Jesse Lund, Head of IBM’s Blockchain department, took the time to answer questions about cryptocurrency and their partnership with Stellar. You can find the article here.
Is Stellar Network being used live by IBM right now?
Yes, IBM provides a major validating presence on the public Stellar network (see dashboard.stellar.org), adding enterprise/permissioned capabilities (like business rule enforcement) for asset issuers as well as transaction processing for our cross border payments solution. Stellar is part of the IBM Blockchain platform strategy, supporting interoperability with leading public-permissioned networks, complementing our strategy for enterprise/private networks with Hyperledger Fabric.
Will IBM and Stellar be used by banks in Europe?
Sorry, not in a position to talk about clients yet, but will soon be able to talk about countries, currencies, and corridors supported.
How far away do you think we are before we see central bank issued tokens on Stellar (or another platform)?
VERY VERY CLOSE
Will Lumens be used by IBM or you will issue your own token?
IBM currently uses Lumens as a bridge asset to support real time FX and settlement as part of the cross border transaction flow. There are no plans for IBM to issue its own token today, but we are aggressively working with commercial banks, central banks, and other FIs to issue other digital assets (e-money, digital currency, digital gold, etc) on Stellar to be used in the same way / as an alternative and complement to Lumens — I think you’ll see a CBDC soon.
What is the status of the pilot program for the Universal Payments Solution and which banks are now participating in the program?
We have received an overwhelming response to our prototype universal payments solution since its announcement at Sibos last October. The initiative will be formally GA’d in Q2 under a new trade name (to be announced soon — stay tuned) and we have been diligently working with banks, MTOs/MSBs, central banks, non-bank FIs and corporates. Our goal for 2018 is to establish operational corridors and to grow and operate a network of financial networks that facilitates low cost, direct, real time cross-currency clearing and settlement of all payment types and values (hence, “universal”). Eventually we’ll support other asset classes to, which is what Stellar is really great for.
Will the Universal Payments Solution be used to perform settlements for the CLS Group or SWIFT?
We are in active discussions with CLS and Visa (who are longstanding and important clients of IBM) to explore opportunities for alignment with our universal payments solution and their solutions/services, but have not signed any definitive agreements with them yet specific to this, although we are actively working on parallel Blockchain projects with CLS. Our goal is to utilize this IBM-owned solution in a way that complements/supports our clients market development plans. My team has no direct interaction yet with SWIFT, but we are very open to collaborate with them.
Are there current or future plans to use the Stellar network for the DTCC derivatives clearing and settlement?
Regarding future plans, as to your question about DTCC, etc: as more digital assets of different classes become accessible and transferrable on public / interoperable blockchain networks, it’s easy to see a future for optimized clearing and settlement across other asset classes (i.e. securities) beyond cash / FX. We think the public Stellar network is a great home for diverse digital assets to live and may become more involved in token engineering, token economics, and token lifecycle management to that end.
IBM’s partnership with Stellar is strong and growing to become an even more integral part of the IBM Blockchain Platform strategy as we begin to expand support from private-permissioned blockchain networks to public-pemissioned networks, enabling use cases from growing client demand for such.
Can you tell us a little about Global Trade Digitization via Hyperledger Fabric and the integration potential for Stellar as a universal rail for real-time clearing and settlement?
Global Trade (GTD) is a solution under the IBM Blockchain portfolio, just like our cross border payment solution (yet to receive its official product name). There are no concrete plans to integrate Stellar with GTD, but there are product-level discussions about a real time payment feature, integrating with our payment solution where buyers / sellers / shippers can pay each other in real time, which would involve the use of Stellar for payment settlement.
Is it IBM’s intent to pitch Stellar as a solution for partners looking for more efficient payments?
Yes. IBM’s validating presence adds a “permissioned” construct on top of the public Stellar network. We have built a real time universal payment solution on top of this validation layer and are also adding a token lifecycle management product soon, which would allow asset issuers to launch their own tokens (ICOs, CBDCs, digital commodities, utility tokens, etc), leveraging IBM for token engineering and lifecycle management.
Coming from a Fortune 100 company myself, I know blockchain is on the radar. What level of interest have you seen from your enterprise partners?
IBM is the undisputed leader in enterprise blockchain with Hyperledger Fabric. We believe the market for enterprises goes beyond private-permissioned networks, hence the partnership with SDF to extend support for public networks in a “permissioned” and secure way. We are seeing extensive enterprise interest in this.
Any news on the Walmart and Maersk pilots and could these types of pilots lead to payments solutions on the Stellar network?
Both Food Trust and Global Trade are now production implementations. There are discussions about integrating with our payment solutions to extend the capabilities of those networks to support real time payments.
How’s the regulatory environment impacting IBM’s ability to execute in the greater blockchain market?
