What happens when blockchains meet?

Speak to CTOs, CDOs and certain CIOs and there is a definite sense of ‘lift off’ around blockchain and DLT, propelled by new as-a-service platforms providing solutions tailored to specific business issues.

I wrote about one of these – Fujitsu Invoice Flow, which tackles the invoice fraud that is estimated to cost businesses in the UK alone some £127 billion a year in a previous blog.  

It is this focus on getting something done today that saves money or improves customer service that is making the difference. Pie-in-the-sky thinking about blockchain is starting to recede – and rightfully so.

The need for interoperability

The nature of blockchain and DLT enables complex trust relationships in untrusted environments between a number of parties who are probably either unknown to each other (‘permissionless’) but could also be known to each other (‘permissioned’).

As more data and transactions are stored on both permissionless (public) and permissioned (private) blockchains, it is clear there is a growing need for seamless interoperability between them.

The spread of ledgers, applications and platforms means they increasingly need to talk to each other and interoperability is rising fast up the agenda, for when blockchains meet. One recent report notes that there were more than 6,500 active blockchain projects on coding site GitHub, using a range of platforms with various coding languages, protocols, consensus mechanisms and privacy measures.

Further innovation and implementation require a fundamental ability for current platforms, current blockchain platforms, and future blockchain platforms to interoperate without creating even more complexity, or, worse still, compromising the very features and functions that make those solutions and platforms unique.

Fujitsu’s focus is very much on permissioned networks as the current driving force of enterprise adoption. The logic of this position becomes particularly clear when you consider that interoperability inevitably requires close collaboration and data reconciliation when transferring data or objects between parties on different chains.

This will be much easier to achieve on permissioned rather than permissionless ledgers, as there is visibility between the ledger participants. The irony, you will have noticed, is that data reconciliation between participants is one of the things that blockchain and DLTs eliminated and one of their unique characteristics.

This reinforces the position I (and many others) have always held on the absolute need to factor-in integration with existing systems and processes as the preferred way forward to ensure proper benefits and reasonable adoption at this stage in the technologies’ maturity cycle.

To get around this and achieve interoperability between platforms, involves adding a layer of complexity, as the platforms themselves need to come together with standards, approaches, protocols and regulatory requirements.

For example, interoperability between public Ethereum with private Hyperledger Fabric could very well constitute a breach of GDPR if the data location isn’t managed very carefully.

As already mentioned, it is not only integration between different blockchain and DLT platforms and solutions that matters.

Integration with existing systems (for example, ERP systems, planning, reporting, etc.) of single blockchain and DLT solutions for specific customers is a crucial success factor in the creation of applications (APIs, etc.) based on ledger technology.

This aspect seems to be more under control and realistic than interactions between various chains at this stage, as there is already a wealth of expertise available, both on existing systems and the platforms and solutions such as Ethereum and various Hyperledger projects.

Regulation and standards

If this all sounds complex, it is. The industry is making accelerated progress, with interoperability now being tackled holistically and backed by industry standards, rather than as an isolated element purely related to blockchain and DLT.

There are new regulations emerging – for example, from the International Organization for Standardization (ISO) including ISO/TC 307 on the standardization of blockchain technologies and distributed ledger technologies and ISO/CD 22739 on standardized terminology.

There is burgeoning collaboration between industry leaders – for example, the International Association for Trusted Blockchain Applications (INABTA).

There are also some initial solutions already available today. Blocknet is a blockchain interoperability protocol that enables communication, interaction, and exchange between different blockchains.

In addition, the Fusion blockchain is an infrastructure protocol designed to connect both traditional and cryptofinance systems that support digitized assets.

Sometimes semi-jokingly called the ‘blockchain of blockchains’, these developments are nevertheless important as part of the transition from an experimental mindset - “how can we do something with this blockchain stuff?” - to a business-led digital transformation approach - “hey, this can actually do something for me now and not in 2021”.

We expect to see the emergence of more distributed and decentralized applications as companies in the market, such as Fujitsu, make use cases absolutely real and tangible, and deliver the easier integration with existing enterprise systems that is so crucial if we are going to avoid creating new ‘islands’ of technology.

The cryptographic power of Fujitsu InvoiceFlow, for example, is integrated via REST APIs to standard Enterprise Resource Planning systems, such as SAP, Microsoft Dynamics and Oracle Financials.

When Fujitsu develops applications, either as-a-service apps or customer projects, we always start with the need for integration embedded in the requirements. We build with APIs in mind, to facilitate integration while retaining the benefits of security, immutability, traceability, etc.

That may add some constraints in the ideation phase; however, no one is likely to sign-off a project that bypasses legacy system investment or regulatory boundaries in favor of something that carries relative risk during implementation.

Fujitsu’s approach is to ask the right questions and opt for the best solution for the use case, which may or may not involve blockchain.

Delivering on potential

For distributed ledger solutions to reach their potential, industries, companies and governments must agree on a common set of standards to ensure interoperability – since it is only when different blockchains are able to interact with one another and integrate properly in existing systems (API-based) that they start delivering true value and will gain mainstream adoption.

As I have shown here, the roadmap looks positive in this regard. The various components needed for blockchain and DLT to breakthrough to mainstream adoption are lined up and ready to go. We have business-benefit driven supplementary platforms that can be integrated to existing systems via APIs and which conform to emerging standards. This is the start of the next wave of digital transformation.

Fujitsu offers an extremely rapid blockchain Proof of Business productization framework, including the development of a Minimum Viable Product (MVP) in just five days. To find out whether blockchain and DLT can help digitally transform your organization, please contact us