commercial blockchain application v3 20180604

@2018 theloop

Commercial Blockchain Application & Scalability

@2018 theloop

JH Kim

@2018 theloop

Table of Contents

01. Considerations for blockchainapplication

02. Case study: KOFIA consortium blockchain

03. Expansion in blockchainapplication

3

Goal of BlockchainTo enable direct transaction from one party to another without a TTP (Trusted Third Party)

What is needed is an electronic

payment system based on

cryptographic proof instead of trust,

allowing any two willing parties to

transact directly with each other

without the need for a trusted

third party.

4

Common Errors and Things to Consider When Implementing Blockchain

Claim that blockchain technology makes certain service available

Claim that an intermediary is untrustworthy

5

Blockchain Technology Test and Use CasesAccording to the analysis of well-known cases, blockchain technology has been tested for about 50 categories and most tests were conducted in the capital market and general financial services area

Source: KPMG(2017)

6

Blockchain Consortium in the Press Release

7

Japan Bank Consortium

61Bank members and counting…

Establishment

Established in October 2016 with 42 founding bank members in Japan

Objective

To establish a unified platform for domestic and cross-border payments by utilizing Ripple’s distributed ledger technology

Organizer

SBI Group, a Japan-based financial service holding company, and SBI Ripple Asia, a joint venture between SBI and Ripple

8

Current State of Global Blockchain ConsortiaThere are more than 40 blockchain consortia worldwide and financial services industry is leading blockchain consortium trend

1

1

1

3

10

26

Public Sector

Technology, Media &Telecommunications

Energy & Resources

Life Sciences & Health Care

Cross-Sector

Financial Services

Number of Consortia by Sector

Source: Deloitte(2017)

9

Success Factors of the Blockchain ConsortiumAccording to an analysis result of more than 40 consortia, Funding, Membership, Leadership, Governance Structure are key factors for success of a consortium

A consortium can be further promoted when a consortium leader plays an active role in

business and technology development

The optimal governance structure is needed to coordinate the various issues that arise as the consortium proceeds

Motivating the involvement of key institutions in the industry strengthens the

influence of the consortium

Securing enough funds is crucial as it takes a long time and huge amount of capital to test and commercialize blockchain technology for consortium

Funding Membership

LeadershipGovernance

Source: Deloitte(2017)

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Table of Contents




11

Korea Financial Investment Blockchain Consortium

• The Korea Financial Investment Association(KOFIA) is the sole self-regulatory organization of Korean financial industry

• KOFIA acts as a think-tank for the financial investment industry, dedicating its efforts to take a leading role in promoting the development and globalization of the Korean capital market

• 25 firms have participated in the consortium, numbers will be steadily growing

12

RoadmapApply blockchain technology to authentication, post-trading and trading business of broker/dealers

Expected business

Universal authentication & information sharing based on blockchain

Clearing & SettlementOTC bond, OTC stock,

trading in capital markets

'17 - '18

'18 ~ '19

'20 ~

Authenticationand information

sharing

Post-Trading

Trading

13

Process of Government Authentication: As-IsA separate trusted third party (accredited certification body) is required with a high operating cost and a complicated registration process

One year validity

FinancialInstitutionA

FinancialInstitution B

FinancialInstitution C

user

Accredited certification body

Financial Institution(Bank/ Securities)

④ Issue certificate

user

① Request digital signature

② Enter Password

③ Digital signature

④ Confirmcertificate

status

⑤ Send confirmation

results

user

① Apply for certificate &undergo personal verification

② Register

③ Request certificate

Third party required

Need to register in each institution

Our of service when system fails

⑥ Transaction complete

Issue Certificate Use CertificateRegister Certificate

Accredited certification body

Financial Institution(Bank/ Securities)

14

Process of Universal Authentication: To-BeIssuance / registration / usage of certificate based on blockchain eliminates unnecessary process and reduces costs

user

Certificate issued through consensus

of consortium members

user

Register once for all institutions

Certificate issued

user

ConstructFault Tolerance

System

Synchronize Certificate

FinancialInstitution

B

Validate Certificate


C


A


B


C


A


C


B


A

Issue Certificate Use CertificateRegister Certificate

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Blockchain Authentication: Shared Data vs. Smart Contract

1. Financial institution confirms user identity2. Certificate is generated based on the certificates that each financial

institution holds3. Upload and share the generated certificate on the blockchain4. Each node authenticates user based on the certificate registered on

blockchain

• The logic of authentication data generation is not verified by blockchain

• If the data registered by each node is reliable enough, Data Replication service can be used instead of blockchain

Blockchain-based Authentication Data Sharing

1. Financial institution confirms user identity2. Each financial institution registers its request to issue certificate on

the blockchain3. Executes smart contract after request is verified4. Users are verified based on the certificate generated by smart

contract on each node

• The contract is executed by the code in accordance to the consensus among consortium members for certificate issuance and usage

• Blockchain ensures the immutability and reliability of issuance/management code generating the certificate

Smart Contract Based Authentication Service

User

Financial Institution A

Financial Institution C

Financial Institution B

Financial Institution D

Smart ContractCertificateAuthority

User

Financial Institution A

Financial Institution B

Financial Institution D

Shared Authentication

Information

Financial Institution E

Financial Institution F

Financial Institution E

Financial Institution F

Financial Institution C

Smart Contract Authentication ServiceCertificate issuance and verification service without a centralized certificate authority based on Smart Contract on blockchain

• Certificate issuance and verification is not delegated to a separate entity

• Instead, Smart Contract executes the service by registering the certificate on blockchain and make it a certification entity that is trusted by all participating nodes

Contents of Contract

• The certificate and its status information are shared by the contract• Information for certificate issuance includes DN, expiration date,

public key, etc• If the node's digital signature in the transaction history is verified,

the certificate is issued based on the issuance request information included in the transaction history and is added to the contract data.

