Back to the future: Blockchain returns to the real world

Transcript

Angie Lau: What good are cryptocurrencies, non-fungible tokens, play-to-earn games, even Web 3.0, if they don’t have enterprise capabilities? That’s the thinking behind the Hyperledger Foundation, one of the most important open-source blockchain frameworks for business applications in the real world. But what are they building now amidst this crypto winter and widespread distrust?

Welcome to Word on the Block, the series that takes a deeper dive into blockchain and all the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast. I’m Forkast Editor-in-Chief Angie Lau.

Well, today we’re in conversation with Daniela Barbosa, a woman who dons many hats. She’s the general manager for the Linux Foundation, focusing on blockchain healthcare and identity, and also serves as executive director at the Hyperledger Foundation. What we’re going to learn today is deeper than price moves. Today we’re going to understand crypto, blockchain, digital ledger technology from a foundational level. This is not about what’s happening right now. It’s a conversation on what’s going to happen next. Daniela, it’s great to have you on the show.

Daniela Barbosa: It’s great to be here, Angie.

Lau: All right. Well, first, let’s get everybody up to speed and be clear, and have you share the origin story, and perception, even, of Hyperledger from the very beginning. Hyperledger Fabric, a permissioned private blockchain ledger built by IBM — it’s not truly decentralized, but what’s the difference here? The origin story? Why is it all important?

Barbosa: All right. Well, we’ll start first with the Linux Foundation that over the last 20 years has been supporting various — hundreds right now — of different open-source technology projects within the Linux Foundation umbrella. And the importance of that is because we truly believe that open-source and building these projects that become fundamentally core infrastructure — whether it’s the Linux kernel or something like Hyperledger — in how the next generation of financial services, of healthcare services, of all different types of enterprise use cases are used, and really creating an environment where communities can come together — big companies, small companies, governments, individuals — and work on the code together is really important, we believe, for building these foundational technologies.

The Hyperledger Foundation since 2016 has been focused very specifically on enterprise blockchain, and even the term ‘enterprise blockchain’ has changed very much since 2016, as you know, Angie. And I think a lot of it has to do with the community that we’ve been building and really the maturation of the tech itself, of distributed ledgers, of things like digital identity, of, obviously tokenomics and the tokenization of assets, whether it’s NFTs or even IP. There’s some great use cases around that.

So, we’re very excited to be here today to talk to you and your audience about that, because we really believe that by doing things in the open, with open collaboration, and more importantly, open governance over the code, we really can achieve a lot of the needs that our future requires.

Lau: I do think it’s important for the audience to understand the dynamics of how it was started in the first place, because I think it reflects also an awareness of what needed to happen. And then the world caught up. And it also goes back to your CO role at the Linux Foundation, where this predates all of the things that we’re seeing in blockchain, at least in its current capacity from a more holistic level. And how are those two combined?

Barbosa: So, if you think about how the market has matured, one of the key things that we’ve always said is there’s never going to be ‘one blockchain to rule them all.’ That’s number one. And number two, it’s a network of networks. It’s really important to start thinking about how these networks — whether it’s public networks or permissioned networks — are going to interact with one another, where the requirements around interoperability become more important as once again, these networks become critical to infrastructure.

We’ve been working very hard in making sure that if organizations and enterprises need, for example, a permissioned distributed ledger protocol that’s enterprise-grade, that has long-term version support already, that has hundreds of vendors who can support that technology, then Hyperledger is a place for them to go to.

Lau: Increasingly, we’re seeing — even from an industry level, with layer two being that kind of middle layer that allows the interoperability to exist, to also highlight the protocols that they’re supporting and offer alternatives or parallel services or parallel optionality — that we are really in a multichain world. There’s not this concept of one blockchain to rule them all, and yet this evolution of thinking has really been accelerated these past couple of years, even since, to your point, December 2015, when Hyperledger Fabric was first launched and that criticism that ‘How transparent can you be if you’re not decentralized.’

Barbosa: Right. Permissioned networks have utility, bring a lot of value to use cases in different consortiums and different networks that have been built. And that’s important to understand. And Hyperledger Fabric is one of those permissioned DLTs, and there are others within the Hyperledger Foundation as well. And it’s important to understand that there’s benefits to that, while there’s also the need for some public permissionless or even hybrid models, where you have perhaps a network that is on a permissioned network, that you have the members of that consortium, for example, still needing this decentralized trust, which they’re getting through a permissioned network, where it could be hundreds.

