 Live from Las Vegas, Nevada, it's theCUBE. Covering IBM World of Watson 2016. Brought to you by IBM. Now, here are your hosts, John Furrier and Dave Vellante. Hello everyone, welcome back to Las Vegas. This is SiliconANGLES Cube. We're here at World of Watson for live coverage of two days, wall to wall. I'm John Furrier, my co-host Dave Vellante. Our next guest is Shyam Nagarajan, who's the director of worldwide blockchain and cognitive business operations. Welcome to theCUBE. Thank you, John. So we love blockchain, obviously it's very disruptive technology, you know, Bitcoin, you saw that evolution. Powered some of the best, you know, racketeering underbelly kind of activities, but all early adopters are about that kind of technology. But blockchain has emerged beyond Bitcoin and it's really being looked at as a fundamental underlying disruptive technology, a disruptive enabler for finance, transactions, and really an interesting traction and mainstream now that it's getting. So give us the update. What's IBM doing with blockchain? You guys recently open sourced it, which is huge news. What is blockchain? How did customers are dealing with it? I mean, what's the reaction? What are they saying to you? Look, you know, blockchain as you realize has grown beyond just Bitcoin. We believe it's the next era of transaction processing and it helps customers significantly do some disruptions that they couldn't do in the past. There is a lot of customers who are doing what we call as blockchain tourism. We see them tinkering with it, but we are also starting to see some realism injected into applying blockchain to real solving problems. And I'll give you an example. Last week, we announced that Walmart was actually partnering with IBM in doing and tracking pork and meat manufacturing, meat from the slaughterhouse all the way to where it goes to the customers. So they can track the recalls or track the quality of the product as it goes through the supply chain. So as you found a lot of interest from the finance and the trade finance kind of places, we're starting to see more innovation in the supply chain management side. And we believe that's where the next level of growth for blockchain is going to come. What's the key thing that people are getting excited about blockchain? Is it the unleashing of a kind of a distributed peer-to-peer network? Is there unique features that customers are attracted to? What's all the buzz about? You know, the shared ledger is the basic basis for all the distributed ledger for all the blockchain. But it's more than that though. It's a distributed ledger, but it's decentralized power in the network. Traditionally, any kind of network that's been established, business network, some is always in control. But in this situation with blockchain, no one is in control. And therefore, it increases the trust that goes across among the participants in the network. It injects the ability for regulators or auditors to be part of that same network. So therefore, it makes it a very interesting new business model. So how about the auditing? This is a big part. Okay, so you got the ledger, which essentially, who's playing in the network, if you will. But the key is no single point of control. Correct. That is a huge deal. Now, the question people say is, well, okay, how do you trust somebody? And there's kind of a, there'll be a kind of a skepticism, if you will. How do you guys answer that? Well, you know, we believe four key things part of blockchain, the shared ledger itself. But there's an element of consensus that's associated with it. Consensus is really when John and I do a transaction, Dave, you're part of this network and you agree that this transaction is part of our common ledger. So there's a level of trust that is actually distributed across the network. And they instill that transaction will go through, will continue to be honored as it goes through. So it makes it very interesting for- So the transparency is everyone in the network sees everything? Absolutely. The transparency is there. And also remember, it's a permission network, which means you don't have to expose all the transactions to everyone. You could choose to what others can see and what they cannot see as well. So how would you describe the adoption of where you're at right now? Obviously in the early days, I haven't hit the steep part of the S-curve, but where are we and what are your expectations? Look, IBM has put the rate behind the Hyperledger. Hyperledger's got, I think the last time I checked, about 80 to 85 different organizations that are backing the standards. And Hyperledger's getting widely adopted. We are starting to see customers beyond blockchain tourism to start to apply for things like dispute resolution, compliance, and provenance. The Walmart situation is actually a provenance. IBM actually, if you guys know or saw a press release, we implemented internally with an IBM, within the IBM Global Financing for dispute resolution. IBM deals with 3,500 sub players across the world and we on average have locked up about $100 million in terms of capital and liquidity in disputes. And we implemented a blockchain, which has been running for the last two months and as a consequence of that, we were significantly able to reduce the time it took to do dispute resolution from 40 days all the way to less than about 10 days and release a significant amount of money as in the process as well. So we're starting to see those kind of realism, real applications being injected in our customers. Yeah, I saw that. I think the average transaction or dispute was like $33,000 a piece and there were many, many thousands of them and the time to resolution was far too long if you're a supplier and so that's huge. You mentioned Walmart. How did a company like Walmart do this tracking beforehand? Was it some kind of tagging or RFID? It was not doing it. Well, tagging, RFID, there's systems. Walmart built their own supply chain systems to do it. Last week I actually spent some time with what we had a process transformation summit in Napa and we spent some time with Walmart. What they do is they actually have a supply chain application that runs across and