making blockchain real for business - kathryn harrison (ibm, middle east and africa payment and...

IBM Blockchain Team :: © 2016 IBM Corporation

Making Blockchain Real for Business

Kathryn HarrisonPayments LeaderMiddle East and Africa

1

IBM Blockchain Team :: © 2016 IBM Corporation 2

Agenda

Introduction

What is Blockchain?

How are companies thinking about Blockchain?

What is the IBM Blockchain?

Q&A


Every CEO, from every industry, wants to know about Blockchain

Blockchain will fundamentally change the way we do business


Blockchain in Financial Markets


What is Blockchain?


Blockchain is an emerging platform for transaction services

Party A’s

records

Bank’s

records

Auditor’s

records

Party B’s

records

Digitally

signed/encrypted

transactions and

ledger

All parties have same

replica of the ledger

Party A

Bank

Auditor

Party B

Blockchain technology has the potential to radically transform multi-party business

networks, enabling significant cost and risk reduction and innovative new business models

Inefficient, expensive, vulnerable Consensus, provenance, immutability, finality


Business Networks, Markets & Wealth

• Business Networks benefit from connectivity

– Connected customers, suppliers, banks,

partners

– Cross geography & regulatory boundary

• Wealth is generated by the flow of goods &

services across business networks

• Markets are central to this process:

– Public (fruit market, car auction), or

– Private (supply chain financing, bonds)


Transferring Assets, building Value

• Anything that is capable of being owned or controlled to produce value, is an asset

• Two fundamental types of asset

– Tangible, e.g. a house

– Intangible e.g. a mortgage

• Intangible assets subdivide

– Financial, e.g. bond

– Intellectual e.g. patents

– Digital e.g. music

• Cash is also an asset

– Has property of anonymity


Participants, Transactions & Contracts

• Participants - members of a business network

– Customer, Supplier, Government, Regulator

– Usually resides in an organization

– Has specific identities and roles

• Transaction - an asset transfer

– John gives a car to Anthony (simple)

• Contract - conditions for transaction to occur

– If Anthony pays John money, then car passes from John to Anthony (simple)

– If car won't start, funds do not pass to John (as decided by third party arbitrator) (more complex)


Ledgers are Important

• Ledger [1] is THE system of

record for a business

– records asset transfer between

participants.

• Business will have multiple

ledgers for multiple business

networks in which they

participate.

[1] The principal book (or computer file) for recording and

totaling financial transactions by account type, with debits and

credits in separate columns and a beginning monetary

balance and ending monetary balance for each account.


Privacy

• Ledger is shared, but participants require

privacy

• Participants need:

– Transactions to be private

– Identity not linked to a transaction

• Transactions need to be authenticated

• Cryptography central to these processes


Validation

• Transaction verification & commitment

• When participants are anonymous

– Commitment is expensive

– Bitcoin cryptographic mining provides verification for anonymous participants but at significant compute cost (proof of work)

• When participants are known & trusted

– Commitment possible at low cost

• Multiple alternatives

– proof of stake where fraudulent transactions cost validators (e.g. transaction bond)

– multi-signature (e.g. 3 out of 5 participants agree)

• Industrial Blockchain needs “pluggable” consensus

1

2


Market Participant

Certificate Authority

Blockchain Developer

Blockchain Network Operator

Business Network

Traditional Processing Platforms

Traditional Data Sources

Blockchain

B2B transactions

connects market participants

access to existing logic

access to existing data

creates applications and solutions

operates

Creates security certificates

Regulatorperforms oversight

The Participants in a Blockchain Network


Market Participant

Business Network

participates in

1.Ledger 2.Processes

shares

Blockchain – the Uberization of Ledgers

• A shared network ledger

– Rather than a set of individual ledgers

– From owned to shared

• Permissioned Access

– Appropriate privacy

– For transaction content and transaction

ownership

• Smart Contracts

– Elevate business processes to the network

1

4

1.Ledger 2.Processes

owns

Increased Trust

Decreased Friction

Improved Discoverability

Business network processes


Smart

Contract

Privacy

Shared

Replicated

Ledger

ValidationEnsuring appropriate

visibility; transactions are

secure, authenticated &

verifiable

Business terms embedded

in transaction database &

executed with transactions

All parties agree to

network verified

transaction

Append-only distributed

system of record shared

across business network

Broader participation, lower cost, increased efficiency

Blockchain for Business


Improve discoverability Shared trusted processes

Trusted recordkeepingReduce costs & complexity Dramatic

Improvements

To ExistingBusiness

Processes

Creation

of NewBusiness

Models

Blockchain for Business - Benefits


How are companies thinking about Blockchain?


