IBM has teamed up with Northern Trust in a deal that will offer blockchain security to the private equity industry. Unigestion, a Swiss asset manager, will be the first firm to use the technology to assist in managing and securing a fund.
The two companies announced the agreement on Feb. 22, with Big Blue noting that this is the first time blockchain is being used within this part of the global financial industry. Investors in the private equity market, IBM noted, are seeking more security, as well as greater transparency and efficiency for these types of financial transactions.
With the deal, IBM and Northern Trust are looking to address innovation problems within infrastructure that supports the private equity industry, and those institutions that manage these funds.
This is where blockchain comes in. Although better known for securing cryptocurrency, such as Bitcoin, companies such as IBM are looking to bring the technology into many other fields, such as financial institutions, logistics and even the healthcare industry. (See IBM Launches Dubai Blockchain Deal With du.)
Unlike a traditional federated database system with different databases from different vendors trying to communicate to one another, blockchain essentially creates different "blocks" of information that link together in a chain of transactions, where each transaction is time-stamped and encrypted.
The technology also makes it hard to disrupt and allows for the chain to be rebuilt if there's a disruption.
In the case of the new announcement from IBM and Northern Trust, blockchain will be used to provide real-time insight and transparency to everyone, including outside regulators, involved with the management and administration of the fund. The technology can also support compliance with local regulations, and various government agencies have been briefed about the technology and the agreement between the two companies.
The Game's Afoot for IBM
"The blockchain solution allows the fund to transfer ownership stakes and be managed, serviced and audited throughout the investment lifecycle on a transparent platform offering 'one version of the truth' to participants who gain access via secured means," according to IBM.
The underpinning software is provided by Hyperledger Fabric
-- an open source project though the Linux Foundation that provides the architecture for different enterprise networks. IBM is a major contributor to the project.
In addition, the technology uses IBM's own hardware assisted cryptography, as well as the IBM cloud for application development.
Charles King, an analysts with Pund-IT Research, wrote in an email to Light Reading that IBM views blockchain in the same way its views cognitive computing or its various Watson initiatives -- as a way to put its particular stamp on a world that revolves around technologies such as cloud computing, security, machine learning and artificial intelligence.
"Banking and finance are two of the strongest use cases for Blockchain implementations, and the longstanding leadership of IBM systems in those markets should result in numerous engagements for the company," King wrote. "In other words, Northern Trust is simply the latest win for IBM's Blockchain solutions, and it will most certainly not be the last."
IBM is also looking beyond the finance industry, and in January, the company announced an agreement with the US Food and Drug Administration to test whether blockchain could secure medical records. (See IBM, FDA Look to Blockchain to Secure Health Records.)
— Scott Ferguson, Editor, Enterprise Cloud. Follow him on Twitter @sferguson_LR.
CALLING ALL CLOUD, NFV AND SDN COMPANIES: Make sure your company and services are listed free of charge at Virtuapedia, the comprehensive set of searchable databases covering the companies, products, industry organizations and people that are directly involved in defining and shaping the virtualization industry.