they give access to their suppliers and information is whatever is input by the suppliers voluntarily into the system. This actually allows it, this blockchain kind of network established makes it immutable and final, the transactions that go into the system and it makes it more interesting for Walmart itself to be able to track where exactly the meat is manufactured and isolate that piece. Another example is Everledger. We were talking about that off camera, basically tracking diamonds from mine to finger. And that's Hyperledger, is it not? It is, Everledger is built on Hyperledger standards and they are one of our showcase pieces and we partner with them very closely. Yeah. And so what's the hacker situation? It was actually last week the DNS got a DDoS attack and that shut down for almost half the internet, Netflix, Twitter, a lot of the popular sites even Spotify. I know there's encryption built in the blockchain which is nice, so you got security built in. But you're seeing a lot of like the clearing houses, can any one point of attack hurt the network? I mean, how do you guys respond to that? How do you secure the customer's expectations? Well, there are two things, right? The Bitcoin or the Ethereum network, which is primarily the anonymous network, right? Anonymous doesn't have identity associated with it. IBM believes in a private and a permission network, so enterprises that actually establish this network know who else is part of this network and give access to them. So that's one. So therefore, if any unauthorized access does that happen, they can immediately isolate and know what the thing is. Second thing is, from, you know, right now the blockchain network itself, if you're not seeing assets being transferred and done as part of it, it's more informatory, maybe you transfer from information, transfer of some, some very, very low value assets. So our assessment, we keep on the analyst team and still can angle is that it's not blockchain that was insecure, it was the exchanges. But people read the press, right? They see the press, they go, they associate Bitcoin with blockchain. Again, this must be something you have to educate a lot of customers on. How do you get through that? Or is it, are they past that now? Well, you know, Bitcoin isn't blockchain. The DAO network, which got hacked and they had to actually fork, I don't know if you remember about that, but they had to fork the code to establish the exchange again. And what actually happened when there, it was not the cryptography, it was actually smart contracts. The smart contracts that are part of the blockchain that caused that trouble. We feel that that is not going to be an issue with the permission and the private network. The other aspect that you need to know is that IBM is launching, we just GA'd, a high security business network, which is a cloud offering, cloud-based offering that's running on BlueMix. And it's actually running on a very secure backend what it's on mainframes and we call it the Linux one box. And it's highly secure and therefore, it offers high levels of cryptography and acceleration and container isolation and things like that, that every large financial organization today is very, very familiar with it. That's what they run the back-ends on. So, but on paper, right? My understanding is blockchain is effectively unhackable unless 50% of the participants in the 51%, right? More than 50% participate in the hack, right? And there's no trusted third party required, right? So, those two factors in and of themselves make it more secure than what we're used to. So, presumably there are great security use cases emerging. Certainly MIT, Enigma, and there are others, I know IBM is working on some, in that use case for security. Can you talk about that a little bit? So, in instances, algorithm that gets implemented within blockchain on how they agree on transactions getting written into the shared legend. Now, if you implement an algorithm that doesn't need 51% and you can have regulatory bodies or authorized parties that actually own and control that, then your 51% is no longer necessary. The other one is you need to, you know, a distinction between a Bitcoin network or a digital currency network and a private blockchain network is a private blockchain. However you want to implement four-year specific enterprise, four-year specific network, which is very different from a 51% if you buy a bunch of hardware servers and let it hack it and do mining and break the network that way, doesn't really have an impact here, right? So, we have the CEO of DocuSign coming on tomorrow. So, and we're a DocuSign customer, we love DocuSign, we use it all the time. What happens to a company like DocuSign? Do they get disrupted by blockchain? Do they embrace blockchain? Well, how should we think about that? They are in the business of contracts, right? If you think about it, that's what they're doing. And I believe that they're going to have to adopt to the new way of doing contracts. And this is not just DocuSign. I believe that it's anyone in the legal business. Legal contracts and legal, they are primarily paper-based and they're done by lawyers. If there was a way to implement these contracts through the blockchain network itself and associated with the transaction, it changes the way that they do business. Whenever you have new transformations, we said we were coming on our intro about IoT and how that, the DDoS attack just highlights the surface area of IoT from a security standpoint, which is a separate conversation. Blockchain brings a new disruptive enabler to it. You mentioned some of the security built into it. Connect the dots for us on where blockchain connects with cognitive. Because you can almost imagine, okay, you got a trust network, you have transactions going on, a lot of people are involved, all these mechanisms in place, but where does the AI thing kick in? Where does cognitive add the value on top of blockchain? What's IBM's point of view on this? So I'm going to come back to the first statement that I made. Blockchain is a new era of transaction processing. Transaction processing is not something that you want to inject intelligence