Blockchain for Business | Interview with IBM’s Jerry Cuomo

Never put personal identity information on a blockchain. That's a bad idea. Blockchains are encrypted, but you're tempting fate. Keep private information off the blockchain, but use the blockchain as a marker for proofs and permissions.

Thanks for being with us.

Thanks for having me.

Awesome. So my first question is, My first question is about a panel today on which Marie Week from IBM said the.

Following permissioned blockchains for a fit for purpose bring your ecosystem scale. The data you want to share is perfect for use cases like trade like provenance, but permission doesn't mean private.

Can you elaborate on that distinction?

Yeah. So one of the things we do at IBM is we co create and we produce blockchain software for enterprise. The funny thing about the software is it doesn't have a conscience. It doesn't know if it's being deployed in a public private permission or permissionless way. But the technology is very flexible based on beholders like a trade finance consortium. It can be deployed in many interesting ways that are appropriate for that use case. The technology that we produce around hyperledger fabric is what we call a permission blockchain. It's not a private blockchain, it's not a public blockchain. It is whatever the users of it make it. So it's not for us to say. Now you might ask, what do our users do? Well, most of them have a business network, a supply chain network, a trade finance network of groups that typically work together and they're known entities to the network. So that's how they implement our technology as permission, so that the members are accountable, but still they can interact privately, they can make it public and set the rules for what it takes to join and get your permissions, get your membership.

Like no rules. Yeah.

Or they can put. You can turn all the rules off. The technology doesn't know. It's quite accommodating. But most of our customers do turn some rules on and govern the network accordingly.

Okay. So I recently saw a panel at a different conference between someone from EY and someone from consensys with a Y who was formerly IBM. And they were talking about this sort of debate between using public versus private, private blockchains, whatever. And they both agreed on the fact that it's important to use the Ethereum blockchain in particular. So a public blockchain and then in particular Ethereum's main net and had kind of like come to that from this enterprise perspective. And so what do you. Yeah, what are your thoughts on That.

I do think it's, I think networks, it's critical that networks work with networks. I mean, it's not a profound thought, it just, it's as simple as any mobile app today uses at least 12 APIs from different services. You know, if the app is going to make a payment and then text the person that the payment was sent, they'll use maybe a PayPal API and they'll use a Twilio API to send the text. Blockchain is no different. So enterprise applications are going to use other services from other networks. So it's not a crazy thought, it's a pretty Grounded thought in 20 years of software integrating with software. So I don't think it's a crazy thought that a public network like a stellar network substitute what I just said about PayPal and introduce Stellar to make a payment. Why not Ethereum itself? I mean Ethereum is a world computer. It can be anything. So you can build all kinds of applications on that world computer. An application in a custom network wanting to call, I can see it now. I don't, based on our clientele, while that might be something that's happening in the future, I don't hear a lot of folks who are grounded in building blockchain solutions today asking that question yet.

Which question?

About, you know, custom networks talking to Bitcoin or Ethereum or others. Not yet at least. But I do think because they're focused on making their dream blockchain consortium come to life. And let's face it, in anything technology is just one piece. Where I see our customers struggling these days is maybe 20% on the technology, but the remaining 80% is on business and legal. And those business and legal conversations, transcendental, you know, the networks. But it really helps then to focus in on a single governance model because now your business and legal frameworks could at least be contained before you start adopting other business and legal. Just imagine the click through agreement in that network when you're going to accept the terms. And it's like this part is running on this custom network, that part is running on Ethereum, you know. So I do think the perspective is. That's an interesting thought. I think it's grounded in precedence, things that have precedence. But I don't hear any of our clientele asking for that just yet.

Okay, so what are your clientele asking for? What are the main things that enterprises are looking for when they're looking to implement blockchain in some way?

Four things they're interested in accountability. Many of these, like a consortium of Drug companies looking to eliminate counterfeiting from the drug supply chain. They're gonna care about accountability because there are rules like HIPAA in healthcare and it's good for you and I that those companies follow those rules.

Right?

Right. Or gdpr like for privacy, respecting end users privacy. Next is while you need to be known to the network you want, customers are asking that they can confidentially transact on the network without everyone else having knowing everyone's business. Right. So many networks in blockchain support a broadcast model where everyone gets everything. But to be able to subset for different class for certain types of transactions, our customers think can we kind of like create little. We call them channels like in Slack where you can just set up a channel of an interest group and only those parties are privileged to those transactions. So privacy is number two. Number three is an insatiable appetite for performance. Immense transaction volumes in the thousands of transactions per second. And no matter all of our breakthroughs that we come up with and we're coming up with them regularly as a community, they want more. And then the other is fault tolerant security. When you have six institutions coming to the table or 12 or 25, not all of them are at the same investment level. So they want to make sure that a careless action on and I would say not nefarious actions, probably more careful careless versus a set of permission institutions that if someone forgets to upgrade their machine that that can bring the whole consortium down.

