evaluating ways to apply blockchain to improve food safety. Walmart will create the blockchain framework and then seek compliance from its list of suppliers as a condition for doing business with the Walmart portfolio. According to Walmart, the framework should be enterprise strong, put data first and keep cognitive at the core.

CLS Group has deep expertise and brand recognition around providing a foreign exchange clearing mechanism for international commerce. The company will collaborate with IBM to develop standards in compliance with existing public policy regulations and will be able to provide niche-specific, yet high-value and high-risk, services that cascade through all international economic activity.

TBR describes this model as having the same value to blockchain ecosystems as rotors have to the operation of a helicopter, in that the rotors, like the CLS clearing mechanism before blockchain, are a potential single point of failure in a larger system. Blockchain ensures the mechanism operates properly to “lift” the entire ecosystem network to a higher level of commercial viability and stability and likely participation by third parties.

 Consortium — or democratic — ecosystems take a different approach to ecosystem standards development by allowing participating members to vote on what these protocols will be. In the following use cases, there are logical extensions to the cultural affinities of the region for technology innovation that will give their sovereign nations first-mover advantage on the global economic stage.

Japan Exchange Group (JPX) is exploring how financial institutions can inject blockchain into Japan’s capital markets. The layers of governance and compliance questions revolving around such an initiative cut across sovereign nation states and international commerce. By taking the lead in its country, JPX can achieve first-mover advantage in the global economy as well as begin stripping operating costs from capital markets. Japan has been a first-mover adopter of consumer technology, and the next logical development is to apply blockchain extensions to capital transactions to provide more choices and channels for commercial transactions.

Dubai Smart Government seeks to transform commerce and government services operations as Middle Eastern capital markets begin aiming to displace New York and London for strategic relevance in the global economy. Dubai has invested great wealth in building out world-class infrastructure to become a major trading hub within the region. This platform and set of agreed on standards will be critical draws to businesses seeking to locate major region hubs for Middle East commercial flows.