[INTERVIEW] Samsung SDS aims to expand blockchain footprint
PUBLISHED :March 07, 2018 - 15:47
UPDATED :March 08, 2018 - 16:58
[THE INVESTOR] Established firms and startups have recently been racing to ride the blockchain wave, seeing the great potential of a technology that is expected to play a crucial role in an ever-more connected world in the near future.
By utilizing blockchain, which can store data in an encrypted form and decentralized manner, for example, users are not required to verify their identity every time they log on to websites. For businesses, the technology can help them skip mountains of paperwork when clinching a deal with other companies or shipping products overseas.
David Ham, head of blockchain global business development at Samsung SDS
Samsung SDS is one of the big players that hopes to spearhead this emerging industry.
The logistics and system integrated solutions business arm of Samsung Group launched its own blockchain platform Nexledger in July 2016, developed jointly with Korean startup Blocko.
Samsung SDS’s blockchain solutions are currently being used by its affiliates -- for authenticating digital documents by credit card firm Samsung Card, and inking digital contracts at battery maker Samsung SDI.
In addition to the affiliates, it is also developing blockchain-based solutions designed to share transaction data among 16 domestic banks. The solutions will be used by the banks starting July after being deployed by some banking institutes in March.
“We started focusing on the global markets from last year, and that is why we joined organizations like the Enterprise Ethereum Alliance and formed a global partnership with companies like Amazon,” said David Ham, head of blockchain global business development at Samsung SDS, in a recent interview.
“We are in discussions with a lot of organizations.”
Bolstered by expectations for its blockchain business, the company’s shares more than doubled from 126,000 won (US$118.45) on March 6, 2017, to 239,000 won on March 14 this year.
Market analysts forecast the stock price will gain further momentum as the firm’s solutions businesses, including blockchain, increase their footprint overseas.
“Starting from its commercialization in the banking industry, Samsung SDS’s blockchain solutions will increase their presence in different segments,” said Lee Sang-heon, an analyst from HI Investment & Securities, in a recent report.
The following are excerpts from the interview.
The Investor: How can Nexledger be used by different businesses?
David Ham: Different from public blockchains which anyone can access and create decentralized sharing of multiple transactions, Nexledger is a private, permission-based technology. What that means for enterprises is they can create their own blockchain network that is privately secured. It provides blockchain capabilities like the ability to create a decentralized network, sharing of ledgers, creating transactions and tokenizing documents and assets.
TI: Why did Samsung SDS choose to build NexLedger as a private blockchain platform?
Ham: The reason why it is closed is if you look at it from an enterprise customer’s perspective, they want to do transactions in an exclusive and secure manner. The transactions could include money, assets and documents. They do not have to be cryptocurrency. They want to transact only between trusted parties, subsidiaries, customers or suppliers. They do not want the public to have access to these transactions.
TI: Can you tell us about your project to develop solutions for Korea Federation of Banks?
Ham: In short, we are creating an interbank blockchain, helping all the connected banks to share data without going through intricate and time-consuming procedures to seek permission from each other. The work to build the solutions will be completed by end-July.
TI: Is the ongoing collaboration with KFB a good reference for doing business abroad?
Ham: We do get a lot of requests related to that from banks and companies that are dealing with financial institutions around the world, including those in Southeast Asia -- like Singapore and Thailand. In Europe, we are in talks with various organizations. In the US, we have just started speaking with industries like finance, logistics, supply chain management, aviation, etc. I cannot name the companies, though, because discussions are ongoing.
TI: What are they interested in the most?
Ham: I would say, digital identity. Everyone is interested in how we can create trusted sharing of digital identity, track that and have a safe environment. Because safety, trust and sharing are the most important things. If you have a digital identity you cannot share, what is the point? If you share it, and you don’t have trusted security, what is the point?
TI: In negotiations, do you explain to your customers how blockchain can change the world?
Ham: I think ‘change the world,’ is a very big statement. We talk about how we can improve their business and their processes with blockchain, and how we take them to what people call digital transformation. In industry 4.0, blockchain is one of the foundation technologies that have been included, and everyone talks about it.
People often ask us, how does blockchain do digital transformation process and innovation? So we have to explain blockchain tech -- we have to understand the process that these companies have and what their pain points are -- and then how do we use blockchain to improve processes for them.
TI: Can you give us a case regarding use of your blockchain solutions?
Ham: As a member of a logistics consortium, Samsung SDS sought to use blockchain technology to improve cargo clearance. If you look at cargo clearance from sellers to buyers and the transportation, there are a lot of documents. We tried to create a system that allows every individual participant to see all the documents at the same time. If a document is pending, then the cargo is kept waiting, and in the shipping industry this means more money. We also worked with banks and insurance companies to improve and speed up the process of letters of credits, or insurance policies. We put devices on the cargo and the ships so that you can monitor it in real-time.
TI: Are there going to be more uses of blockchain down the road?
Ham: Moving forward, there is no doubt that the technology will benefit different organizations. We will see a lot more activities related to blockchain, obviously by Samsung SDS and other organizations as well. It is because people in this industry have just started to learn and understand blockchain now. So as the industry learns about blockchain more, and as we develop further, there will be more activities in the space
TI: Why did Samsung SDS choose to join the Enterprise Ethereum Alliance, not others like R3?
Ham: We utilized some components of Ethereum in our service. Ethereum’s technology is based on public blockchain, but the EEA’s goal was to create a framework and create some learning around how to use Ethereum for enterprises. Samsung SDS’s main focus is a business targeting enterprises, enabling them to provide value to their customers.
The EAA brought a lot of big players in the market, like Microsoft, Intel and all the big banks. We needed to join not only to be part of an alliance that is doing something we are looking at, but also to be able to learn from it.
R3 is focused purely on financial companies as members. We are not a finance company, so just because of that we are not eligible to join.
TI: Can Samsung SDS utilize other types of blockchain technologies?
Ham: We’ve built Nexledger to be what we call an open-source hybrid. So we have the ability to utilize different types of technologies. And we will use different technologies if we feel that we can advance our offerings to our customers. We can tie-up with other blockchains, we have the ability to do so with public blockchains. That all depends on our customers’ requirements as well.
TI: Does Samsung SDS have full access to customer data on NexLedger?
Ham: What SDS does is to build a blockchain network that is owned by, for instance, Bank A. We don’t build a blockchain for ourselves and say ‘Hey, use this as a shared service.’ We don’t have access to the data, nor do we want it because then we would have to manage that. So in our current and ongoing deployments, we don’t have access to customer data unless they want us to help them with that and give permission. But beyond that, no.
TI: Is NexLedger better than other solutions?
Ham: I don’t think any one blockchain is better than the other. But where we do well is we have a focus on enterprise businesses. We also have a history of working on enterprise-related projects. We have delivered solutions to enterprises. What we have done with Nexledger in the enterprise space is trying to resolve key issues for certain organizations: security, scalability, performance, latency and things like that. These are areas we are focused on now.