So what about the issue of scalability which you just mentioned? How is Hyperledger working on that?

Yeah, so one of the things that I love about the Hyperledger community and kind of incited by the Linux foundation and how they've run the Linux foundation over the past decade and more is it breeds a fierce setting of collaboration and through a modular architecture in Hyperledger fabric, while we're collaborating on the core, we are also at the same time through modularity, adding our own value and then fiercely competing. So we all benefit from. For example, I would say about a month ago, University of Waterloo in Canada did a study on Hyperledger fabric performance and found that if they create swim lanes for different types of transactions, things could move a lot faster. And they took a use case, one of their examples that they were running at about 3 or 400 transactions per second and got it to run at 20,000 transactions per second. When I read the paper one morning, it just kind of came into the community out of nowhere seemingly. It was like Christmas morning for me. I was like wow. And that's the Fierce collaboration that you get under the hyperledger kind of umbrella. Cool. You know, fierce competition because fair governance, liberal licensing, encouraging secure software with many eyes looking at it, and modularity to allow businesses to differentiate and offer services that folks will pay for on top of the free software so they can get paid and invest more in the open software, et cetera.

Right, okay, what are the. So you recently published, IBM recently published the five principles, I believe, of blockchain. Can you just summarize what they are?

We've seen blockchain used for less wholesome things.

Yeah.

ICOs that aren't backed by anything more than a two page white paper that fold up. But you know, like anything else, the technology doesn't have a conscience. As I said before, it's the people who use it that do. So we have some principles that help people think about the proper use for this technology, informed by our four plus years working on blockchain. The first is, and we've talked about it, is open. Open by design is what Marie Week talked about this morning. Open, just not as a dump and run on your code. It's not about just that. It's open source, but it's openly governed. The practices are fair and known. The community of contributors are diverse. Liberal licensing, that's a really important aspect of the principles. The other thing is around data ownership. The blockchain really doesn't mind what data you put on it. It doesn't discriminate. But we advise the users of a blockchain to never put perfect personal identity information on a blockchain. That's a bad idea. Yes, blockchains are encrypted, but you're tempting fate. So keep personal identity information off the blockchain, but put proofs and permissions. Use the blockchain almost like as a digital rights management system to allow people, for example, if everyone's putting their, their personal information in a database, the database could be, you know, breached. It can be a data breach. And we've seen like you've seen this happen?

Well, we've seen it happen with centralized databases.

Centralized databases. But if everyone keeps their personal identity information on their phone, that's true, the likelihood in a wallet, in an encrypted wallet on their phone. While yes, you can lose your wallet next Tuesday, but the chance of everyone in New York losing their wallet on the same day, not likely to happen. Right. So another principle is the data is yours, not ours. So keep private information off the blockchain, but use the blockchain as a marker for proofs and Permissions.

Okay. So that you can have something like a blockchain based identity solution or something kyc. But it's like right.

And it's less the blockchain is used for identity. We call it an identity blockchain. But the fact is is that the blockchain is really a coordinator. It is, it is the almost a legal verification system. It issues credentials, it verifies credentials. But they're not all kept there. But the proofs are kept there, the contracts are kept there and it's a very wise use.

Last question is about the these two events. I guess in crypto markets that people or in blockchain and crypto in general in the industry, people have been looking to two things and this is sort of outside of the enterprise topic, but I'm curious what you think of this from your perspective. One thing is the launch of a bitcoin ETF in the US specifically and the other is Bakkt, the company backed launching which will be, you know, they're from the New York Star Stock exchange operator. So big institutional move and they would be launching bitcoin futures. So can you speak to those two events? Is that something you pay attention to at all?

It's funny, I'm a lifelong software engineer, computer scientist converted into a business leader at IBM through the school of hard knocks in blockchain world. You also get forced to be a bit of an economist thinking about I would say the whole behavioral science of incentivizing a group. Blockchain I like to say is a team sport. And it's interesting to see how cryptocurrencies provide that incentivization of how they incentivize a group to work. But other than that, again, I don't have a dog in that hunt. But I'm intrigued by it. But I really don't have a real one one thing to say one or the other on those events.

Okay.

Yeah.

Well, cool. Well, that's all I have. Thank you so much for your time. Thank you.

Great questions.

Appreciate it. Yeah. Cointelegraph, like subscribe and HUD.