IBM has a strong relationship with most regulatory agencies around the world. We are monitoring closely the evolution of regulatory sentiment on cryptos and blockchain, particularly in the U.S., UK, Europe, and Asia, and will continue to work closely with regulatory bodies around the world to ensure regulatory compliance in Blockchain adoption.
How are Stellar investors going to benefit from the IBM & Stellar partnership?
My view of cryptocurrencies (not ICOs) is that their price is directly correlated with the utility provided by the network on which they live — i.e. its defined purpose, measured in part by the number of participants using it, and its interoperability with exchanges that support direct access to fiat networks and liquidity (like ACH to bank accounts in the US). My advice to you: patience and faith.
Is the joint venture with Maersk directly or indirectly involves the use of Stellar network via IBM validators to settle and process international trading and cross-border importing/exporting payments?
The joint-venture with Maersk is currently focused on Global Trade Digitization — optimization of the flow of information / documentation in the trade process. There is discussion and opportunity to add payments to this in a subsequent release. It is an obvious synergy with the universal payments initiative, no doubt.
Where do you see public vs private ledgers going in the future?
I see it to be very important for leading Blockchain providers to support both private and public networks where use cases drive such, hence IBM’s partnership with Stellar on the latter. We don’t want to be involved in mining, but permissioned-public network patterns are very interesting and important for many solutions.
Any difference between IBM’s blockchain technology with Stellar’s?
IBM’s Blockchain Platform strategy provides at its core, a toolkit to create secure private Blockchain networks using Hyperledger Composer and Fabric, as well as interoperability with public networks such as Stellar.
Is there any way to hide information about transaction details?
You should look at Stellar’s Lightning initiative. We are actively exploring this with banking / FI clients who want exactly what you described.
When pitching blockchain to prospective clients, is there a generalizable concern that they seem to have? If so, what is your response to this concern?
Banks and large corporates seem hesitant to hold cryptos on their balance sheets due to regulatory restrictions and/or volatility. That’s why we provide two modes of operation in our universal payments solution — a gross settlement option using a digital asset bridge (initially XLM, but support for others coming soon like CBDCs), and a net settlement option that allows counterparties to replace Nostro/Vostro accounts by dynamically issuing each other digital fiat tokens on the shared settlement ledger (Stellar). As more assets are made digital on Stellar and interoperable blockchains, I believe the gross settlement option will become the preferred because it doesn’t require counterparties to have any agreement in place prior to transacting — each transaction is an atomic set of operations that either settle in real time or don’t. That’s the basis of agreement between counterparties, one transaction at a time.
What quantum computing initiatives does IBM have if any at all?
Quantum presents an interesting dynamic to Blockchain that IBM is leading. Check out IBM Q — https://www.research.ibm.com/ibm-q/.
What are your thoughts on blockchain tech involving mining.
I honestly don’t see a long term interest in mining for anyone. It’s horribly inefficient and not a good way to incent transaction participation. For initiatives like Bitcoin, it was really a way to seed network adoption and provide an equitable way to distribute the native money supply. But mining will end someday (even on Bitcoin) and we’ll all be able to get on with changing the world in optimized, fair, and efficient ways.
What’s the future of Stellar Lumens on IBM’s blockchain?
IBM’s cross border payment solution leverages Lumens as a bridge asset to facilitate real time FX for the final settlement of payments. That will continue to be an option for the platform even as additional assets are deployed to the Stellar network (CBDCs, etc).
Do you see an inconsistent approach by individual countries on cryptocurrency regulation in 2018?
Yes, there is regulatory inconsistency in perspectives among different countries/jurisdictions about how to classify and regulate crypto assets. It’s the early days tho, so I’m confident it will work itself out.
Why IBM chose Stellar network and its use of XLM over other cryptocurrency platforms?
IBM chose Stellar because of its design, which supports a scalable, secure digital asset registry and built-in distributed exchange that facilitates real time clearing and settlement across multiple asset types/classes. It was purpose-built for this, and IBM’s value-add is the validating and operational presence on the public Stellar network that makes it more attractive for enterprises to deploy assets and solutions on publicly accessible blockchain networks.
How does your interpretation of Stellar.org’s mandate coincide and improve upon a symbiotic relationship between IBM and Stellar?
First and foremost, stellar-core is a scalable, secure, open source public DLT platform that aligns nicely to the IBM Blockchain platform strategy. It allows IBM to extend its vision for permissioned blockchain networks to support public accessibility. More specifically, Stellar allows IBM to create a permissioned public asset registry and token lifecycle management system that will enable many different use cases where IBM brings operational integrity and stability that most enterprises want.
Is blockchain technology seen as IBM’s ticket to the forefront of notoriety once again?
I wouldn’t have left a really good job at a really good company (Wells Fargo) to come to IBM if I didn’t believe in IBM’s vision (or my ability to influence it :-) IBM’s perspective on cryptocurrency support, however, is still a work in progress and subject to more understanding from the lawyers and regulators.
