Blockchain as a digital transformation platform

Traditionally, IT systems of enterprises were formed under the tasks of automation, support of target systems, such as, for example, ERP. Today, organizations have to solve other tasks - the tasks of digitalization, digital transformation. It’s difficult to do this based on the previous IT architecture. Digital transformation is a big challenge.

What should the program for transforming IT systems with the goal of digital business transformation be based on?


The right IT infrastructure is the key to success

As modern solutions for the data center infrastructure, vendors offer various traditional, convergent and hyperconverged systems, as well as cloud platforms. They help companies to remain competitive, make better use of the potential of the data collected, and bring new products and services to the market faster.

The change in the IT landscape is also due to the introduction of artificial intelligence and machine learning technologies, the Internet of things, big data, and cloud services.

According to the survey results, over the next two years 72% of organizations will implement digital transformation strategies. The number of devices by 2020 will increase by 40% and reach 50 billion. A 53% increase in the development of artificial intelligence and cognitive technologies is expected, 56% of companies will use blockchain by 2020.

According to IDC analysts, by 2020 at least 55% of organizations will be focused on digital transformation, transforming markets and changing the image of the future by creating new business models and the digital component of products and services.

By 2020, 80% of organizations will create data management and monetization tools, thus expanding their capabilities, strengthening competitiveness and creating new sources of income.

By 2021, advanced intra-industry value chains thanks to the introduction of blockchain will expand their digital platforms to the entire multi-channel ecosystem, thereby reducing transaction costs by 35%.

At the same time, 49% of organizations are severely limited in budgets, 52% need a more productive technology platform, 39% want to work with more reliable partners (The Wall Street Journal, CIO Blog).

One of the key drivers of digital transformation is blockchain technology. In particular, according to IDC's forecast, by 2021, approximately 30% of manufacturers and retailers around the world will form digital trust based on blockchain services, which will allow for building collaborative supply chains and giving consumers the opportunity to familiarize themselves with the history of product creation.

Since all participants in the chain are verified and identified, the blockchain is well suited for environments with high security requirements, such as banks. Some of them have already included blockchain in their digital transformation strategies. For example, Lenovo is working on a digital identification system that will be used by government agencies and commercial banks, introducing new blockchain platforms.

From hype to reality

Blockchain today is turning from a hype into a real business tool. The transparency of business processes increases the confidence of their participants, which affects the efficiency of the business. It is no accident that the largest companies in the world are mastering the blockchain. For example, Amazon Web Services offers blockchain tools for companies that want to use distributed systems but do not want to develop them on their own. Among the clients are Change Healthcare, a payment management company between hospitals, insurance companies and patients, the provider of Workday HR management software and the clearing company DTCC.

Microsoft Azure launched the Azure Blockchain Workbench last year, a tool for developing blockchain applications. Users include Insurwave, Webjet, Xbox, Bühler, Interswitch, 3M, and Nasdaq.

Nestle has tested the blockchain in more than ten projects. The most promising joint project with the IBM Food Trust, in which the blockchain is used to track the origin of the ingredients of a number of products, including Gerber baby food. It is expected that the service will be available in Europe at the end of this year.

BP invests in blockchain to increase the efficiency of commodity trading. The oil company is one of the founders of Vakt, a blockchain platform aimed at digitizing contracts and billing. BP has invested more than $ 20 million in blockchain projects

BBVA, the second largest bank in Spain, announced the first blockchain-based loan as part of a deal with electric grid operator Red Eléctrica Corporación. Citigroup Bank has invested in several startups (Digital Asset Holdings, Axoni, SETL, Cobalt DL, R3 and Symbiont) that develop blockchains and distributed registries for securities settlements, credit swaps and insurance payments. Last year, Citi entered into an agreement with Barclays and the CLS software infrastructure provider to launch LedgerConnect, an app store where companies can purchase blockchain tools.

The ambitious project of the Swiss bank UBS - Utility Settlement Coin (USC) - will allow central banks to use digital money instead of their own currencies to transfer funds between themselves. UBS USC partners include BNY Mellon, Deutsche Bank, and Santander.
And these are just a few examples that demonstrate a growing interest in the blockchain. However, pioneers have to solve difficult problems.

Intelligent Transformation

Changing business models requires serious competence, design and implementation of a platform that allows not only to translate everything into a “digital", but to ensure effective interaction of deployed solutions. The process of digital transformation, which was initially put “on the wrong track”, is then very difficult to rebuild. Hence the setbacks and disappointments in the implementation of some digitalization projects.

Over the past decades, data centers have evolved markedly, become software-defined (SDDC), but many companies continue to operate legacy data centers, and this makes digitalization of such organizations difficult.

Data Center Transformation: Virtualization and the Transition to SDDC.

Lenovo has been manufacturing server hardware and systems for data centers since 2014, inheriting this business from IBM. Today, the company ships 100 servers per hour and is among the top 4 manufacturers of these products in the world. It has already released over 20 million servers. The presence of our own production facilities helps to control product quality and ensure high server reliability (according to the ITIC reliability rating for x86 servers over the past 6 years).

The project, which will be discussed below, is one example of a successful digital transformation. It was implemented on the basis of Lenovo equipment at the Central Bank of Azerbaijan. A similar project is being implemented at the Central Bank of Russia, which pursues an active policy on the use of blockchain in the development of the financial system of Russia.

Blockchain technologies were introduced in the Central Bank of Azerbaijan in parallel with the deployment of a new software-defined IT platform based on Lenovo products.

