September 7, 2017

Blockchain Technology Is Changing How Business Is Done

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blockchain
The Hyperledger Project is a collaborative open source development effort built on the goal of advancing blockchain technologies.

This article was sponsored by IBM and written by Linux.com.

Blockchain technology is changing the way businesses record and monitor data transactions. It provides a decentralized, immutable ledger, or record of transactions, that effectively verifies the integrity of data in that ledger.

The Hyperledger Project is a collaborative open source development effort built on the goal of advancing blockchain technologies. Hyperledger now has more than 140 members and hosts several blockchain-related projects. These include Hyperledger Fabric a blockchain framework implementation and Hyperledger Composer a toolset for integrating blockchain applications within existing business systems.

In this article, you’ll hear from Ivan Vankov of Cognition Foundry, an IBM LinuxONE business partner working with customers on implementing Hyperledger, about the principles of the distributed ledger model, how blockchain technology can help eliminate data forgery and verify supply chains, and how Hyperledger is changing the way business is done. To find out more, visit www.hyperledger.org or www.ibm.com/linuxone/solutions/blockchain-technology.

Linux.com: Briefly describe Hyperledger in your own words.

Ivan Vankov: The shortest definition is that Hyperledger is a blockchain designed not for cryptocurrency but for business needs. It takes all the good parts from the blockchain model, adds a ledger inside the blockchain, and has the ability to create smart contracts that manage the ledger. This is governed by a very strong and flexible authorization/authentication system based on state-of-the-art cryptography. However, this is not enough for the business — scalability, data isolation and separation, interfacing with existing systems, replacement of core components, and many more features are available with Hyperledger. Since by design it is a distributed system, there is no central point of failure.

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Ivan-Vankov
Ivan Vankov, Chief Consultant Architect at Cognition Foundry

The ledger is immutable, and every member inside the network has a copy on their servers, information is synchronized automatically without the possibility of divergence. Even if one or more participants alter their copies of the data, this will not affect the process because blockchain will see the altered data and will refuse to use it in any process. Hyperledger is able to prove which is the real data without any doubts. Data forgery is not possible inside Hyperledger. The main consequence is that members inside a Hyperledger network can have trust between each other since nothing can alter the data, and the data is updated only using smart contracts that are run by every single member of the network within their own infrastructure. If all smart contracts do not agree at the same time about a particular operation the operation will not be executed. Also Hyperledger can work in a completely private and isolated network.

Linux.com: What is the difference between Hyperledger and other systems like Ethereum. Why is it necessary?

Ivan Vankov: The main difference is that Hyperledger does not require mining, gas fees, or taxes. Many people think that blockchain is a cryptocurrency this is a wrong assumption. Hyperledger is a blockchain, not a cryptocurrency. Real businesses will not use a blockchain that requires constantly increasing needs of computational power just to process transactions. Mining is very useful in the context of cryptocurrency; however, it makes the throughput very low. For example, Ethereum operates in the range of a 1000 transactions per minute. Hyperledger operates in the range of 500 000 transactions per minute with ease and can be tuned to process more than a million transactions per minute.

Also Hyperledger is built for business needs; many decisions were made by using a real feedback from companies with different portfolios, including banks and financial institutions, logistic companies, medical and research teams, consulting companies, manufacturers, etc. The result is that Hyperledger is very flexible companies adapt the tool to their needs and not the other way around.

Linux.com: Describe some real-world use cases.

Ivan Vankov: The idea for distributed ledger is not new, but adding the ledger inside a blockchain with all other enterprise grade tools makes a huge difference. One of the first projects built using Hyperledger is Everledger, a system that tracks provenance for assets. Users can track the history of an item, previous owners, numismatic value, etc. A concrete example is when users want to buy a diamond, they can check whether it is a blood diamond, where and when it was mined, who polished it, etc. And, this is not a central database, it is distributed among all participants in the diamond trade.

Walmart is testing Hyperledger for food supply chain, and the first results are very positive. Let’s imagine that the pork meat imported from China is not with expected quality; who is responsible? The farm in China, the transporting company, the processing or storage facility? Using Hyperledger, every single step can be tracked without any doubt. This is a simplified example. Supply chains are complex, but Hyperledger can make the whole chain more efficient.

Transactions in Hyperledger are really fast, and a couple of banks use this property in pilot programs for micropayments and microtransactions. The cost of the transaction can be a fraction of the current cost, and the user satisfaction reports are more than impressive. SWIFT, the backbone for financial transactions, officially announced that will start testing Hyperledger. The final goal is to replace their current infrastructure and processes so they can be based on Hyperledger.

At IBM Interconnect 2017, a proof of concept (PoC) for distributed identity was shown. Companies can add user information but only if they verify the information. For example, banks can provide a user's bank account and residence details; mobile operators can provide verified mobile number. This information is distributed and stored inside the Hyperledger network and if a user decides to rent a car, they can give temporal access to a particular subset of their data to the rental company, and the rental company can be sure about the validity of the data. Moreover, there is no need to expose an exact data. For example, if a user is required to be older than 21 years, the system can answer with yes or no without exposing the real age or birth date of that user. This is achieved using IBM Identity mix protocol.

Hyperledger will also play a huge role in the future of IoT. Currently, there are many PoC systems, but a model is beginning to appear and this model is working. In general, Hyperledger has a real value in models where data provenance is critical or where trust between parties must be enforced.

Linux.com: What will be required for integrating Hyperledger?

Ivan Vankov: The operating costs can be very low. Hyperledger is open source under Apache 2 license and can run using conventional hardware that companies already own or use. Integration needs to be considered; however, Hyperledger is designed to interface with existing systems. It makes no sense to completely replace the whole software stack. Hyperledger can be integrated using small incremental steps and only in places where it brings real value. This makes the whole integration process more manageable and predictable.

From a technical point of view, Hyperledger uses Docker containerization, so any proper DevOps tools and processes can be applied directly. From my experience, I can say that the most difficult and critical step is defining the points in the business process where Hyperledger will be placed. Not how but where! The next critical decision is what security model will be used, for example, every transaction will be directly linkable to the user that executes it or will be completely anonymous. There is a third option: transactions are anonymous but a specific entity can link transactions back to the users which is absolutely necessary for companies that are under regulations and where an audit can be executed at any point.

Linux.com: What gives you confidence that Hyperledger is here to stay?

Ivan Vankov: Hyperledger will not only stay, it will grow and expand. It brings real measurable benefit for the businesses and opens completely new possibilities for partnerships and interactions. Not only for B2B but also for B2C and for the very new and unexplored field of C2C.

Hyperledger will change the way how business is made in the same way that Internet changed it not so long ago. And, let’s not forget who is managing the project The Linux Foundation and that Hyperledger is backed up by companies like IBM, Intel, American Express, J.P. Morgan, Cisco, and many more that help define leading business systems.

Learn more about Hyperledger at Open Source Summit in Los Angeles. Check out the full schedule for Open Source Summit here. Linux.com readers save on registration with discount code LINUXRD5Register now!

Ivan Vankov is a software developer with more than 15 year of experience in back-end and service development using Java, Go, Python and Haskell. In his professional career he has been involved in projects building ERP systems, security using technologies from Machine Learning like deep reinforcement learning, and high precision GIS systems used in automotive industries. Follow Ivan on Twitter at @gatakka.

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