An IBM official testified on May 16 before the President’s Commission on Enhancing National Cyber Security about the potential for blockchain to become the technology foundation for conducting transactions over the Internet.
Jerry Cuomo, IBM’s vice president of blockchain, testified before the commission in New York City, stating that he believes the technology could potentially cause a “tectonic shift” in the way financial systems are secured and that government, technology companies and industries should work together to advance blockchain to enhance national security.
Blockchain is a permissionless distributed database based on the Bitcoin protocol that maintains a continuously growing list of data records hardened against tampering and revision, even by its operators. The initial and most widely known application of blockchain technology is the public ledger of transactions for Bitcoin.
Eighty years ago, IBM helped the U.S. government create the Social Security system, which at the time, was the most complex financial system ever developed, Cuomo said. Now, IBM is hoping to work with the government to advance blockchain to help make the financial systems of the future more efficient and secure.
“Blockchain has inherent qualities that provide trust and security, but to fulfill its promise, the core technology must be further developed using an open-source governance model to make it deployable on a grand scale,” Cuomo said in his testimony.
Moreover, government must play a central role in advancing blockchain. For instance, the National Institute of Standards and Technology (NIST) can help shape standards for interoperability, privacy and security, Cuomo said. “And government agencies can become early adopters of blockchain applications,” he said. “In addition, government has a key role to play in certifying the identities of participants in blockchain-based systems.”
In his testimony, Cuomo identified four areas where government and industry should work together on blockchain: proof of identity, data provenance, secure transaction processing and sharing intelligence.
Blockchain is potentially a game changer, Cuomo said. “Not only is it inherently more secure than other types of networks and financial management systems, but blockchain has the potential to be used by multiple parties to share cyber-threat intelligence. Today, for fear of being exposed, many financial services firms are reluctant to share information about cyber-attacks. However, with blockchain, they could confidentially share information in real time that, when combined with data from other companies, could be used to spot patterns and quickly develop countermeasures.”
Although blockchain is best known as a component of Bitcoin, its usefulness extends far beyond the Bitcoin cryptocurrency. “While Bitcoin is an anonymous network, industries and government agencies are exploring the use of blockchain in networks where the participants are known,” Cuomo said. “We call this a ‘permissioned blockchain.'”
Cuomo noted that IBM is playing a key role in the development of a permissioned blockchain. Big Blue is a founding member of the Linux Foundation’s open-source Hyperledger Project, where IBM is helping build the foundational elements of a business-ready blockchain architecture; with a focus on privacy, confidentiality and auditability, he said. And IBM is using blockchain in its own operations.
“Blockchain has tremendous potential to help transform business and society, but it’s so strikingly different from what people are used to that many business and government leaders are adopting a wait-and-see attitude,” Cuomo said. “We applaud judicious caution, but, at the same time, we believe that organizations and institutions that don’t quickly assess the potential of blockchain and begin experimenting with it risk falling behind as the world undergoes what we see as a tectonic shift.”
In February, to help developers quickly begin exploring the use of blockchain in the enterprise, IBM made nearly 44,000 lines of code available to the Linux Foundation’s open-source Hyperledger Project to help developers easily build secure distributed ledgers that can be used to exchange most anything of value.
And last month, to help speed the adoption of blockchain for business, IBM announced a new framework for securely operating blockchain networks, as well as new services on the IBM Cloud that meet existing regulatory and security requirements.