Foreword

I’m delighted to provide some context for this enormously thoughtful and eminently practical book, Blockchain for Business.

When Alex Tapscott and I wrote the first edition of Blockchain Revolution in 2016, we characterized blockchain as a platform for conducting transactions of value. We explained that for nearly four decades, we had the Internet of information. It vastly improved the flow of data within and among firms and people, but it didn’t transform the deep architecture of the firm. That’s because the Internet was designed to move information from person to person. It wasn’t designed to solve what cryptographer David Chaum called the “double-spend problem,” the ability to spend a single digital dollar in two places online.¹

1. David Chaum. “Blind Signatures for Untraceable Payments.” Advances in Cryptology: Proceedings of Crypto 82 (January 1982): 199–203.

Now for the first time ever we have a native digital medium for value, through which we can transfer any asset—from money and music to votes and intellectual property—peer to peer in a secure and private way. Trust is achieved not necessarily by intermediaries like banks or governments, but by cryptography, collaboration, and clever code.

Based on the success of the book, Alex and I founded the Blockchain Research Institute (BRI), a think tank dedicated to investigating blockchain use cases and the leadership required to drive experimentation and change in an organization. Our membership has grown to include global corporations, governments, nonprofit organizations, and members of the blockchain start-up community.

IBM’s CEO, Ginni Rometty, recognized the transformative potential of blockchain technology early on, and IBM became a founding member of the BRI. Gennaro “Jerry” Cuomo, co-author of this book, participated in the opening panel of the BRI’s first all-member summit in the fall of 2017. His contributions were invaluable to the executives in attendance. Since then, we’ve expanded the program to nearly 100 projects across 10 industry vertical groups and nine C-suite roles in both the public and private sectors. IBM has been an active member, open to sharing what its teams have learned in their collaborations with Walmart and the Brooklyn Roasting Company on food traceability, with Maersk on digitizing global shipping, and with Unilever on tracking digital ad buying.²

2. Reshma Kamath. “Food Traceability on Blockchain: Walmart’s Pork and Mango Pilots with IBM.” Journal of the British Blockchain Association (June 12, 2018). jbba.scholasticahq.com/article/3712-food-traceability-on-blockchain-walmart-s-pork-and-mango-pilots-with-ibm; IBM Corporation and Brooklyn Roasting Company. “Transparency from Farm to Cup.” The Blockchain Bean, May 1, 2017. www.ibm.com/thought-leadership/blockchainbean; Larry Dignan. “Unilever Aims to Force More Digital Ad Transparency, Plots Blockchain Pilot with IBM.” ZDNet, February 12, 2018. www.zdnet.com/article/unilever-aims-to-force-more-digital-ad-transparency-plots-blockchain-pilot-with-ibm; Nicky Morris. “Maersk/IBM Complete Supply Chain Blockchain Pilot.” Ledger Insights, August 9, 2018. www.ledgerinsights.com/maersk-ibm-supply-chain-blockchain-pilot-tradelens.

The crucible of common experience leads to similar thinking. That’s probably why these themes of Jai Singh Arun, Jerry Cuomo, and Nitin Gaur’s book, Blockchain for Business, resonate so much with our own—and in my view, are spot on.

Digital identity. Jai, Jerry, and Nitin highlight the role of digital identity throughout Blockchain for Business. Indeed, Jai is a thought leader in this area, the co-author of one of IBM’s important works, “Trust Me: Digital Identity on Blockchain.”³ This is a big deal, and it was a big idea of the paperback edition of Blockchain Revolution. Alex and I underscored the need for self-sovereign identities, using blockchain as a means of bootstrapping our identities and enforcing them in any context without a third party. We reported on the work of the Decentralized Identity Foundation (DIF), a consortium of which IBM is a member. DIF was formed to combine “decentralized identities, blockchain IDs, and zero-trust data stores that are universally discoverable.”⁴ Its working groups are focusing on three big areas—identifiers and discovery, storage and computation of data, and attestation and reputation—with an eye toward developing use cases and standards.⁵ IBM has contributed a lot to these endeavors, working with ATB Financial, Evernym, the Sovrin Foundation, and Workday on verifiable credentials, and with SecureKey Technologies on a new digital identity and attribute sharing network with a mobile app, among its many collaborations.⁶