into. Because the shared ledger and the system of record is not something that you want it to be creative. That said, what we have found is that this, the shared ledger or the information can be exposed and used as part of the data that goes into the cognitive to do predictive analytics, to be able to, we had an interesting conversation with one of our customers and they are a large supply chain management company. And they have a relationship with 17,000 different suppliers. And think about if some of their data was on blockchain that could be accessible to cognitive and Watson-like systems that traces and be able to provide predictive information as to the best way to optimize the supply chain. That makes it very interesting. The other thing that we also believe is from a business processes, organizations run their workflows, business processes and injecting blockchain for transactional side of it, but also cognitive to improve the processes to make them more intelligent, to make them more aware of what customer is interacting with them, makes it more interesting for organizations. All right, so for customers out there that don't know the internal IBM kind of organization, where does blockchain fit within the IBM per view? And if they're out looking for more information, what events can they go to? What things you guys have going on in market? Obviously the open source location, you have GitHub out there, all kinds of code. Can you just lay out the landscape for how a customer would engage with IBM? So IBM is, I want to talk about three things. One, IBM is invested in building a community around blockchain, which is the hyperledger.org, which is the IBM road code and actually donated to hyperledger, and we are continuing to invest in building that fabric. There is a lot of meetups and that way customers can get started. The second one is IBM offers blockchain for developers and organizations that just want to get started and get to know there's a lot of tutorials, there's a lot of information on bluemix.com. We have a starter developer plan that allows them to get started. The third thing that IBM is also doing is we are actively working with customers in building solutions together, right? The Walmart- Joint solutions. Joint solutions, and the Walmart situation is one of such partnerships and there are more partnerships that we are working together. The idea is that blockchain is a network that extends beyond a single organization and IBM is in a unique position where we can bring all these different participants into the network. So on the joint development, you bring that to bear with services and also product teams, so like cloud and or however they want to construct that new network, if you will. I agree, and every conversation with the customer is a little bit different because their value out of that network is different. It has to be different, I mean. Absolutely. And so I engage with you. You expose these services through the IBM cloud, right? And okay, so what if I don't have IBM cloud or I have multi-clouds? Can I use them across clouds? We just GA'd some of the blockchain offerings last week. And what we did was if a customer wants to just get started, the Hyperledger.org offers a Docker image that they could download, throw it onto their local machines or even any other cloud places that they can run. The other one is the BlueMix. We have the developer edition starter offering as well as the high-security business network which runs with the Linux one Z backend and very secure, and that's for large organization enterprises. We serve a lot of business-minded developers, so I want to get your take on my final question, is for the ones that really want to see kind of a business model or kind of understand kind of where this, as you mentioned, transaction networks. Where can they go as you guys have a blockchain event? Is there an IBM event like World of Watson, kind of smaller version of blockchain? And how should they understand the business implications of a blockchain? So we were actually out at Money2010 here, and you guys know that's a problem. Even that's going on, we have a significant big presence. And three weeks ago I was at CyBus. These are events where we believe blockchain. Blockchain is a technology. By itself doesn't have significant value. What we believe is- But the communities must go to some event that kind of capstones everything in one here, culminating event. I mean, has there been a, like a premier blockchain event out there? We are working on it. We haven't put it together yet. Okay, sounds like it's in the works. It's in the works. But right now it's organic. Get developers, meetups. Absolutely. You have the BlueMix joint solutions and- And we do hackathons and we are working with a number of innovation labs, accelerators, tech accelerators, and so on. So it's kind of early innings for this. Right, right. All right. Any other data you'd like to share with folks around blockchain? Well, there was significant disruption waiting to happen because of blockchain, right? And enterprises shouldn't be afraid of adopting it. Either they either adopt it, internalize it, and be on the forefront. Are they going to get disrupted? I was talking to somebody the other day and they said, hey, you're one of the old guys on the internet, you know, 50, but still I remember the early days. I said, hey, P2P killed music and brought us iTunes. So like there's an innovation opportunity with blockchain. I'm not saying blockchain will kill pre-existing stuff, but it's certainly going to shape the landscape big time. Absolutely. So there's an iTunes out there for somebody with blockchain and every vertical. Absolutely. And music industry is one place where we see a lot of application. Think of it a way where a music developer gets directly paid and doesn't have to go through any of the exchanges and all of that. Free up the data, let the networks form with some trust. Yeah. Blockchain time. Thanks so much for coming on theCUBE. We really appreciate it. This is theCUBE here live at Roller Watson. We're wrapping more live coverage here at the Mandalay Bay in Las Vegas. I'm John Furrier, Dave Vellante. We'll be right back.