I’ll give you an example. TradeLens is one of the largest trade finance blockchain networks. Today, it has over 300 different carriers. They’re doing billions of transactions right now using Hyperledger Fabric. And it works because they needed this trusted infrastructure to have that trade finance in regards to transportation of containers worldwide. And in that use case, a permissioned network that scales to their needs is the important part of that technology play.

There are other situations that we’re seeing where a permissionless network is more valuable, using the different open-source methods allows them to build that out. So I want to be very clear that at the Hyperledger Foundation, we’ve always said that both permissioned and permissionless networks around topics of different use cases are important to be open to in the marketplace, obviously.

Lau: In this world, nothing is ever black and white. The opportunity lies in the gray space. Help us understand the magnitude of the enterprise and the industries that you’re working with right now, from both a permissioned, decentralized, hybrid perspective.

Barbosa: We have a couple of members in our community and different use cases that are really addressing traceability. For example, in the electronic manufacturing of batteries for cars — so the EVM industry — one such company is actually Circular, and they’ve been doing some really advanced ways of looking at mining from the mine to that car in your driveway, and how it affects from a sustainability perspective, pulling those minerals out and being able to track those minerals, that they’re not, for example, slave-traded minerals, that they have requirements from a sustainability perspective and a regulation. In the case of Circular, they are using Hyperledger Fabric, working with the Oracle blockchain platform as well, to create that environment of trust from where the materials are coming from all the way to the consumer. And that’s something that a permissioned DLT fits very nicely into, because there are checks throughout the organization.

So, supply chain continues to be a use case where we believe that both permissioned and permissionless use cases will continue to flourish. We continue seeing reports on efficiency gains that are coming, for example, and I think that’s the important aspect of it. It’s not always sexy blockchain stories that people don’t want to hear about, but they’re actually creating a lot of value in the enterprise space, as well.

Lau: And let’s just pick up on the supply chain issues that have confounded — and I use the word confounded because it has been close to two years on now, and although they were well explicable at the beginning of Covid… why are there still issues now? And, I wonder, with the teams that are using this technology, how is it being applicable right now in the real world to supply chain issues? Are we going to see improvement? Are more people, more industries, more companies thinking about this? What’s the rate of adoption when it comes to supply chain and blockchain?

Barbosa: There are a lot of use cases that people actually don’t want to talk about the fact that they’re building … these networks using distributed ledger technology, because of, kind of, the negativity around some of the crypto and blockchain as a crypto source. So examples, obviously — the longest long-standing and probably the biggest network out there is the Walmart Food Trust platform. So, Food Trust is now being used by many major brands, Nestlé, for example, Costco, Walmart for sure, if there’s a recall on a specific vegetable. And once again, people laugh about that all the time. But if it was your family who was being affected by something that they ate wrong, and you could have saved them or you could have efficiently saved a retail store from lots of issues around selling bad produce, for example, you would care about that. And that’s important to know.

And I mentioned the trade finance use case. A lot of this is really about the digitalization, digitizing the content. If you imagine, there are still people going to ports all over the world with big stacks of paper trying to get their shipment into that boat that then travels across the seas and through there could potentially be hundreds of people touching that paperwork. We do hope that things like regulatory requirements that are being put into place in the U.S. around supply chain traceability will hopefully help both the digital transformation of these supply chains and the applications of distributed ledger as a way for people to be able to track those shipments, for example, as a way for people to trust one another as they go through the process, and also as a way to finance some of these smaller suppliers who have been unable to to move into modern transformation because they can’t afford it, by being able to maybe get money faster in their pockets.

Lau: When we can talk about efficiencies that could maybe reduce the time taken by those paper documents from days to potentially milliseconds, when people can get paid, meaning a business can actually stay in business rather than gamble on capital needs, payroll and what it anticipates in terms of how people are going to get payments to them — all of this really matters. I want to get into all of that, because I want to talk about the impact the current bearish sentiment is having on new blockchain projects.

There’s this perception of crypto, blockchain, there’s headline after headline after headline that focuses on a lot of scary volatility, some projects that have blown up, wealth being destroyed… so I want to talk about the foundational stuff. How do you build a foundational layer that’s so critical to the business amidst this bearish sentiment?

