Banks interested in blockchain technology will soon have a new starting point to work from: open-source software that can serve as the base for new applications. (A blockchain is a type of shared, trusted ledger, originally created to track bitcoin digital currency transactions, that allows parties to a transaction to maintain records in a decentralized way.)
The open-source blockchain project will be called Open Ledger Project. Early next year, Blythe Masters' Digital Asset Holdings will donate code from a distributed ledger company called Hyperledger that Digital Asset bought last year. In January, IBM will contribute cryptography and smart contract code it's been developing for two years. (Smart contracts are computer programs that can automatically execute the terms of a contract.)
The project is backed by a pack of technology and financial services players that includes IBM, J.P. Morgan Chase, Wells Fargo, State Street, ANZ Bank, Swift, R3, Cisco, Digital Asset Holdings, Accenture, Intel, London Stock Exchange Group, Mitsubishi UFJ Financial Group, IC3, the Linux Foundation and VMware.
The group plans to create a blockchain "fabric": a common, standards-based layer upon which other blockchain applications can be built, with features like permissioning and security built in. The goal is to remove complexity from blockchain application development and allow different companies to quickly create compatible blockchain software. Such programs could be used to log transactions between banks or international businesses, or even let banks and businesses share the same system of record.
"Many firms are evaluating blockchain technology for the transactional, transparency, and settlement innovations it may hold," said Steve Ellis, head of Wells Fargo's Innovation Group. "The open ledger project enables institutions across industries to collectively explore how to create value, reduce cost, and improve accessibility to financial systems and services for customers."
In a separate announcement, R3 announced today that it has added new bank partners to its blockchain consortium; it's now up to 42. New members include U.S. Bank, Northern Trust and Westpac. R3, which launched in September, has focused on building a network of bank supporters; it hasn't announced any technology yet. Since it also joined the IBM/Linux open-source project, presumably it will base the software it develops on it.
Myriad blockchain technology initiatives already exist. To name just a few, Eris Industries and MultiChain have open-source blockchain software. There's the Blockstack forum and the Ethereum project, two developer communities for open-source blockchain software. Microsoft recently rolled out a blockchain-as-a-service offering with partners like ConsenSys, Ripple, Eris, CoinPrism (OpenChain) and Factom, that banks could use to build and test blockchain software in a cloud environment.
All are trying to help companies like banks use some of the qualities of the blockchain to build efficient applications in areas like trade finance, securities settlement and cross-border payments.
