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Technology

IBM executive says blockchain 'creates a lot of value' for manufacturers, retailers

Blockchain, a digital record-keeping method that exploded in popularity in conjunction with the cryptocurrency craze, will change the way the world makes transactions, IBM’s Martin Schroeter told CNBC on Thursday after earnings.

“If you bought IBM stock today, you would have to wait three days for that to clear because it has to go through its process,” Schroeter, IBM’s senior vice president of global markets, told “Mad Money” host Jim Cramer. “In a blockchain, … you can see every transaction instantly, so your trade could clear and go from their account to your account instantly.”

But blockchain isn’t all about trading, and certainly not all about trading cryptocurrencies, Schroeter, former CFO of IBM, told Cramer. (Schroeter took on his new role, once held by IBM CEO Ginni Rometty, on Jan. 11, ceding the CFO role to IBM veteran James Kavanaugh.)

Having recently partnered with shipping colossus Maersk on a joint venture to apply blockchain software, IBM hopes to establish an efficient “global trade network” of manufacturers, shippers, freight forwarders and others, Schroeter said.

The idea is to streamline the $2 trillion global trade market, making its numerous logistical undertakings faster, easier and more comprehensible, he told Cramer.

“There’s no more paperwork and you know that it’s going to be cleared at a specific time,” Schroeter said, using shipments as an example. “Everyone has perfect visibility to where everything is. You’ve just shortened that cycle dramatically. That creates a lot of value, a lot of value for manufacturers and retailers.”

When it comes to enterprises — IBM’s main customer base — Schroeter said they look for three key applications of blockchain.

“One, they have to know that it’s a permissioned network,” Schroeter said. “So, permissioned network means I know who else is in with me. Bitcoin is not permissioned. Anybody could have a bitcoin. But if I’m Maersk, … I need to know who the manufacturers [are] and I need to trust and only let people in that I want in my network.”

No. 2 on the list is scalability. Shippers often carry tens of thousands of containers across thousands of ships, so the network that serves those enterprises must be able to scale.

“We’re operating in the thousands and thousands of transactions per second. That suits an enterprise world. Bitcoin can’t do that, as an example,” Schroeter said.

The third thing companies look for when implementing blockchain is immutability, or the inability to erase or reverse a transaction, the former CFO told Cramer.

“When you buy a share, the reason it takes three days [to process] is because somebody has a physical share. But the blockchain, it makes it so our blockchains are immutable. Nobody can go back and say that didn’t really happen,” Schroeter said.

As IBM’s earnings recover after 23 quarters of declining revenues, Schroeter maintained a focus on the company’s long term goals, particularly with regards to the country’s new tax laws.

“The cause of our tax rate to go up is tax reform,” Schroeter acknowledged. “But we have been supporters and we remain big supporters of tax reform because over the long term — and IBM always manages over the long term — over the long term, it’s going to free up our capital [and] it gives us a territorial system so we can invest on par with our competitors.”

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Source: Tech CNBC
IBM executive says blockchain 'creates a lot of value' for manufacturers, retailers

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