Barbosa: Yeah. To your point around why, for example, why are people using distributed ledger technologies when they could potentially just use a centralized database that might be much cheaper and easier to deploy, and they have experts in-house already. But I’ll give you an example of a large Japanese company, Hitachi, who have been active contributors to our code bases. They’re actually made up of 173 companies within the Hitachi brand, and they do business in over 100 countries with close to 400,000 employees worldwide right now. That is a large business, and what they’ve seen is by applying blockchain specifically for a paperless procurement solution in-house, they’ve actually seen a 20% increase in contract cases being managed by one division. So that means that they can do 20% more business and contracts with their vendors. And they’re projecting savings of over 1,000, I think, 1,200, person-hours per month, which then can take that savings and apply those people to other high-value resources, as well.

So those are the kind of scale things that we’re seeing. Now, Hitachi is one company with thousands of vendors throughout it, so it impacts that network. Imagine taking that and creating it over and over again with different supply chains, with different use cases, as well. And I think we see these all the time internally when these large multinational companies do value. So, as you apply those principles even to multi-networks, I think you could see the value changes there.

Lau: Yeah, 100%. I want to talk about cryptocurrencies here. They’re still the most popular application of blockchain technology, and so inevitably when the crypto market is suffering, so does the entire blockchain space. And the recent crypto bear market resulted in a cascade of liquidations that brought a lot of companies like Celsius to the brink of failure. There’s insolvency issues with Three Arrows Capital as they’re unable to repay their lenders. How do you see these failing crypto companies, these firms affecting the mainstream trust in crypto and by default, blockchain?

Barbosa: We’ve always said since 2016 that Bitcoin was the killer app, blockchain app, to build on top of it. And since then, there’s been, obviously, lots of different coins and different ecosystems that have developed, as well. For us here at Hyperledger, we were here in 2017 and 2018 during the ICO craze, and then afterwards of the ICO dump, as well. And that crypto winter was really another time for our community to put our heads down and continue working on building the hard tech that once again is going to power a lot of the future infrastructure, from financial services, for example, whether you’re talking about CBDCs (central bank digital currencies), stablecoins or other types of technology that really will become core infrastructure.

And public blockchains — Bitcoin, Ethereum and others — are doing open development in the open, so they are open-source. You can download the code, you can take a look at the codes that are powering these networks, because they understand that open-source motivates higher-quality code. Because you could open-source anything, put it on GitHub and say, ‘Hey, now it’s open source.’ But how do you really democratize the contributions of that open-source, that governance? How is that governed? Can anyone come in and participate and rise … to a level that they can become maintainers and contributors? I think that’s really important. And one of the things that I believe intersects very closely with the crypto world is that everybody understands that open-source is needed and the Linux Foundation can help build out that education requirements around the governance of that open-source. And how do you build truly democratic open-source communities so that we are not in a place again where the same people are making the same mistakes over and over again? So I think that’s a really important aspect of our focus at the Linux Foundation and particularly at Hyperledger, as well.

Lau: A point of distinction and point of clarification, perhaps, is how do you define open-source versus a decentralized project where actually the code is for everybody to contribute to? On GitHub, you could be anybody. How do you define open-source?

Barbosa: For us here at the Hyperledger Foundation, and at the Linux Foundation, it’s not about just saying, ‘This code is open and everyone can participate,’ but actually creating those pathways to becoming a contributor and to participating, because, once again, if you don’t do that, and you don’t do that through community building, when you don’t do that through having inclusive practices of bringing people in, you’re going to get to a point where the same people are creating the code and governing the code and pushing that out. So, I think it’s really important to think through, and I just listened to a podcast recently where Christine Lagarde at the European Central Bank was talking about the need for — even at the economics level — having, for example, women’s voices and asking women to become economists, to become developers, and becoming part of the process, as opposed to just standing by and waiting for these new systems to be developed. So, I think diversity and really focusing on open governance and the pathways to get to the participation of these codes is going to be the most important thing going forward for us.

Lau: And for everyone. Diversity is critical if we’re talking about the future of financial structures, how we can all participate. The future that you’re building right now in this current environment — the crypto winter, that has a lot of people distracted about the falling-down events — but what are you building up, and the importance of diversity, voices, perspectives and contributions to what you are currently building that are the future winners when this market returns?

