What is the Hyperledger Project and how will it affect you?

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IBM made a big announcement recently, and it was one that is certain to have lasting repercussions on the finance and tech sectors. However, few people are actually aware of its full implications.

The blue chip giant has been at the forefront of various tech advances for decades. Now, it has revealed that it is giving a significant donation to the Hyperledger Project, namely 44,000 lines of blockchain code. The move is the latest that has seen an increasing number of major financial and technology firms beginning to seriously invest in blockchain tech in various ways.

Blockchain is the system that lies at the heart of Bitcoin and many other cryptocurrencies, and IBM’s announcement is part of a plan to provide an open-source foundation that will take things many steps further.

Distributed ledgers

Blockchains have had something of a murky reputation until recently. This is mainly due to digital currencies being favored by hackers and users of the deep and dark webs, well away from reputable investors and large corporations.

However, things have been changing quickly in recent months. Major investment houses have been making tentative moves into Bitcoin and other digital currencies, and banking corporations have been trying to work out how to use blockchain tech in their own operations.

JPMorgan and Goldman Sachs are part of a nine-strong team of major banks that are working with the fintech firm R3 to look at ways to incorporate blockchain applications into their world. A blockchain is already being used by Nasdaq to track private companies’ ownerships.

At the heart of the blockchain concept lies the “distributed ledger”, essentially a publicly accessible record of every transaction that occurs within certain parameters, with multiple copies being held on millions of different machines. In theory, this allows for a level of transparency and fraud protection that is far beyond anything that has been available before.

An open-source blockchain program will mean that distributed ledgers will be adopted widely across many industries, especially with the likes of IBM backing the initiative.

Internet of Things

IBM is opening up its blockchain source code in a move that will revolutionize the way that the process is used. It is likely to become the de facto standard for blockchains as it will be available to any company, developer or other third party that wants to work with it.

The tech behind blockchain is essentially public in its execution, and previously other firms that have looked at ways of privatizing their own versions have been criticized. Writing for Recode, Jeremy Allaire said that previous attempts by big businesses to develop proprietary blockchains were similar to early-90s attempts to build “permission Internets” using “the technology behind the Internet” back in the early 90s.

Today, IBM’s “Watson Internet of Things” platform already enables many different devices to communicate information, so the ability to update distributed ledgers with data from sensors, barcodes and other metrics would be a quantum leap forward. IBM has said that it will set up “garages” in London, New York, Tokyo and Singapore to give potential customers the opportunity to test out the blockchain-based products.

What is the Hyperledger?

The Hyperledger is essentially an umbrella project as it defines various standards in order to allow open-source collaborative work. It also provides a framework, tools and guidelines to enable the building of blockchains and the applications required to use them effectively.

The real impact of the concept will come from the fact that it is there to be used across various industries, not just for tech firms or banking corporations. This means that the outcomes are extremely unpredictable, as by using the opportunities that the Hyperledger Project offers, any business can use blockchain to create its own bespoke solutions and look for ways to improve productivity and performance.

DLT ecosystem

In order to allow third parties to make full use of an open-source blockchain system, there needs to be a full ecosystem to back it up. This is known as “distributed ledger technology” (DLT), and it is a network of growing infrastructure both public and private.

The concept is similar to the Google Play Store and Apple App Store, both of which revolutionized the way that smartphones from various manufacturers could utilize compatible apps built by third-party developers. Instead of relying on installed operating systems and proprietary apps, different features and applications were made available for easy download and installation.

This interoperability factor is an important step for any emerging tech looking to gain wider acceptance, and LedgerConnect is emerging as the platform for blockchain applications. The idea is that financial institutions will be able to access DLT services and apply them to their own operations.

Hosted on a single blockchain network, it aims to become the first app store for the financial industry and ultimately any other enterprise blockchain solution that could meet a market need. IBM’s Vice President for Financial Markets Keith Bear explained: “Having a secure network and proven infrastructure allows an app store kind of model, where banks can identify applications from certified fintech and software providers and deploy these apps over a seamless blockchain network.”

Individual impact

IBM’s donation to the Hyperledger is likely to help its own efforts to shake up its reputation as an innovator, but for other companies, the effects could be far greater in terms of the way they operate. Open source leads to greater compatibility, and together with the Internet of Things and big data. the Hyperledger could really be a game changer across the spectrum. For individuals to feel the effects, it might take a bit longer, and when the changes do kick in at an end-user level, they will probably be so integrated as to go unnoticed in most cases.