Cryptography, mobile, machine-to-machine, payments – while those in the blockchain community may associate such terminology with use cases for the emerging technology, they are all already components of Gemalto’s business strategy.
The digital security giant earned €2.4bn in annual revenue in 2014 on the strength of its two main offerings – embedded software and products, and platforms and services – both of which serve its broader mandate of facilitating trusted exchange in a digital environment.
Given this background, it may be no surprise that Gemalto is looking to leverage its success with government, telecommunications and retail clients to explore applications for its services in the burgeoning blockchain space, recently partnering with Symbiont, a blockchain startup that seeks to advance capital markets applications of the technology.
Speaking to CoinDesk, Gemalto vice president of business strategy Mark Yakabuski called the partnership with Symbiont the company’s "first step" in learning how to potentially incorporate blockchain products or services within its portfolio.
Further, Yakabuski sought to portray Gemalto’s existing hardware and APIs as flexible in terms of possible integration, given that its hardware security module (HSMs) manage, process and store cryptographic keys not dissimilar from those used in today’s blockchain networks.
Though the company is still in exploratory stages, Yakabuski said he sees two potential markets for the technology, stating:
"We believe that the first generation of blockchain is going to be driven by the financial services industry. The second generation, we believe the blockchain has the ability to be adopted within the Internet of Things."
Gemalto, Yakabuski said, sees the company making a "strategic thrust" to leverage its existing expertise to generate new business opportunities around these use cases, should they develop as expected.
Notably, he said Gemalto already provides technology to select bitcoin exchanges, which he said use its HSMs for cryptographic security. Though Yakabuski declined to name the firms, New York-based Gemini has previously indicated it engaged with SafeNet, which was later purchased by Gemalto, about using its HSM technology as part of its key storage.
Still, Yakabuski stressed the flexibility and synergy between blockchain use cases and its technology as the main impetus for the deal.
"[Our tech] can adopt to new use cases, and we’re doing what we’ve done across financial industries, which is protecting identities and the transactions they perform," he said.
Private or permissioned
Yakabuski indicated that Gemalto is so far intrigued by the possible applications, though it sees certain uses, like smart or programmable contracts, as offering the biggest opportunities.
Yet Yakabuski was critical of the approach of the "anonymous" nature of the bitcoin blockchain, suggesting Gemalto sees more value in opportunities in applying its tech to private or permissioned-based ledger systems in which the institution operating the blockchain has control over the nodes that process transactions.
"We are obviously leaning toward where we see partnership opportunities for participating in private and permissioned based ledgers," he said, adding:
"[Our partners are] looking for the level of assurance we provide on our products, and that leads us to believe that these ledgers are going to be adopted by those institutions."
Yakabuski indicated that he sees the bitcoin blockchain as conflicting with this goal given that, as a public ledger, it does not feature restrictions on who participate in the operation of the network.
Further, he lauded the approach being taken by Symbiont, which is seeking to create a blockchain that includes support for smart contracts.
Fresh off a $1.25m seed round last year, Symbiont is currently focused on use cases in the corporate bond, loan, private placements, over-the-counter (OTC) derivatives and crowdfunding markets.
As for its work with Symbiont, Yakabuski was keen to stress that this was an agreement he believes will benefit Gemalto given that its clients have been asking about its work in the blockchain industry.
Yakabuski sees its HSM product appealing to companies that are seeking to secure blockchain networks, given that the technology overlaps with what he considers to be the company’s core competencies.
"We have a history with our payment cards, our payment chips and key management systems. We have a long and very good history with payment transactions," he said.
He went on to suggest that, in Gemalto’s view, the market for security solutions around blockchain technology is not yet sophisticated, and that, as a result, today’s early players are moving with caution.
He went on to suggest that he believes Gemalto could compete against other blockchain security providers such as BitGo and Gem, stating:
"From what I’ve seen, security within the bitcoin and blockchain solutions is certainly in its infancy and there’s a lot of room for growth and improvement."
Still, the company hasn’t yet made the leap to formally courting the market.
Yakabuski said that a major source of interest for Gemalto’s clients is understanding how best to deploy blockchain networks, indicating that they are unsure of whether to deploy the technology in data centers and in private or public clouds.
"Right now, I would say that the majority of conversations I’ve had with potential adopters of blockchain, they’re looking at enterprise, where they would deploy a blockchain footprint within their own data centers," he remarked.
The comments come at a time when Microsoft, for example, has already launched a testing environment on its Azure service that allows enterprises and financial institutions to create blockchain networks in its cloud environment.
While such questions remain unanswered for Gemalto and its clients, for now, Yakabuski said he believes the market is about to heat up, and that there’s room for the company to compete for new business in the industry.
"We believe that the solutions built on blockchain will expand quite rapidly, and we want to be a leading security option for our customers as that expands."
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