How are IBM and the Stellar blockchain planning to deal with GDPR regulations?
Careful consideration is being given to data protection and privacy regulations. Technically there are many ways to implement this. Stay tuned, but suffice it to say that IBM’s solution will be compliant with GDPR and all other regulations. Stellar’s recent announcement to support Lightning will help toward this end.
Regarding the IBM/Maersk partnership, what challenges are you facing applying blockchain to an industry that for the most part has been behind on the technological curve?
I see global trade and trade finance in general as “low hanging fruit” for positive disruption using Blockchain. This is just the beginning. The WTO estimates there is more than $8 trillion of global trade activities that are not currently bank intermediated — that poses a huge new market opportunity for banks and non-banks alike.
Do you think in the future the SDEX can replace classic Stock Exchanges as the prime spot to trade Stocks, Bonds, Currencies and Commodities.
Will we see Central Bank backed fiat tokenized on the Stellar Network? If yes, do we still need Banks for money transmitting?
Yes on CBDCs and tokenized fiat (definitely… soon). I think banks will start to refocus on what they were invented for — safeguarding deposits, paying a decent low risk rate of return, and making loans from those deposits thereby creating credit to stimulate economic growth. Charging fees simply to intermediate payments is lame.
Isn’t a public ledger a problem for people who want to keep their accounts and transactions private?
Private transactions will be enabled by Lightning adoption in Stellar.
How can IBM help Stellar in insuring that the platform can support the present and future onboarding and load capacity (scaling) for as smooth-as-possible operation.
It’s kinda what IBM is good at… like over 100 years of building and operating scalable, mission critical transactional systems! ;-) It helps when you have engineering partners like SDF (Stellar Development Foundation) who write really smart code.
What value does the actual currency (any cryptocurrency, not just Stellar) provide to IBM?
What “value” does any currency provide to anyone other than a medium of exchange? That’s exactly what we’re using it for. The advent of crypto currencies, however, does present a new, somewhat circular dynamic in the relationship between currency valuation and the utility of the network upon which the assets (“coins”) live.
Could you discuss your insights on blockchain technology as an enabler for sustainable development and addressing UNs Sustainable Development Goals — in particular energy transition/ smart grids/ sustainable cities and communities.
Simply stated, Blockchain allows for the globalization of peer-to-peer relationships in real time, which is to say, it removes intermediaries. In developing regions intermediaries can be bad actors, corrupt governments. To that end, whether its financial inclusion (bringing capital and financial services directly to emerging economies in remote villages) or enablement for sustainable development / fair distribution of resources, Blockchain offers a lot to combat the inefficiencies of intermediaries and reduce or eliminate corruption through better transparency.
I was wondering how Stellar and IBM plan to use hyperledger technology to continue improving transaction time? is there a chance Stellar becomes outdated, or will it be able to keep up with the times?
Less than three years into the most exciting transformational technology since the invention of the Internet (thanks Al Gore) and you’re talking about obsoletion?! Tough crowd! :)
Will IBM use XLM this year in cross border payments?
Yes. IBM already is using XLM in this capacity. Low volumes right now, but we expect that to ramp up as we launch the official branded product (stay tuned, coming soon).
Is the Universal Payment Solution live on the Stellar network? When can we expect to see the network volume increase?
The prototype is live and we are onboarding clients now to the production version that will launch officially in Q2. You’ll begin to see a lot more XLM payment volume as the transaction volume grows. And yes, you’ll be able to see it on the Stellar network.
Beside the Universal Payment Solution with Klickex, are there any planned projects where Stellar will be used to process payments?
I think a lot of different companies are using Stellar for payments related use cases. IBM’s solution adds some defined structure, a standards based api (ISO 20022) and trust/validation features that will bring on a lot more MTOs, Banks, and non-bank FI’s to the network via our solution.
Has increased government scrutiny of blockchain caused delays in your work, or has it had a chilling effect on client participation?
We anticipate the need for regulatory oversight, but when you consider this was just a concept 12 months ago, and the internal business plan was approved only 3 months prior to the launch of the prototype (announced at Sibos last year), this whole thing has moved really, really (like impressively) fast. I feel like the CEO of a startup inside IBM. It’s awesome.
Do you foresee IBM getting involved with projects that tokenize equities, traditional securities, or bonds?
Yes. Definitely, though not as the issuer, more so the “listing agent” and token lifecycle management partner.
How has the relationship between Stellar and Hyperledger evolved over the past 6 months? In a recent Q&A you use the project name Hyperledger Starlight, does this mean it is developing a bigger role among Hyperledger members?
I hope so. We have introduced Stellar and Hyperledger. I believe Stellar already joined as an associate member of Hyperledger and they are discussing how to evolve that relationship.
From when you were hired by IBM in early 2017, do you think blockchain adoption is moving forward quicker than you thought it would? Slower?
I’m pleasantly satisfied with the pace.