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What developers need to know about the Hyperledger Project

At DeveloperWeek, an IBM executive explains how blockchain efforts like the Hyperledger Project are going to change the way financial services developers do their jobs.

Software developers in financial services and large enterprises are taking a fresh look at new blockchain architectures that promise more efficient transactions and better supply chain auditing, said Sean Barclay, creative director at IBM Blockchain and co-creator of the open source Hyperledger Project, at the DeveloperWeek conference in San Francisco. The cloud is a natural fit for blockchain technology, since it can reduce overhead in creating peer-to-peer exchanges between trading partners.

The poster child of blockchain technology has been Bitcoin, which has drawn attention owing to its rapid growth and support for anonymous transactions. Bitcoin is also being shunned by banks and established entities owing to its association with the dark web, use in ransomware and lack of accountability. Barclay said that financial institutions have strong requirements to implement governance to prevent money laundering and to know their customers. In addition, a few high-profile cryptocurrency hacks on blockchain fabrics like Bitcoin and Ethereum have resulted in substantial thefts.

The Hyperledger Project is a new open source effort supported by dozens of banks, insurance companies, and large manufacturers that addresses these concerns. It includes features for ensuring trust, transparency, and smart contracts. Leading supporters of the Hyperledger Project include financial companies such as American Express, JPMorgan Chase & Co., the London Stock Exchange and Wells Fargo. One of the tools to emerge from this collaboration is the Hyperledger fabric, which is expected to be finalized in March.

Unlocking distributed value chains

A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it on a digital network or cloud infrastructure. David Treat, managing director of financial services at Accenture, said, "Distributed ledger technology will unlock the full 'digital' potential of capital markets and the wider financial services industry by enabling a shift away from the current reconciliation-based systems that are very expensive and highly inefficient."

These distributed ledgers promise to reduce settlement time for large transactions from days to seconds. They remove cost by eliminating intermediaries that add overhead and processing. They also promise to reduce risks from tampering, fraud and cybercrime, since the underlying math adds a layer of protection to each transaction.

A shared distributed ledger promises to increase trust because it is replicated by all parties in a transaction. Participants can only append to this registry, rather than modify it. In the traditional transaction model, hackers only need to change an entry in a database to divert funds. In a blockchain approach, changes are only appended to the registry, rather than written directly to a database.

Creating a chain of trust

The ability to establish provenance is another key promise of blockchain exchanges. In this use case, a distributed record establishes the history of parts in a supply chain. If a problem is identified in a particular part, such as a faulty break pad, a car manufacturer could quickly narrow down the supplier, manufacturing date and production line responsible. This would make it easier to narrow the scope of product recalls. Furthermore, an unscrupulous supplier would not be able to make changes to their local database to hide blame since the record is shared across all partners in a transaction.

The Hyperledger Project also has support for confidential transactions. Identity is important, but companies need a ledger that protects confidentiality between different suppliers or customers. They did not want a system that would allow one business to see that another was getting a better deal.

Smart contracts require new debugging tools

Smart contracts are another component of the Hyperledger Project for implementing executable contracts that automatically kick off complex transactions on a certain date or when other conditions are met. One developer in the audience was concerned that smart contracts could add one more source of bugs. What happens if a developer puts a decimal point in the wrong place or implements flawed logic?

Barclay said they are looking at a variety of approaches to reduce this risk. One is to create tools for debugging these smart contracts before they are posted into the ledger. Another is to make it easier to end flawed contracts and start a new one. However, there are no mechanisms for rolling back unintended smart contract logic, so businesses would have to address this outside the blockchain infrastructure.

Still early

The core concepts are still in their early stages. One prototype is already being implemented by The Seam, a multibillion cotton exchange. IBM has an experimental Bluemix blockchain cloud service now available. A more refined implementation based on Hyperledger fabric is coming soon.

The Cloudsoft Application Management Platform includes tools for simplifying the modeling, monitoring and management of blockchain applications across different cloud providers on top of Docker containers. Duncan Johnston-Watt, CEO of Cloudsoft, said "Interest in blockchain technology has exploded and with this has come the recognition that deploying and managing blockchain applications in the cloud is a critical factor in its adoption by the broader business community."

The biggest challenge lies in making it easy for developers to take advantage of the new paradigm. Barclays said that new APIs and modeling tools for implementing blockchain in the cloud will help. He explained, "It is all about modeling your data. Rest APIs will make it easier to implement transactions that interact with business networks and existing systems."

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