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Andrew Darley - Blockchain Leader Europe at IBM

Our guest for this new episode of #FintechInterview is Andrew Darley, IBM Blockchain Leader in Europe, Middle East, and Africa.

Having you here is a true honor, Mr. Darley, and we are thrilled to have a chat with you about the Blockchain world. First of all, What sparked your interest in blockchain?

We’ve been in the game for a long time, doing a lot of research and development for IBM, then we spotted blockchain as being interesting and significant about 5 years ago, and by looking at the market we realized there were no blockchain fabrics suitable for business, so we decided to develop our own blockchain spending 9 months on it.

First, we developed nearly 40 thousand lines of code before we had an epiphany and realized that was a better way of doing it. We needed to build something which would evolve really quickly and also become a standard, therefore we decided to donate everything we had done to open source, to the Linux Foundation, which became the genesis of Hyperledger fabric. There, the modular blockchain framework we developed has become the standard for enterprise blockchain platforms.

Today, we develop Hyperledger Fabric open source with a very large group of companies that collaborate with us: Airbus, Intel, Accenture, Morgan Stanley… It’s about 250 to 300 collaborations in total. The desire was to build the best blockchain for the business that we could.

How did you end up in the sales department after graduating with a Physics degree?

I graduated from Oxford University in 1986 with a Masters in Physics. At that time, I wanted to join a company that was doing interesting things and did a lot of research. At IBM, there were many Nobel laureates and people doing pure research in IT, as well as creating the next generation of computing. By joining a big company, you understand that the things that make it big are the sparky and clever people working there, and that’s what you need, a stimulating environment: “life is too short to be somewhere boring”.

Generally, students think of blockchain as an extremely complex notion. How could you explain this technology to someone who doesn’t know it? What are its potentials?

Often, people make blockchain to be really complicated but it’s actually very simple: it’s just a way companies share data, it’s a way of tracking the status of something such that there can be no misunderstanding. It’s a different lens to look at the world: throughout the whole history of information technology, individual companies had their own information systems and did things for themselves. Why should different companies have different views on the same thing? It’s inefficient. The reason blockchain hasn’t happened before was the lack of the appropriate means in the past, strong cryptography, Public Cloud, endorsement and so on. There are two types of blockchains:

  • Non-permissioned blockchain (public): Where Identity is not required to buy or sell on the blockchain. Ie where you can be anonymous. The most basic use of public blockchains is for mining and exchanging cryptocurrencies. It allows trading of virtual currencies such as Bitcoin or Ether without the traders knowing each other identity: this provides pros and cons, but is not suitable for regulated industries as Identity is key. Without more regulation, non-permissioned blockchains will continue to be a kind of a money-laundering paradise.

  • Permissioned blockchain (private). Where people have to identify themselves in a closed network usually used within an organization or enterprises where only selected members are participants of the network. The level of security, authorizations, permissions, and accessibility is set by the members of the Network. That’s really good for business because of the potential regulation of such environments, which could make the system far safer than public blockchains.

It’s not as complicated as you think but it does really change the world because some active companies work together in ways that really were impossible before and it has some features which are really cool, and those features are for the blockchain a kind of immortality. Basically, the idea is that when you write something in the blockchain it’s there forever; you can’t update it or delete it and it’s really useful to know where something has been in terms of provenance.

Moreover, I believe that in the future the word “blockchain” will disappear, because it’s just an enabling piece of technology, a way of sharing data. Just as the internet is underpinned by TCP/IP which is a name largely forgotten, the same fate will apply to blockchain.

Why choose IBM’s solutions rather than others?

There are maybe 50 firms providing blockchains solutions available on the market nowadays and I can assure you that they are not all going to survive. In this sort of environment, speed of evolution is key, and therefore your blockchain fabric needs many developers working on it, and a strong future roadmap. Those that don’t evolve quickly enough will not survive, and will die out like the dinosaurs. IBM is committed to open source development which puts us in good shape to be one of the blockchain companies that survive and thrive. I believe that open-technology and open-collaboration are the future of the tech world.

If you look at the blockchain operations around the world we’ve done about half of them, it’s pretty impressive, I think. Furthermore, IBM does more research than all the computer companies put together so that was very attractive to me.

How is blockchain transforming the way in which businesses operate? In which business might blockchain play an important role in the future?

Currently, Blockchain is moving very fast into the food industry providing details about the provenance of food. For instance, if you go to a Carrefour supermarket in Italy, France and Spain you can now scan QR codes of the products and they will provide lots of information about the food, powered by blockchain. By scanning an organic chicken, it will tell you which farm it came from, a map of the area, a picture of a farmer, some recipe ideas… Earlier this year we launched the Umbrian Food Cluster: in Umbria (Italy), a group of local producers of pasta and olive oil got together to build a blockchain that would show the customers the value of local genuine and organic products. This kind of use of the blockchain that allows collaborations among local firms will be more and more popular.

Another use of blockchain concerns the renewable energy field, where the energy produced by private solar panels and wind turbines can be sold to grid companies in real-time, for an appropriate price. More importantly, they can balance their whole grid in real-time so they can switch-off gas or coal-powered stations when renewable energy is coming in, in a much more responsive way. This works thanks to IoT (Internet of Things) computing devices of millions of devices/sensors instrumenting the system. In order to handle all the data, a distributed system is needed, and blockchain lets this system fit like a hand in a glove.