Barbosa: One is on digital identity. So, since early 2017, we at the Hyperledger Foundation have really focused on making sure that digital identity projects are really privacy-first, and really self-sovereign. It’s about the ownership of the digital identity to have the end user or the user themselves control that. So we have many projects, Hyperledger Iris, Hyperledger Indy and others that really are focusing on making sure that the technology is going to be able to give us that decentralized identity that I think is needed, just like there’s not going to be one blockchain to rule them all. There’s going to be a lot of approaches that will get adopted.

But we’re seeing governments — specifically governments in Europe, for example, and in Canada — leading the way in participating and actually contributing even to these code bases. So, we have code contributions from the government of Canada and from European states where they want to make sure that these digital identity code bases continue to expand and meet the needs of their regulated requirements from a digital identity perspective. So I think that that one is number one.

And if you tie digital identity to money, things like central bank digital currencies become really important. And we’ve been supporting central banks since 2017. For example, the Boston Fed, the Bank of England, the Monetary Authority of Singapore and many others have been part of the Hyperledger community in understanding open-source development once again, because that’s our focus, and how to go about doing that with distributed ledger technologies. Central bank digital currencies have been adopted in experimentation as well as in production. We believe here at the Linux Foundation and Hyperledger that there’s many approaches that can be taken for central bank digital currencies.

We’ve seen experimentations — for example, the Eastern Central Bank, the Bank of France, Thailand, Nigeria… So, the Bank of Nigeria has a production-based distributed ledger project that uses Hyperledger Fabric. Cambodia — one of the first CBDCs that went public with their retail CBDC really is helping, kind of, a community that needs to have more access to their money and be able to distribute that. So, we’re seeing really, across the world, implementations of central bank digital currencies.

Lau: Another powerful thing that I think you’re building out is version one of the Hyperledger Firefly. This is the first super-node to supercharge, if you will, the development of Web 3.0 enterprise applications like DeFi (decentralized finance), like metaverse. Foundationally, what do you hope to build right now in terms of the technology architecture, and what will it support, in your view, 12, 18, 24 months from now?

Barbosa: So Hyperledger Firefly is one of those new projects within the Hyperledger Foundation, and I think that it’s really important to understand that from a tokenization perspective, if we’re talking about NFTs and different types of digital assets that many enterprises and many use cases are going to want to build on top of that layer of distributed ledgers or blockchain. So Firefly, for example, supports multiple DLTs, both public and permissioned. So it supports, for example, the main Ethereum. It also supports Fabric. It also supports others — Quorum, for example, the GoQuorum client. So, really understanding how the enterprise and use cases are, when it comes to Web 3.0 and the metaverse, still, the core point that I made before around digital identity becomes something that we want to make sure that it is addressed in many of these use cases, as well.

Lau: Final question, amidst this market, who’s funding these projects right now? If markets or projects that depend on token sales, that depend on a mass adoption for liquidity… who is actually funding these projects right now, and is that a concern for you?

Barbosa: I say this all the time. You could build the most beautiful code in the open, but if you don’t have use cases and a commercialization of those use cases — someone that can support enterprises in deploying them — you’re not going to have a successful project or a successful technology. So, for us, it’s really important to make sure that our members and our community that fund the development and the work that happens and the community building that happens in Hyperledger Foundation are a nice mix of, once again, the public sector — so you want to have that advocacy from the public sector within the community — but also large and mid-size companies and system integrators, for example. So, we just announced Infosys as one of our newest members in the Hyperledger Foundation. They’ve been supporting Hyperledger use cases for many years, but they understand the value of contributing as a member and contributing to the funds that fund the open-source development of these code bases, as well. So, really, end users, companies, as well — so Walmart, for example, and FedEx, who want to have a voice of leadership funding the development of code bases here at Hyperledger, I think is really important as well. It’s not just paying membership fees for a foundation, but actually putting employees to help develop and contribute and grow the ecosystem there.

Lau: Every voice matters, and I thoroughly enjoyed you sharing your open-source thinking with us at Forkast and our audience, which absolutely shows the importance foundationally of what’s being built right now. And thanks for letting us peek under the hood a little bit, Danielle. It was a pleasure.

Barbosa: Pleasure’s all mine. Thank you so much.

Lau: And thank you, everyone, for joining us on this latest episode of Word on the Block. It was great to have you here. I’m Angie Lau. Forkast Editor-in-Chief. Until the next time.