Ibm's Crypto Investment Plans: Exploring Digital Currency

IBM has had a complex relationship with blockchain and cryptocurrency. The company has been a supporter of permissioned blockchains and has invested in blockchain platforms and Hyperledger Fabric. However, IBM has also faced challenges, with its blockchain unit missing revenue targets and job cuts being made. More recently, IBM has been focused on partnerships with crypto custody firms and the safekeeping of cryptocurrencies and digital assets. The company has also launched a stablecoin backed by FDIC-insured banks, indicating an interest in the cryptocurrency market. Overall, IBM's involvement in the blockchain and cryptocurrency space has been evolving, with a mix of investments, partnerships, and strategic shifts.

IBM's stablecoin, USD Anchor

IBM Corp. (IBM) has partnered with Stellar and Stronghold, a startup, to launch its stablecoin, USD Anchor. Stellar is a blockchain that shares technology with Ripple, while Stronghold acts as a bridge between fiat currencies and Stellar's network.

USD Anchor is a stablecoin backed by an equivalent amount of US dollars on deposit at FDIC-insured banks by Nevada-based Prime Trust. This makes it less volatile than other cryptocurrencies, which fluctuate in value. IBM's head of blockchain services, Jesse Lund, stated that the startup plans to:

> "enable all sorts of digital transactional networks to settle their transactions with digital fiat currency on the same blockchain networks."

In other words, IBM wants to create a network where digital fiat currencies can be used to settle transactions across multiple blockchains. This could include digital euros, dollars, and pounds.

IBM's partners in this venture bring different capabilities to the table. Stellar, similar to Ripple, focuses on cross-border transfers within developing economies. Stronghold, on the other hand, serves as an anchor between fiat currencies and Stellar's network. All money transactions on the Stellar network occur in the form of credit issued by anchors like Stronghold.

The initial use case for USD Anchor is to enable cross-border transfers, with the eventual goal of expanding beyond digital fiat currencies and using the partnership to accomplish real-world use cases, such as supply chains for tracking food supply.

IBM's crypto custody play

IBM, one of the biggest supporters of permissioned blockchains, is now carefully positioning its hardware security and cloud computing capabilities around the safekeeping of cryptocurrencies and digital assets. With less fanfare than its enterprise blockchain experimentation, IBM's cryptographic key management infrastructure is becoming a complementary technology to several crypto custody firms. These include Hex Trust, Protego Trust, Custodigit, Unbound, Onchain Custodian, and Swiss custody firm Metaco.

IBM's involvement in crypto custody became public in 2020 via Promontory Financial, a consulting firm it owns that was involved in Wyoming's special purpose depository institution (SPDI) charter and the national charter granted to custody firm Anchorage Digital. IBM's head of digital asset infrastructure, Peter DeMeo, has been looking closely at the technology since 2016, when the company was diving into enterprise blockchain. DeMeo says that while IBM could offer a custody stack and become a custodian, it would require significant organizational commitment. Instead of competing, IBM is forming partnerships with existing crypto custody firms, providing the tools for others to build on top of its technology.

IBM supplies many banks with hardware security modules (HSMs)—physical computing environments for protecting keys and encrypting functions. However, the "hardware is dead" narrative has gained traction, especially among the cryptocurrency community, as software can achieve key fragmentation and security without hardware. IBM has invested in confidential computing for its on-premise Linux One mainframes and cloud capabilities, addressing the challenges of governance policies and authorization processes around cryptographic keys.

Working with IBM has been beneficial for crypto custody providers like Hex Trust, helping them gain the trust of large banks. Banks and financial institutions are also attracted to security techniques like multi-party computation, which allows them to split and store private keys in different locations while maintaining full control over their assets. IBM provides a technical environment for deploying stacks, ensuring fully attested processes and world-class cold storage for key management.

Additionally, IBM addresses the risk of an institution's custody tech partner being acquired by creating the ability to do off-chain seed migration. The debate over the best security technology, such as hardware security modules, multi-signature, or multi-party computation (MPC), is pushing the boundaries of crypto custody innovation. IBM's main market for its digital asset suite remains banks using its LinuxOne mainframes, which can deploy a digital assets stack without additional infrastructure. However, cryptocurrency exchanges have yet to be convinced of the benefits of using IBM technology, despite the potential for reduced collusive attacks and inside jobs.

