Making Blockchain Real for
Business
Explained
V2.09 19
Jan 16
2016 IBM Corporation
https://ibm.box.com/BlockExp
Contents
2016 IBM Corporation
What
. . are Blockchain technologies ?
Why
. . is it relevant for our business?
How
. . can IBM help us apply Blockchain?
Business Networks, Markets & Wealth
What?
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 network
Markets are central to this process:
Public (fruit market, car auction), or
Private (supply chain financing, bonds)
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Transferring Assets, building Value
What?
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
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Ledgers are Important
What?
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.
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Participants, Transactions & Contracts
What?
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)
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Introducing Blockchain
What?
A shared ledger technology allowing any participant in
the business network to see THE system of record
(ledger)
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Problem -Diculttomonitorassetownershipandtransfersinatrusted
businessnetwork
What?
Ledger
Incident
Ledger
Ledger
Party As Records
Counter-party
records
API-integrations
Auditor records
Party Cs Records
Ledger
Bank records
Party B Records
Ledger
Ledger
Inefficient, expensive, vulnerable
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Solution a permissioned, replicated, shared ledger
What?
Party As Records
Counter-party
records
Ledger
Ledger
Bank records
Ledger
Auditor records
Party Cs Records
Ledger
Ledger
Ledger
Party B Records
Participants have
multiple shared
ledgers
NOTE :
Participants
same as before
Consensus, provenance, immutability, finality
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Blockchain underpins Bitcoin . . .
What?
1.
is unregulated, censorship-resistant
shadow currency
2.Blockchain ensures cash like coin passing
unique,
immutable,
final
3.Bitcoin is the first Blockchain application
Blockchain is not
4.Digital currencies dierent from cyptocurrency
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Blockchain for Business
Append-only distributed
system of record shared
across business network
Ensuring appropriate
visibility; transactions are
secure, authenticated &
verifiable
What?
Shared
Ledger
Smart
Contract
Privacy
Validation
Business terms embedded
in transaction database &
executed with transactions
All parties agree to
network verified
transaction
Broader participation, lower cost, increased efficiency
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Shared Ledger
What?
Records all transactions across
business network
Shared between participants
Participants have own copy through
replication
Permissioned, so participants see
only appropriate transactions
THE shared system of record
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Smart Contract
What?
Business rules implied by the
contract . .
. . embedded in the Blockchain &
executed with the transaction
Verifiable, signed
Encoded in programming language
Example:
Defines contractual conditions under
which corporate Bond transfer
occurs
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Privacy
What?
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
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Validation
What?
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
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Contents
2016 IBM Corporation
What
. . are Blockchain technologies ?
Why
. . is it relevant for our business?
How
. . can IBM help us apply Blockchain?
16
Industrial Blockchain Benefits
Reduce costs and complexity
Why?
Trusted recordkeeping
Improve discoverability
Shared trusted processes
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Blockchain not for all . . .
NEGATIVE Indicators
1.
2.
3.
4.
5.
Need high performance (millisecond) transactions
Small organization (no business network)
Looking for a database replacement
Looking for a messaging solution
Looking for transaction processing replacement
Why?
Patterns for Customer Adoption
How?
(1) INTERNAL LEDGER
(3) INFORMATION HUB
Ledger for internal reporting, audit and
compliance,
A ledger set up in a single organization
Consistent view of key business assets,
Sharing of information between participants
(e.g. voting, dividend notification)
Provenance, immutability & finality more
important than consensus.
Assets have information, not financial value,
Access to auditor and regulator
(2) CONSORTIUM SHARED LEDGER
Require provenance, immutability & finality.
(4) HIGH VALUE MARKET
Created by a small set of participants
Ledger for the transfer of high financial value
assets
share reference data between themselves
and consumers.
between many participants in a market.
Consistent real-time view of key information
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Requires all enterprise features of
Blockchain
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Use Case Letter of Credit
Why?
What?
Bank handling letters of credit (LOC) wants to oer 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 bankand counter-parties to have the same
validated record of transaction and fulfillment
Benefits
Increased trust
Increase speed of execution (less than 1 day)
Vastly reduced cost
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20
Use Case Corporate Debt (or Bond)
Why?
What?
Bank holding a corporate debt would like to
pay vendors quickly for transactions validated by theclient
allow the corporate client to see the payment is made
provide government with oversight of the process
How?