The first blockchain ecosystem in Azerbaijan

In this project, the regulator decided to build a whole blockchain ecosystem, however, in terms of digital transformation, many banks are by no means leaders, but conservatives, and are used to working the old fashioned way. The additional complexity of the project was determined by the need to create not only a technological basis for using the blockchain, but also changes in the legislative and regulatory framework.

Finally, the scale of the project, dubbed "Personal Identification Systems." In this case, this is a Single Window service (public services), implemented by a special agency, and commercial banks that check their customers on various lists, and the Central Bank as a regulator. All this had to be combined using blockchain technology with a distributed registry. Similar projects have already been implemented or are being implemented in different countries of the world.

At this stage, the pilot phase of the project is being completed. It is planned to be launched by the end of 2019. Technology partners include Lenovo and Nutanix, IBM and Intel. Lenovo has been developing hardware and software. Lenovo and Nutanix, a well-known developer of hyper-converged and cloud platforms, have already gained experience in cooperation in implementing projects in Russia and the CIS.

This decision will be applied by various state bodies, such as the Ministry of Justice, the Ministry of Taxes, etc., and commercial banks. Today, a client, in order, for example, to open accounts in several banks, needs to be identified in each of them. Now the client’s digital signature stored in the blockchain will be used, and the organization requesting a document from an individual or legal entity will receive it during an electronic transaction. To open an account, the bank client will not even need to leave the house.

Ecosystem members using a digital identification system.

In the future, the project is planned to be expanded, in particular, to connect a video identification service to it, to integrate various financial platforms and international databases into public services.

“This project actually covers the entire range of public services in the country,” says Rasim Bakhshi, Lenovo Business Development Manager for Hyper-Converged Infrastructure Solutions in the CIS countries. - Its hardware and software platform consists of Lenovo four-processor servers with Nutanix software. These latest solutions debuted in this project during their announcement at the SAP conference in 2018. Given the tight deadlines for the project and the wishes of the client, they were put into production three months ahead of schedule. ”

Three of these high-performance servers in one rack can cope with the increase in load in the next five years.

Nutanix has already participated in such large-scale projects, for example, its software was used in the famous Russian traffic control system Plato. It allows you to effectively use the hardware platform and replaces classic storage systems, and computing resources are divided into separate server blocks.

The result is a high-performance and compact solution that does not take up much space in the data center, the return on investment is significantly increased.

Expected results

The project involves the development of a blockchain infrastructure between financial institutions, the development of a digital transformation plan and the creation of a digital identification system based on Hyperledger Fabric .

In this project, it is planned to implement the following digital services on the blockchain:

The identification process will follow W3C standards and W3C decentralized identification principles as much as possible, comply with GDPR requirements and protect data from fraud and substitution.

Digital identification system - trusted identity under control.

The project also includes integration with the current identification services used by the Central Bank of Azerbaijan, such as video identification, fingerprint scanning, new generation identification cards, as well as integration with banking systems and e-government services. In the future, integration with new technologies and systems is planned.

Solution Architecture

The solution uses the Lenovo ThinkAgile HX7820 Appliance firmware on Intel Xeon (Skylake) processors, and Nutanix Acropolis was chosen as the virtualization platform.

Hardware and software architecture of the project.

The solution is based on the main and reserve sites. A three-node Lenovo hx7820 server cluster with Nutanix AOS ULT / AHV / Prism PRO +, Red Hat OS Docker, Hyperledger Fabric and IBM and third-party applications is installed on the main site. The rack also houses the NE2572 RackSwitch G7028 network switch and UPS.
The backup sites use two-node clusters based on Lenovo ROBO hx1320 equipment and Nutanix AOS ULT / AHV / Prism PRO software, Red Hat OS, IBM applications and independent developers. The rack also houses the NE2572 RackSwitch G7028 network switch and UPS.

Lenovo ThinkAgile HX7820 Platforms with Nutanix Acropolis pre-installed Hyperconverged Software is an industry-proven, scalable suite with simplified management and ThinkAgile Advantage Single Point support. The first four-processor Lenovo HX7820 platforms were delivered for a blockchain project in the Central Bank of Azerbaijan.

The blockchain project based on the ThinkAgile HX7820 Appliance and Nutanix Acropolis in Baku for Personal Identification Systems combines several bank registries and allows financial institutions to create scalable distributed solutions based on Lenovo-Nutanix infrastructure for managing real-time operations, such as opening bank accounts online, etc. It is also planned to use this platform to provide Blockchain-as-a-Service cloud services.

Such a platform accelerates the implementation by 85%, occupies a third less area in the data center compared to the traditional system, and reduces administration by 57% due to simpler and unified management (ESG data).

It is worth noting that Lenovo also uses blockchain in its own business processes. In particular, the company will use the technology to monitor the supply chains of hardware and software used in its data centers.

Blockchain technology will also become one of the components that IBM, in agreement with the vendor, will integrate into Lenovo's client systems, including Virtual Assistant for technical support, the advanced Client Insight Portal personalization tool and augmented reality technology.

In February 2018, Lenovo filed a patent application with the US Patent and Trademark Office for a system for verifying the integrity of physical documents using the “security blockchain”.

Lenovo is also partnering with Intel to create solutions based on Intel Select Solutions for Blockchain: Hyperledger Fabric. This blockchain solution will be based on Lenovo's portfolio of server, network and software products for data centers.

Blockchain is the main technology of the 21st century for the financial market. Businessmen and politicians in Russia and around the world call it the “new Internet”, as it is a universal and much more convenient way to store information and conclude transactions. In addition, this is a significant saving of resources and increased reliability. Taken by a number of countries, including the leadership of the Russian Federation, the course towards the “fourth technical revolution” implies the adaptation and development of key technologies. A correctly selected technological basis is the key to the success of such initiatives.


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