IBM's blockchain dominance

IBM's interest in the cryptocurrency market has been growing, with the tech giant exploring blockchain technology and investing in crypto custody firms. IBM's head of blockchain development, Jesse Lund, has stated that the company is witnessing a high demand for digital asset issuance. IBM's recent launch of a stablecoin, USD Anchor, in partnership with Stellar and Stronghold, indicates its intention to create a network where digital fiat currencies can facilitate transactions across multiple blockchains.

IBM's involvement in the blockchain space dates back to 2016 when it began promoting the technology's potential to revolutionize industries. The company has since developed its own blockchain platforms, IBM Blockchain Platform and Hyperledger Fabric. However, in 2021, IBM faced setbacks due to missed revenue targets, leading to job cuts and a shift in focus towards hybrid cloud services. Despite this, IBM remains committed to blockchain technology and continues to explore its potential.

IBM's approach to blockchain dominance has evolved over time. Initially, the company prioritized developing its own blockchain platforms and supporting related projects. However, with the recent launch of USD Anchor, IBM is now creating a network for digital fiat currencies to be used across multiple blockchains. This shift in strategy demonstrates IBM's adaptability and willingness to explore new opportunities within the blockchain space.

IBM's partnerships with crypto custody firms, such as Hex Trust, Protego Trust, and Metaco, further showcase its commitment to the secure management of cryptocurrencies and digital assets. By leveraging its hardware security and cloud computing capabilities, IBM is establishing itself as a key player in the safekeeping of digital assets for banks and financial institutions. This move aligns with the growing institutional interest in crypto assets and the need for secure handling solutions.

IBM's investment in Hyperledger Fabric

IBM has made a significant investment in Hyperledger Fabric, a permissioned blockchain infrastructure, as a founding member of the Hyperledger open-source community. Hyperledger Fabric is an open-source project from the Linux Foundation, serving as a foundation for developing applications with a modular architecture. It allows interchangeable components, including consensus and membership services, creating a plug-and-play environment.

IBM Blockchain Platform is the company's commercial version of Hyperledger Fabric, offering continuous support and advanced productivity tools for building, governing, and operating blockchain systems. IBM's investment in Hyperledger Fabric is part of its broader commitment to enterprise blockchain solutions, partnering with large companies like Walmart and Aetna to launch blockchain pilots.

Hyperledger Fabric offers a flexible blockchain framework with advanced privacy controls, allowing users to share data selectively within a permissioned network of known participants. It also enables smart contracts, which automate business processes with self-executing terms coded between parties. These smart contracts enhance trust between organizations, enabling faster and more informed decision-making while reducing costs and risks.

IBM's support for Hyperledger Fabric includes enhanced security, with regular vulnerability scans to prevent malware and ransomware attacks. It also provides multicloud flexibility, with an open-source protocol designed to run across multiple computing infrastructures and environments. Additionally, IBM offers IBM Certified Hyperledger Fabric images, which include the Fabric Operations Console and Kubernetes operator for simplified image deployment.

IBM's blockchain networks

IBM offers a range of blockchain solutions and services to businesses. IBM Blockchain is a shared, immutable ledger that facilitates the recording of transactions and tracking of assets in a business network. It provides immediate, shared, and observable information that is stored securely, with access limited to permissioned network members.

IBM Blockchain offers several benefits, including operational agility, cost reduction, and new monetization opportunities. For instance, businesses can build their own blockchain ecosystem for better supply chain management, leveraging IBM's distributed ledger technology to achieve greater transparency and trust.

IBM's blockchain solutions also extend to the Internet of Things (IoT). IBM Blockchain enables businesses to send their IoT data to an immutable blockchain ledger, enhancing accountability, security, and trust. This integration with IoT devices and sensors creates new business value across a company's ecosystem.

Additionally, IBM Blockchain provides smart contract functionality, allowing for the automation of agreements and workflows. These smart contracts are stored on the blockchain and are automatically executed when predetermined terms and conditions are met.

IBM also assists businesses in embracing blockchain technology through its consulting services. As the top-ranked blockchain services provider, IBM helps companies build powerful solutions using insights from live networks.

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