Blockchain and Hyperledger Hackfest: from another planet

Early this week I was invited to attend a Hyperledger Hackfest at ABN AMRO in  Amsterdam. This event organized by the Hyperledger Fab led by IBM took place in the rooms of the bank’s new Innovation Lab, an ultra-modern environment. Certainly the right place for such a happening. Technical specialists and architects from companies and organisations all over the world from China to Japan and the US as well as Europe were participating.  

From another planet

For me as a ‘normal’ economist who thought to know a lot about blockchain and distributed  ledger technology, trying to bridge the gap between this technology and the financial world, this was sometimes different (and difficult) stuff. Just as if I was on another planet. But for many of them the other way around may also be true. The present financial world is often a complex one for these technical people. To realise that this technology should fit in this financial world they also need to understand what is happening there in other to bridge their gap. That means we should learn from each other in order to get the best of both worlds.

Blockchain platform Iroha

I have learned a lot at this event. But for this blog I like to restrict myself to an interesting offering that is a real example of such a cross-disciplinary research approach: the Japanese blockchain platform Iroha. One of the speakers from the Japanese fintech Soramitsu, was just returning from the Geneva SIBOS event where he had announced the open sourcing and proposal of a blockchain network called Iroha to the Hyperledger Project (see my earlier blog about Hyperledger Project). Once the proposal is accepted by the Hyperledger Project and its members, Soramitsu will be able to collaborate with a wider range of partners and corporations in testing the network and finding easier methods in deploying blockchain networks to private companies.

What is Iroha?

Iroha, jointly sponsored by leading Japanese technology firms, including NTT DATA Corporation, is a distributed ledger technology and smart contract platform using Java-based smart contracts and a Byzantine Fault Tolerant consensus algorithm, called Sumeragi. This network is adapted from the Hyperledger Fabric architecture, with plans for greater interoperability in the future

Soramitsu intends to increase the availability of smart contract enabled networks to open opportunities for companies in using the blockchain technology. Iroha is expected to provide private businesses, financial institutions and organization with a simple blockchain architecture that is easy to understand, develop, and integrate. That will enable businesses of any size to implement its network with substantially lower costs, as well as run smart contract-based applications with improved security measures.

All of Soremitsu's partnering institutions and research firms will support the development of
Iroha, by running experiments on Iroha’s local currencies and the network’s overall
efficiency.

Expected use cases for the Iroha blockchain network include: Payment and Settlement,
Contract management, Securities clearing, Development of financial products such as
Insurance, Supply Chain Management, Smart Grid, Trade finance, and Internet of Things
(IoT), and efficient compliance with Know Your Customers (KYC) regulations.

Soramitsu collaborative approach

Soramitsu, started in February 2016, and a member of the Hyperledger Project, currently oversees various research projects and developments with Japan’s leading research institutions, technology and financial firms.

• Weather derivatives

The company’s Iroha project can be implemented outside the realm of finance. Recently,
Soramitsu began the development of derivative insurance contracts using blockchain
technology, such as weather derivatives, together with the Japanese insurance company
Sompo Japan Nipponkoa Holdings.

• KYC

In addition, the company is working with Rakuten Securities to develop a Know Your Customer (KYC) system using blockchain technology. They are now looking for global KYC
partners.

• Smart currencies

Soramitsu has also created a joint research project with The University of Tokyo, The University of Aizu, and the Center for Global Communications (GLOCOM) of the International University of Japan, who founded the Blockchain Economics Research Lab back in March 2016,    to study the creation of local currencies running on blockchain and distributed ledger technology (Iroha network), so-called ‘smart currency”, and their  effects on regional development. This project will focus on the area around Aizu, in Fukushima Prefecture, Japan.

Thereby the University of Tokyo and its Interfaculty Initiative in Information Studies, researched the effects of network economics and information technology (IT). The University of Aizu OpenAppLab and regional technology center looked into the relationships of local smart currencies to solve regional problems. Lastly, GLOCOM, focused its efforts on socio-economic systems and the impact of distributed ledger technology.

Blockchain and cross-disciplinary approach

What may we learn from this? Intensive collaboration between the financial, the technology and the University world is a must. Such an cross-disciplinary approach on blockchain and distributed ledger technology is a pre-requisite to meet the needs of both worlds. The Hyperledger Project is already a platform where most of these disciplines come together. Given its open-source approach this gives the best guarantee to make further progress. It is no up to the regulators to make that a reality!