Features

• Blockchain itself becomes the certification authority, therefore does not require a separate certification authority to issue the certificate

• Certificate issuance key is issued every block based on Smart Contract and is used to issue X.509 certificates without managing of a certificate issuance key

• Financial institutes performs the role of RA like accredited certification systems

RA Service RA Service

RA Service RA Service

16

Certificate Issuance Based on BlockchainAfter requesting certificate issuance through each securities company, it creates a transaction based on the information required for issuing the certificate and executes the Smart Contract to generate the certificate

Company A Node

Company D Node

[Leader Peer]

⑦ New Block

Generation

⑪ Certificate Registration/Discard List

[LIST]


[LIST]


[LIST]


[LIST]

Blockchain Execution

Blockchain Record

Company B Node

Company C Node

⑩ Certificate Issuance through Smart Contract

⑧ Request Verification and Send Result(Consensus Algorithm)

⑨ New Block Added

Company ALegacy

(MTS/HTS)

① User Authentication

③ Request Issuance of Certificate

⑤ Request Certificate Issuance (BlockchainTransaction Generated)

⑫ Send Issuance Result (Certificate)

④ Create Transaction on Certificate Issuance (Public Key)⑬ Certificate

Certificate Management SCORE

⑥ Create transaction of certificate issuance to leader peer

17

Certificate Verification Based on BlockchainVerify certificate validity with the authentication information stored in the Smart Contract of each participant: Provides the same functionality as existing OCSP

Company A Node

Certificate Registration/Discard List



Blockchain Execution

Blockchain Record

Company B Node

Company C Node


Company D Node

[LIST] [LIST] [LIST] [LIST]

Company ALegacy

(MTS/HTS)

② Request Certification(Submit Certificate)

⑤ Check Certificate Status

⑥ Authentication Result④ Extract Certificate Information

③ Verify Certificate Request (Verify Digital Signature)

Certificate Management SCORE

18

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Table of Contents




Polkadot• A platform for inter-blockchain connection that does not provide its own application function

• Led by Ethereum co-founder and CTO Gavin wood, scheduled to open in Q3 2019

20

MS Coco Framework• Provides its own framework for blockchain application in enterprise environments

• Scheduled to open in 2018

21

MS Coco Framework• Constructs nodes based on State Replication Machine

• Supports integration to various blockchains in TEE

22

ICON Project

• The ICON Project was launched to address the problem with interoperability

• Through the C-Rep of each independent community of blockchain, different blockchains can be connected to one another on Nexus

• Multiple Nexus can co-exist and connect with each other as well

• Constructs nodes based on State Replication Machine

• Supports integration to various blockchains in TEE

23

Blockchain Transmission Protocol (BTP)

BTP Comments

• BTP is a protocol to connect transactions between blockchains

• Transmitter blockchain transfers transaction to the receiver blockchain via Notary Channel in Nexus

• Nexus nodes with voting rights to the Notary channels (validator nodes) possess multiple channels, where the Light Client of each blockchain connected to Nexus is counted as one channel

• A Notary channel is implemented based on Multi-Channel feature of Nexus

• Transactions confirmed by respective blockchains can be identified through the blockchain’s Light Client connected to Nexus

Blockchain A Blockchain B

Blockchain B

ICON Nexus Node

Node

Node

Node

Blockchain A Light Client Channel Alight client A

light client A

light client A

light client A

Light Client Channel Blight client B

light client B

light client B

light client B

24

25

Blockchain Transmission Protocol (BTP) – (continued)

Notary Channel Transaction Flow

ICON Nexus

Destination BlockchainPortalNotary

Channel

ICON Nexus

ICON Nexus

• Multiple signatures of nodes with voting rights to request Notary

registration are included in the blocks to form blockchains of the

Notary Channel

• The block data with the transactions registered to Notary

channel will be transmitted to the Receiver blockchain via Portal

• When the Receiver blockchain verifies the relevant block data, it

validates the signature of each node based on the certificates of

nodes from Notary channel

• If two-thirds or more of the signatures are confirmed according

to the Notary channel standards which follows the LFT

consensus algorithm, the consensus will be confirmed and the

requested transaction will be executed

Notary Channels Comments

BTP Example – Certification Transfer

Blockchain A Blockchain BICON Nexus NodeNode

Node Node

① Request certificate

Client Client

② Consensus on issuing certificate

③ Issue certificate ④ Submit certificate

⑤ Request validation of certificate

⑥ Transfer validation result using BTP

⑦ Check validation result

26

@2018 theloop

Thank you!

@2018 theloop

JH Kim

commercial blockchain application v3 20180604

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