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IBM using tech behind Bitcoin for digital contracts

Putting the controversies around Bitcoin aside, IBM is betting on the technology under the hood and is planning to release open source software that could be used to manage contracts digitally, using similar logic that Bitcoin transactions use.

 IBM using tech behind Bitcoin for digital contracts

Reuters


As an IBM developer explains how it works in a blog, Blockchain, the technology used under Bitcoin, records transactions without the need for banks or any central authority. All transfers of Bitcoin are announced to the currency's network of users, and Bitcoin miners are rewarded with newly generated coins for bundling those transactions into specially formatted records called blocks. New blocks need to satisfy certain mathematical properties when taking in conjunction with those already generated, and the complete historic transaction record is known as the blockchain.

The blog explains that blockchain is a distributed ledger, shared via a peer-to-peer network that maintains an ever-expanding list of data records. There is only one file, the ledger, that looks like an append-only database transaction log. Each participant on the network has a copy of that log and any addition made is reflected throughout the network. This way all participants have an up-to-date ledger at all times.

Going beyond Bitcoin, blockchain can be applied to various business scenarios. Business agreements can be locked using this technology. Terms of agreement can be specified on a blockchain, knowing it will execute and be enforced autonomously. As Arvind Krishna, SVP And Director, IBM Research explains in his blog, take for instance the condition, "Pay me in under 15 days, and I will give you a discount". "Nobody is in private control of the ledger and nobody can secretly change the terms of the agreement. So, with blockchain, facts and agreements are recorded certifiably and indelibly, increasing trust, reducing risk, and thus reducing friction in business," explains Krishna. IBM is currently developing blockchain to add in more security features and getting it to work with Internet of Things, thus opening up even more use cases. "A number of companies are developing blockchain implementations, and we expect more to come. We believe that for blockchain to fulfill its full potential, it must be based on open technology standards to assure the compatibility and interoperability of systems. Furthermore, the various blockchain versions should be built using open source software rather than proprietary software, which could be used to suppress competition. Only with openness will blockchain be widely adopted and will innovation flourish," says Krishna.

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Updated Date: Sep 22, 2015 17:16:38 IST