Blockchain provides a common ledger for recording the
corporate debt / bond,
available to bank, corporate client, vendors & government.
Benefits
Speeds up vendor payments bigger net discounts
Eliminates risk and accelerates decision making
Owning bank can spread the cost across each market.
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Use Case Business to Business Contracts
Why?
What?
Buyer wants ecient way of converting a purchase order
into validated, self executing contract updated to reflect
the status of the supply.
Agreement must be visible to the buyer, the seller, banks,
logistics partners and other stakeholders.
How?
Blockchain provides a shared record of the contract
status which is updated as the contract progresses.
Available to all parties to the agreement, their banks and
partners.
Benefits
1. increased eciency and transparency acrossthe
supply chain.
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2. risk management improved through the near real time
update of all contracts.
22
Use Case Smart Refrigerator
Why?
What?
Value of connected smart devices limited by
ability to interact with business systems
How?
Blockchain to manage automated
interactions with the external world
ordering and paying for food to arranging for
its own software upgrades and tracking its
warranty.
Benefits
1. business value from connected technology
2. eciencies in network and supply chains.
3. status transparent to all network members
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Use Case Open, Trusted Supply Chain
Why?
What?
Consumers demanding transparency on where and
how their products are made.
EU requires more information about corporate
supply chains, with penalties for non-compliance.
How?
Blockchainenable safe digital transfer of property
across the end to end supply chain.
Benefits
1. verifiable,preventing any party from altering
2. eciencies through greater transparency
3. consumers can make informed purchases
4. governments get reliable information
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Use Case Aircraft Maintenance
Why?
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
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25
Use Case On Line Gaming
Why?
What?
Game player wants to trade gold earned in
current game for the currency or assets of another
game
Use experience with the current game to put me
ahead and not have to start cold in the new game
How?
Blockchain holds tokens of value shared across on
line gaming platform
Benefits
Transparency to game player,game owners &
infrastructure providers
Eciencies through elimination of intermediaries
Increased trust for all involved parties.
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Other Potential Use Cases include . .
Securities
Why?
Retail Banking
Post-trade settlement
Cross border remittances
Derivative contracts
Mortgage verification
Securities issuance
Mortgage contracts (smart contract)
Collateral management
Trade Finance
Public Records
Real estate records
Bill of Lading
Vehicle registrations
Cross-currency payment
Business license and ownership records
Syndicated Loans
Intra-bank settlement
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Contents
2016 IBM Corporation
What
. . are Blockchain technologies ?
Why
. . is it relevant for our business?
How
. . can IBM help us apply Blockchain?
28
Hyperledger Project
How?
Linux Foundation - announced 17th December 2015
New open ledger project to transform the way business
transactions are conducted around the world
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
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Hyperledger Project Members [1]
How?
[1] At 17th December 2015
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Hyperledger Project Draft Scope
App
Layer
How?
Custom built applications for specific use
cases
Value
Added
Systems
Application development facilities
specialized extensions,
specialized validation algorithms
integration gateway,
operations dashboard
Shared
Ledger
Smart contract execution environment,
ledger data structures,
Membership services,
modular validation framework,
modular identity services,
network peer services
Out of
scope
Inscope
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Engagement Model overview
Conversation &
Demonstration
Proof of
Technology
How?
First Project
1. Discuss Blockchain
technology
2. Explore customer business
model
3. Show Blockchain
Application demo
1. Understand Blockchain
concepts & elements
2. Hands on with Blockchain
technology
3. Standard demo customization
1. Design Thinking workshop
to define business challenge
2. Agile iterations incrementally
build project functionality
3. Enterprise integration
Remote or face to face
Remote or face to face
Face to face
Free of charge
Free of charge
For fee
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Enterprise Integration
How?
What?
Customer realizes full benefit of Blockchain solution by scale up, scale out and
enterprise integration
How?
Full range of consulting, system integration & project skills
Extension of Agile from Proof of Concept
Integration into customers existing systems and business processes
Metrication to prove Return on Investment
Commercial?
For fee
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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 eciencies and increase accessibility
4. Blockchain addresses an exciting and topical set of business
challenges, which cross every industry
5. Linux Foundation Hyperledger 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
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Thank You!
2016 IBM Corporation
