IBM has inked a deal with Japan's largest bank to develop "smart" contracts and automate business transactions based on blockchain modelling.
Together with Bank of Tokyo-Mitsubishi UFJ (BTMU), the IT vendor said it would design, manage, and establish contracts that potentially could be deployed among business partners. The two companies themselves planned to tap blockchain technologies to automate business transactions between both organisations.
The first pilot project, which started in May this year, was built on Linux Foundation's open source blockchain platform, Hyperledger Project, and deployed for contract management on IBM's cloud infrastructure.
Most commonly recognised as the core technology behind Bitcoin, blockchain is a distributed database, or public ledger, shared by participants in a given system and validated with a set of technical rules. It is formed by a growing list of data records, each containing timestamps and information linking it to the previous block. Transactions are not recognised until they are added to the blockchain and because every participant has a copy, tampering is evident, making it difficult to hack and steal.
Robert Morris, IBM Research's vice president of global labs, told ZDNet that the BTMU partnership was led by the IT vendor's Tokyo Research Labs and recently launched IBM Centre for BlockChain Innovation in Singapore. The bank's Singapore operations also collaborated on the project.
Morris said the London Stock Exchange Group and Japan Exchange Group were among other clients IBM was working with on similar blockchain projects. He was unable to provide further details on these initiatives, adding that most of the customers viewed blockchain as a potential competitive advantage and currently were unwilling to go public their plans.
When asked, he also declined to reveal financial details involved in the BTMU project.
IBM and the Japanese bank had developed a smart contract management prototype based on a blockchain, which they said aimed to improve the efficiency and accountability of SLAs (service level agreements) in multi-party business interactions.
The bank planned to use the tool to manage contracts within its business environment in fiscal year 2017, which would begin in April. This would be extended to its business agreements with IBM by the end of fiscal 2017.
According to the two companies, sensors containing relevant information would be used within the blockchain to monitor the delivery and usage of equipment. The process would facilitate the automation of invoicing and payment processes between BTMU and IBM.
"Blockchain technology has the potential to change not only the financial world, but also other areas of the business world, leading to improved efficiency of the end-to-end business process," said Motoi Mitsuishi, BTMU's deputy CEO for Asia and Oceania and general manager of Singapore branch and corporate banking division for Asia and Oceania.
IBM's senior vice president of industry platforms, Bridget van Kralingen, added that blockchain was able to "reinvent" complex multi-party and contract-based business models, particularly in the banking and financial services sector.
The IT vendor believed blockchain could help establish trust, often lacking within business networks, as it decentralised the system of governance and security. It could provide different parties within the network equal influence of authority since blockchain involved a ledger that is shared and replicated across the ecosystem.
IBM this past year had been building up its gameplay in the market, introducing blockchain services for the public and healthcare sectors as well as opening development labs focused exclusively on blockchain technologies. In July, it opened its first IBM Center for Blockchain Innovation in Singapore, housed at its local Watson Centre.
It was, however, not the only vendor to tout the benefits of blockchain. Singapore-based Acronis in May unveiled plans to tap the technology to develop data protection tools, forming a research and development team focused exclusively on such initiatives.
The storage vendor believed blockchain had the potential to offer new data protection use cases based on its distributed architecture, which could be leveraged to ensure authenticity and privacy. For instance, Acronis said, it could be used to protect data such as property and medical records, stock transfers, chain-of-evidence in court documents, as well as long-term data archives for IT audit.