Have you ever seen blockchain fail? Could you name an industry where this kind of technology would not be compatible?

Yes, many times. In the very first use cases, we were implementing blockchain on We.Trade (a trade, finance consulting app in Belgium) and we struggled because doing the basic things was hard. For example, collecting requirements from seven banks for the next version of their products, aggregating them up, making a proposal, and getting then get them to agree through blockchain: it is not like normal IT. How do you push updates out? How do you run the network so that even if a company might want to use Amazon for its cloud while another one might want to use Google it still runs as a single network? We messed up many times, but we have learned from it. Actually, any new technology needs that period where innovators fail but then they have to admit it, learn from it, fix it and move on.

A current limit on the use of blockchain in various sectors is still the relative slowness of transactions and the large expenditure of energy to implement them. How do you expect these limitations to be resolved in the coming years?

Blockchain went through a difficult period from 2018–2019. The two problems were the bad name attached to virtual currency (because of their high-profile losses) and that the technology wasn’t quite ready. But if you look at it now, it is really coming over: we’ve seen a huge resurgent interest, and investments in blockchain are going up massively. If it hadn’t been for Covid-19, I think 2020 would have been a stunning year for the blockchain: it is pretty good anyway, but it could have been better. I think 2021 will be absolutely great.

As regards the huge amount of energy, there’s a really important distinction that we need to make: it’s only the non-permissioned blockchain that uses a huge amount of energy. For instance, Bitcoin or Ethereum use something called proof-of-work, which is solving a complex maths problem by using lots of compute to “mine” or generate a new coin. The permissioned blockchains, like the Hyperledger Fabric, don’t do that: there is no proof-of-work and no need to throw lots of compute resources at it. So, they are “eco” and much more “green” than traditional computers. This is a misunderstanding for most of blockchains, as most of them are business blockchains.

What are the pros and cons of using the blockchain for more decentralized finance? What do you think will be the future role of centralized credit institutions?

Right now, the central banks are very much getting into virtual currencies. For instance, Sweden is launching the e-Krone. Many similar initiatives are coming soon. This kind of digital currency will be different because it would be regulated by the Central Bank: it is called “central bank digital currency” (CBDC).

I think that in 4–5 years, most advanced countries will have some sort of CBDC. This would revolutionize more than just the currency side: it will also revolutionize equities and trading. All shares at the moment are traded on share certificates which are still real pieces of paper, so we’ll have to move to digital equities, and I think that’s also coming in a very short time.

Will blockchain or in general DLT (distributed ledger technology) be able to allow all the unbanked in the world to have access to a bank account with no costs?

Today, there are still 2 billion unbanked people, that either have money under their bed or have no money, which is a huge number. To tackle this problem there are many projects going on, some sponsored by the UN, some sponsored by charities. For instance, the UN is giving $ 125 to anyone who’s unbanked and wants to set up a bank account. They’re looking for ways to do that which don’t require infrastructure, and I think blockchain will be central to that. For example, you will be able to set up a bank account from an ATM anywhere and you’ll be able to verify your identity by retinal scan (there’s a project on the way to do that). In this way, you can identify yourself as being unique and unbanked, get access to your money, set up a bank account and move into the “modern world”. If you have a smartphone, you could also use face ID or fingerprints.

How is IBM’s blockchain currently contributing to innovate European businesses? What are your ambitions for the future?

The market is getting very big very quickly: the predicted compound growth rate for the blockchain is about 50% over the next 5 years, which is a huge number, so we intend to stay at the front. To do that, first and foremost, we are going to stay committed to open technology. If we build the project for you on Hyperledger fabric, we hope you’re impressed with what we do and you stay with IBM, but if you don’t like it, it’s all open and you’re free to leave. I think that’s an honest way to do things, and we’ll keep doing that.

Moreover, we’re looking at use cases and we do research. I’ll give you some examples as the research is coming up. One of the things that stopped virtual currency trading so far is the fact that there’s a pre-funding gap because things aren’t done in real time. When you make an offer, the supplier decides whether to accept or not, but you have to put the capital in upfront and it takes a bit of time to settle the trade, generally overnight. That becomes a problem for virtual currency because, like in the case of Bitcoin, the price is moving quite wildly all the time and you cannot have a temporal gap between a bid and an offer while trading. So, we’ve got technology that will be able to let things happen in real time.

Also, technology will do away with private keys. Right now, if you have a virtual currency, you need both a public and a private key, but you can lose your private keys or it can be stolen. There is a research paper that IBM wrote about technology like multi-party computing (MPC) which does away with the need for private keys. So, interesting projects are coming soon that will fix all the problems that we’ve got at the moment.

Lastly, quantum computers are very interesting but, in many ways, we don’t know how to use them yet. As I said, there is a quantum computer open to anybody to use. One of the reasons we made it open to use is so that we can get people to work out how to program it in a useful way. There’s a lot of research going on in many major universities around the world about quantum computing, because what we’re working on is going to be game changing. We are still struggling, but it will come: we just need some smart people to work it out.

Bocconi Students Fintech Society



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