3. Jai S. Arun and Alexander Carmichael. “Trust Me: Digital Identity on Blockchain.” IBM Institute for Business Value, April 2017. public.dhe.ibm.com/common/ssi/ecm/gb/en/gbe03823usen/gbe03823usen-00_GBE03823USEN.pdf

4. Identity.Foundation. “Decentralized Identity Foundation” n.d. identity.foundation.

5. Identity.Foundation. “Working Groups.” n.d. identity.foundation/#wgs.

6. Dan Gisolfi. “Decentralized Identity: An Alternative to Password-Based Authentication.” Blockchain Unleashed: IBM Blockchain Blog. IBM Corporation, October 5, 2018. www.ibm.com/blogs/blockchain/2018/10/decentralized-identity-an-alternative-to-password-based-authentication; Adam Gunther. “Collaboration: Unlocking Decentralized, Digital Identity Management through Blockchain.” Blockchain Unleashed: IBM Blockchain Blog. IBM Corporation, April 4, 2018. www.ibm.com/blogs/blockchain/2018/04/collaboration-unlocking-decentralized-digital-identity-management-through-blockchain.

Opportunities and challenges. Concerted effort to transform obstacles into opportunities has been the most important factor in the blockchain’s success thus far. Executives need to understand the regulatory uncertainty, the level of energy consumed by proof-of-work consensus mechanisms, the efforts of governments such as China and Russia to limit individual use of cryptocurrencies, and the fears that blockchain technology will be a job killer, to name a few areas of concern. We wrote quite a bit about these issues, and we applaud the authors for tackling them head-on.

Business models. The business models for blockchain are largely decentralized networks, subject to network effects such that when the number of nodes increases, so does the size of the business model. Jai, Jerry, and Nitin have described four important business models: founder-led networks, joint ventures, the consortium, and business ecosystems. They outline a four-step process for moving from pilot project to enterprise integration. It’s very hands-on.

Governance. The blockchain space is full of formal and informal leaders. Some have executive roles in start-up, blockchain consortia, and regulatory bodies, and others possess vision and talent that are both compelling and influential. We wrote extensively about the need for governance networks—multistakeholder networks in the domains of standards development, policy guidance, community advocacy, knowledge, and education, among others. Jai, Jerry, and Nitin were wise to cast these issues in practical terms of permissioned and permissionless blockchains, with on-chain and off-chain governance of protocols and the applications that run on them. These issues will be critical to the scaling, interoperability, and crisis management of these systems over time.

Team building. Here’s where the rubber meets the road in enterprise blockchain pilots. IBM has vast experience in this area, assembling teams across divisions within its own firm and working across industries and national boundaries. The authors provide a guide to getting the right people on the team and then managing the project effectively, so that the enterprise can leverage success and learn from failure.

Financial models. The financial services industry has become somewhat of a Rube Goldberg contraption that performs eight basic functions: verifying identity, transferring payments, holding savings, making loans, trading assets, investing capital, insuring assets and managing risk, and accounting. Smart contracts and distributed applications running on distributed ledgers are challenging incumbents in each of these eight areas. Initial coin offerings are already disrupting venture capital. Conversely, incumbents could transform their businesses for the better, if they embrace blockchain. IBM is working directly with American International Group on a smart multinational insurance contract for Standard Chartered Bank, and with the Bank of Montreal, CaixaBank, Commerzbank, Erste Group, and UBS on their global trade finance platform called Batavia.⁷

7. Suzanne Barlyn. “AIG Teams with IBM to Use Blockchain for ‘Smart’ Insurance Policy.” Reuters, June 15, 2017. www.reuters.com/article/us-aig-blockchain-insurance-idUSKBN1953CD; Giulio Prisco. “IBM, Five International Banks Pilot Blockchain-Based Platform for Trade Finance.” NASDAQ.com, April 26, 2018. www.nasdaq.com/article/ibm-five-international-banks-pilot-blockchain-based-platform-for-trade-finance-cm954045.

Jai, Jerry, and Nitin have provided a sound blueprint for constructing an enterprise blockchain strategy, from identifying appropriate use cases to driving top-line growth and establishing a competitive position. We agree—now is the time for leaders to act, and Blockchain for Business should get them moving.

—Don Tapscott,
Cofounder and Executive Chairman
Blockchain Research Institute
Co-author, Blockchain Revolution