‘Blockchain ensures transparency on all levels, is the future’: Frans Kempen of IBM

In an interview with YourStory, the IBM’s Blockchain lead for logistics and supply chain solutions for BeNeLux extols the technology’s relevance in a collaborative business scenario that spans several locations.

Distributed databases were always controlled by a central gatekeeper leaving little room for transparency. But Blockchain has turned the status quo upside down by bringing all parties on the same platform.

Any changes made on a Blockchain keeps the entire system in the loop and the authority rests with all the stakeholders to agree on changing the transactions.

This assurance of transparency is what pushed IBM to adopt Blockchain for its logistics and supply chain businesses, which have several stakeholders involved before the product gets delivered to the end customer. It noted that Blockchain, by bringing all the stakeholders on a unified platform, is an efficient way to do business.

Frans Kempen, IBM’s Blockchain lead for logistics and supply chain solutions for BeNeLux (Belgium-the Netherlands-Luxembourg) region , believes that the technology’s ability to make corporate entities function more efficiently led IBM to test it in over 500 pilots. But will IBM manage to usher in an era where Blockchain can increase speed of business?

Here are the excerpts of the interview with Frans on the sidelines of the International Blockchain Congress held in Goa on August 5.

YourStory: What momentum do you see with blockchain?

Frans Kempen: Blockchain can do a lot for business. The momentum has started globally and investments in things like Internet-of-Things (IoT) and artificial intelligence (AI) are growing in size. Today, startups are growing in India, thanks to the push from the Government of India and Prime Minister Narendra Modi. And IBM is doing a lot of work in India when it comes to Blockchain. We are working with Tech Mahindra to build a Blockchain for supply chain and trade finance in India.

We at IBM think Blockchain is going through a hype cycle. Here I quote Bill Gates, who famously said, ‘We overestimate the speed of implementation of new technologies, but we often ignore the impact.’ This is the situation with Blockchain. The adaption will happen over time because the technology has to evolve. Look at the dotcom era; no one expected things to change so fast and, today, everyone uses services on the internet.

YS: How do you differentiate Blockchain from the internet?

FK: Internet is about information; Blockchain is about transactions. Today, there are information systems and financial systems across the world. For example, Amazon is an information company and uses the financial networks of others. But as they have grown they can very much become a transactional system with their own financial ecosystem. Today, transactions go through payment systems that are controlled by banks. With Blockchain, information and transactions can be combined into one. You don't have to have multiple systems. Amazon was selling books online, but after 20 years it can become a bank itself if it deploys Blockchain because it uses open source code to scale up its platform. It can use hyperledgers to start its own transactions system.

YS: So can you tell us what changed to underscore the need for a technology like Blockchain?

FK: The old system worked on a client-server model and was called web 2.0, where a bank, for example, was the in-between providing a guarantee of the information exchange between two parties and the financial settlement. Uber, for example, is the middleman and has data of all the consumers. Here, only a single system has the data. With Blockchain, all this will change.

Web 3.0 is individual-to-individual or corporate-to-corporate transactions. The token system is going to be big because it essentially brings information and transactions together, so all parties decide the price of a service or product among themselves. Let me tell you why journalists need to be paid more than the publishers, though it's the other way around today. Brave Browser allows readers to decide whether content needs to be paid for or not. The browser provides tokens for every story read and the money goes into the journalist’s wallet. Today, journalists don't know how much advertisers bring to publishers, and publishers, in turn, are clueless about what the audience truly wants to read. This brings power back to content creators.

YS: Can you tell us a little about what IBM is doing with Blockchain?

FK: IBM supports the hyperledger foundation. We do so because businesses can reduce cost of implementing a Blockchain platform that can enable transactions at great speeds. We want to help integrate Blockchain with ERP and bring all stakeholders on a single platform. The open-source technologies help us build and integrate faster for our clients. This is why IBM wants to support the Blockchain protocols. The consensus protocol - where all parties agree to share information about the transaction - should be very robust if you need a Blockchain platform to succeed. As an enterprise, you may want to know which companies are in your network and how your company interacts with them.

YS: What kind of pilots have you run?

 FK: IBM is running over 500 pilots in Blockchain in trade finance, pre and post-trade and supply chain. Take a car, which is being manufactured and transported across countries and is sold in a dealership of another country. The car has a journey and its journey needs to be tracked.

The bill of lading can be in a Blockchain - we can bring manufacturers, shipping lines, cargo movers and dealers onto one platform - for transporting a car from one country to another. It is a brilliant case to go after. We are working with Volkswagen and Nissan to use Blockchain in Europe to keep a track of their cars, thereby avoiding their shipments going missing, something that is fairly common across the world.

We have also introduced Blockchain for maintenance and repairs of cars. The service centres often claim they have put new parts in the car. But, have they really? Blockchain can enable this and bring trust to a consumer. Mahindra is using IBM Blockchain to track its SME supplier base and solve their working capital problems. We have built a case where all suppliers are on a common platform and all their POs go to a bank and they get working capital finance at low interest. In the earlier days, a delay in getting payments would hurt their business, but when you bring a bank on the platform they can track the POs and provide low interest loans.

Walmart is using us to track products from the supply chain and traceability perspective. It's all about origins and identity in a Blockchain.

At IBM, we start with a vision and think about how the business process can use Blockchain. A Blockchain is not the solution for everything. ‘What about distributed databases,’ people ask me. I tell them that the world was about having people controlling permissions on a centralised basis. The benefit of Blockchain is that it is a great use case and can be scaled up because it is open source. It is the future.