Consensus Use Case – Shared Routing Codes

What?

• Competitors/collaborators in a business network need to share reference data, e.g. bank routing codes

• Currently each member maintains their own codes, and forwards changes to a central authority for collection and distribution

How?

• Each participant maintains their own codes within a blockchain network

• Blockchain creates single view of entire dataset

Benefits

1. Consolidated, consistent dataset reduces errors

2. Near-real-time of reference data

3. Naturally supports code editing and routing code transfers between participants


Provenance Use Case – Vehicle Maintenance

What?

• Provenance of each component part in complex system hard to track

• Manufacturer, production date, batch and even the manufacturing machine program

How?

• Blockchain holds complete provenance details of each component part

• Accessible by each manufacturer in the production process, the aircraft owners, maintainers and government regulators

Benefits

1. Trust increased no authority "owns” provenance

2. Improvement in system utilization

3. Recalls "specific" rather than cross fleet


Immutability Use Case – Financial Ledger

What?

• Financial data in a large organization dispersed throughout many divisions and geographies

• Audit and Compliance needs indelible record of all key transactions over reporting period

How?

• Blockchain collects transaction records from diverse set of financial systems

• Append-only and tamperproof qualities create high confidence financial audit trail

• Use privacy features to ensure authorized access

Benefits

1. Lowers cost of audit and regulatory compliance

2. Provides “seek and find” access to auditors and regulators

3. Changes nature of compliance from passive to active

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Finality Use Case – Letter of Credit

What?

• Bank handling letters of credit (LOC) wants to offer them to

a wider range of clients including startups

• Currently constrained by costs & the time to execute

How?

• Blockchain provides common ledger for letters of credit

• Allows all counter-parties to have the same validated

record of transaction and fulfillment

Benefits

• Increase speed of execution (less than 1 day)

• Vastly reduced cost

• Reduced risk, e.g. currency fluctuations

• Value added services; e.g. incremental payment


IBM Blockchain


Many Blockchain Vendors Offer Specialization …

- Variant trust systems –

Consensus, Mining, Proof of

Work etc.

- Lock into single trust system

- Purpose built infrastructure

components for a specialized

use case

- Design being field tested in

form of POCs.

- Creates fragmented blockchain

models for enterprise.


Enterprise Blockchain Deployment

2

4

- Driving synergies between

blockchains

- Invisible Blockchain infrastructure

- Inter and Intra enterprise connections

- Concept Introduction

- Interledger

- Intraledger

- Cross the trust systems for

transactions

- Fractal visibility of ledger data

- Enterprise visibility – control systems


IBM Blockchain Architecture

2

5

- Open Design

- Providing flexibility with pluggable

and modular trust system

- Open for specialized blockchains

e.g. Ripple

- Trust Intermediary – a trust system

provisioning layer

- Enterprise blockchain platform

concept

- Separate Business domain with

technology that supports it.


Integration with Existing Systems


Open Ledger Project

Linux Foundation - announced 17th December 2015

Current Situation: Blockchain systems are being built in a

variety of industries

The project members understand that an open source,

collaborative development strategy supporting multiple

players in multiple industries is required

Enable adoption of shared ledger technology at a pace and depth not

achievable by any one company or industry


Open Ledger Project Members [1]

IC3

[1] Small sample

How?

http://www.initc3.org/


Open Ledger Project –Scope

Code execution environment,

ledger data structures,

modular consensus framework,

modular identity services,

network peers

API libraries & GUIs for app development

specialized extensions,

specialized consensus algorithms

membership policies,

gateway, operations dashboard

Custom built applications for specific use

casesApp

Layer

Shared Ledger

Value Added

Systems

In-scope

Out of scope

Core APIs

How?


Blockchain on IBM Cloud

3

0

Linux Foundation creates demand and

a funnel for developers on Bluemix

ON BLUEMIX NOW!

Blockchain DevOps

Start working on a Blockchain

in seconds

Blockchain DevOps for Developers on Bluemix

plus Value Added Services and Solutions soon

LINUX

Hyperledger Project

Working to create an industry

standard Blockchain for business


Summary

1. Blockchain is a shared, replicated ledger technology

2. IBM supports an open standards, open source, open governance Blockchain

3. Blockchain can open up business networks by taking out cost, improving efficiencies and increase accessibility

4. Blockchain addresses an exciting and topical set of business challenges, which cross every industry

5. Linux Foundation Open Ledger project developing open source, open standards shared ledger technology

6. IBM has an easy to access, proven and incremental engagement model giving customers the confidence to get started NOW

making blockchain real for business - kathryn harrison (ibm, middle east and africa payment and...

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