Bitcoin seems to be the only alternative currency in the past few decades with any real staying power. But, the true legacy left by Bitcoin won't be the currency itself, rather it will be the technology behind it: Blockchain.
Bitcoin is what is known as a cryptocurrency, or an encrypted digital currency that operates independently of any banks or regulatory organizations. A big part of keeping Bitcoin safe is the blockchain.
Basically, the blockchain is a master ledger, or database, of all Bitcoin transactions that is shared among all participants in a network. Everyone has a list of the transactions and can track ownership of the Bitcoins through the blockchain.
The business world is now moving, albeit somewhat slowly, to capitalize on the blockchain technology with major banks and financial institutions beginning to test it out in the past year or two. However, it has begun to spread to the greater enterprise and now a new competitor has entered the market—IBM.
SEE: Encryption Policy template (Tech Pro Research)
On Tuesday, IBM announced new initiatives to help deliver blockchain-as-a-service for developers, and to help make blockchain technology better suited for enterprise use. For starters, the company made 44,000 lines of code available to the Linux Foundation's open source Hyperledger Project, which is a collaborative effort to help advance blockchain technology. This will help give developers the means to build blockchain ledgers for use outside of bitcoin.
Big Blue also announced new blockchain services on its cloud platform, Bluemix, as well as deeper integration of data from IoT devices on blockchain as well. According to an IBM press release, "Blockchain applications can access existing transactions on distributed servers and z Systems through APIs to support new payment, settlement, supply chain and business processes."
Additionally, the company said it would be opening IBM Garages in cities like Tokyo, New York, London, and Singapore to foster creativity regarding design and development of new blockchain applications.
IBM said it will be working with "a number of global partners" including the London Stock Exchange Group and a business development organization based in Finland. Jerry Cuomo, IBM's vice president of blockchain, said the company saw a need to bridge the gap between what blockchain is capable of and what businesses actually need.
"One possibility in the future is that we could provide an exchange with the whole array of blockchain services to support their core business processes," Cuomo said. "A second scenario would have us providing services a la carte—such as identity management, consensus and compliance."
SEE: Bitcoin an official commodity: US trade commission (ZDNet)
So, the big question becomes whether or not IBM's involvement will have any impact on the blockchain as a business technology.
First, let's look at the current state of the technology. For starters, the one well-established blockchain implementation, Bitcoin, is proven but limited in scope and scalability. Banks have been exploring the technology for more than a year or so, and many of the world's largest banks have joined the R3 Blockchain Consortium to look into uses of the technology. Still, Gartner analyst Ray Valdes said it does add some weight to the project to have IBM behind it.
"It is one more indicator that blockchain fever has struck in full force across a wide swath of the banking and financial services industry, but also now expanding the scope to other verticals," Valdes said.
The next question becomes what can IBM do for blockchain that hasn't already been done. So far, many of the blockchain initiatives have been vertically focused, but Valdes said that he thinks what IBM and the Hyperledger Project are doing is trying to expand interest in the technology, creating a "horizontal fabric rather than a vertical technology."
In terms of the different pieces of the announcement, the Hyperledger Project is the core value. Cuomo said that an open standards approach was critical to wide adoption of blockchain. However, the other announcements are complementary initiatives, which Valdes said won't really show their true value until the core technology project matures.
Of course, blockchain isn't out of the woods yet. There are a few challenges that could prove to be an issue to its growth. One major potential issue is the impact from government or regulatory efforts in the space, Valdes said.
But, we aren't to that point just yet. The technology is still being developed and it has a long way to go.
"This is the year of proofs of concept, it's not yet the year of systems in production," Valdes said.
The 3 big takeaways for TechRepublic readers
- IBM announced that it was throwing its weight behind blockchain, the backend technology behind Bitcoin, and it is working to make the technology more accessible to businesses. The biggest announcement is IBM's contribution to the open source Hyperledger Project.
- The announcement is indicative of the growing visibility of blockchain and, if successful, IBM could provide business users with a horizontal product to help them leverage the technology.
- Blockchain is still in its infancy. IBM's support of the technology will add some weight to its potential future usefulness, but business leaders looking to invest in blockchain won't see a return in the immediate future.
- 10 things you should know about Bitcoin and digital currencies (TechRepublic)
- How blockchain is likely to transform IT and business (ZDNet)
- Digital currency is poised to reinvent how startups are funded, led by Chroma Fund (TechRepublic)
- Blockchain has the potential to redefine a business model: Think CEO (ZDNet)
- Pay with Bitcoin: 10 of the most interesting places to spend it (TechRepublic)
Conner Forrest has nothing to disclose. He doesn't hold investments in the technology companies he covers.
Conner Forrest is News Editor for TechRepublic. He covers startups and enterprise technology and is passionate about the convergence of tech and culture.