Inside Advanced Scale Challenges|Friday, September 21, 2018
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Banks, Tech Firms Back Open Transaction Framework 

The point of operating a business is transactions. Hence, a new open source effort designed to create what amounts to an operating system for transactions has attracted major players from the financial and technology sectors.

The Linux Foundation effort launched before the holidays is designed to harness block chain technology at the core of Bitcoin digital currency and optimize it for enterprise use cases. Block chains are used to record and verify transactions.

The initiative called the Hyperledger Project aims to scale block chain technology through a cross-industry open standard for distributed ledgers that promises to transform global business transactions. Distributed ledgers are secure tools that could underpin new enterprise networks used to track and trade practically anything of value.

For example, organizers said a distributed ledger framework could help banks settle securities transactions in minutes rather than days. It also promises to help businesses manage global supply chains and payments for goods and services. The Linux Foundation said distributed ledgers also could find applications in the emerging Internet of Things.

Jim Zemlin, executive director of the Linux Foundation, announced earlier this month that the Hyperledger Project has already attracted 30 founding members. They include "premiere" members J.P. Morgan, Deutsche Boerse Group, the London Stock Exchange Group, financial services technology specialist R3 along with tech heavyweights IBM and Intel Corp (NASDAQ: INTC). Cisco Systems (NASDAQ: CSCO), Red Hat (NYSE: RHT) and VMware (NYSE: VMW) also have signed on.

Several founding members themselves represent financial services consortia. For example, Digital Asset Holdings includes Accenture, Citi Bank, J.P. Morgan and Goldman Sachs.

The more than 3,000 inquiries about the Hyperledger Project represent "the biggest response we’ve ever experienced for a new open source project," Zemlin noted. The response illustrates "the pent-up demand for an enterprise-grade, cross-industry open standard for distributed ledgers," he added.

Founding members met recently in New York to discuss initial architectural concepts for leveraging block chain and "crypto-currency" technologies. The result was code and technology proposals from Digital Asset Holdings, IBM and others that are now under review. Zemlin said the Linux Foundation expects more submissions, adding: "All parties have agreed that whatever code we go forward with will be released under the Apache open source license."

The goal is to integrate code from as many sources as possible to develop a "neutral technology platform" that Hyperledger Project members can use to differentiate future products "on top of the standard block chain fabric," Zemlin noted in a recent blog post.

IBM (NYSE: IBM) has contributed code and corresponding intellectual property while Digital Holdings chipped in with "enterprise grade code" and developer resources. Other contributions include a financial transaction framework from R3.

Separately, R3 last month announced the results of a cloud-based distributed ledger experiment involving eleven global banks. The "blockchain-as-a-service" was hosted on a virtual private network in the Microsoft Azure Cloud. "The transition from vision and hypothesis to application and execution signifies the next major step towards using this technology to transform how institutions interact, report and trade with each other in financial markets," R3 CEO David Rutter noted in a statement.

As banks and technology vendors coalesce around block chain and distributed ledger technologies, financial services specialist and Hyperledger Project member DTCC is sponsoring a symposium on the future of block chain technology in New York on March 29.

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).

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