Blockchain for the Real World David Pinski Chief Strategist, - - PowerPoint PPT Presentation

Blockchain for the Real World

David Pinski

Chief Strategist, Financial Innovation Laboratory September 19, 2017

§ Quick blockchain recap § How blockchain operate § The practical hurdles to deploying blockchain in a business § Innovating business models with blockchain § Which blockchain?

Today’s Topics

§ Uses mathematical algorithms to link strings of data together over time § Operated by distributed computing resources within a company or throughout the world § Blockchain supports cryptocurrencies such as Bitcoin, Ether, Zcash § Blockchain Smart Contracts manage and store business data in a blockchain The Blockchain Recap

§ Cryptocurrencies fuel the network § Companies pay coins to store business data (gas) § Miners and Nodes earn coins for processing and storing data

‒ Coins from Businesses ‒ Minting New Coins

§ Coins can be used as currency in commerce

The Business of a Public Blockchain

Smart Contracts Blockchain Nodes Miners

§ Platform Options: HyperLedger, Ethereum… § Not cryptocurrency dependent § Funding Options

‒ Run on their hardware (absorb costs) ‒ Subscription model ‒ Pay per transaction

The Business of a Private Blockchain

Smart Contracts Blockchain Nodes

§ Rewiring money movement with blockchain § Private networks funded by banks § Banks transact against a distributed ledger rather than back and forth to a central authority § Bypasses clearing houses § New central bank model? Case Study - Replacing Legacy Technology

§ Distributed Ledger ‒ Redundant within an enterprise or globally ‒ S3 storage reliability § Immutable ‒ Records can’t be deleted or altered* § Consensus ‒ All parties agree to transactions ‒ Business logic is integrated (like stored procedures)

§ Distribute Business Rules

‒ All nodes process data the same way – normalization across systems

Deconstructing Blockchain

§ Decentralized data storage as a service § Blockchain network powered by cryptocurrency § Blockchain network will store customer’s data § Used an ICOs (Initial Coin Offerings) for funding

‒ Raised $200M in 1 hour ‒ Coins represent future data storage payments, not company ownership

§ Filecoin will manage the network but not own its resources Case Study - New Business Model - Filecoin

§ Agreeing to terms with another entity § Business Process (sequencing events) with limited linkages § Enforcement of logic across entities § Data integrity § Transfer of digital assets Inefficient & Corruptible Business Processes

§ Rethinking energy markets

‒ Leveraging Blockchain and IoT

§ No central authority § Rides on existing distribution infrastructure § Buy and sell electrons on an open market § Blockchain enabled meters control energy flow § Blockchain enables billing and payments Case Study – Old Business, New Business

What Drives the Microgrid?

IoT Blockchain Meters Mobile App Local Generation

§ Hyperledger vs. Ethereum § Sawtooth, Corda, EEA, Coco, Burrow § Selection criteria

‒ Public/private operation ‒ Speed ‒ Maturity ‒ Capabilities

Which Blockchain?

“We view the Enterprise Ethereum Alliance as a standards body and we view Hyperledger as a natural home for housing the implementation of those standards.” – Casey Kuhlman, Monax – Member of both EEA and Hyperledger

Blockchain Feature Cheat Sheet

Name Operational Model Supports Contract s Trust Administered Configurable Block Size Nodes Data Replication Management Integrated Encryption Hyperledger Member Operated Y Y Y Y Private Y (Channels) Planned Ethereum PoW, PoC - Coin Based Y N N N Public N N Bitcoin PoW, PoC - Coin Based N (workarou nds exist) N N N Public N N/A

§ Blockchain itself isn’t really a database § Local files for managing chaincode (proofs) § Utilizes NoSQL database for smart contract data § Large amounts of data can be stored “off-chain”

‒ Large files such as images and documents can be hashed as a proof and recorded in a blockchain for immutability

Where is my data?

§ Encrypting data stored in Blockchain

‒ Some data must be visible – specifically the transaction parties ‒ Adds system overhead

§ Hyperledger supports ‘channels’ where transaction data is

• nly copied between defined nodes, not the entire network

‒ Referential data is written to all nodes

§ Off chain data replication can be managed independently Security and Data Replication

Use Case: Check Clearing

August 2016 Bank of Tokyo-Mitsubishi and Hitachi Begin Blockchain Technology Project in Singapore § Project issued, transferred and settled electronic checks § Based on Ethereum Blockchain (Project began pre- Hyperledger) § POC included Hitachi Group Companies and BTMU

§ Be conscious of scope

‒ How many companies involved – internal only, or including enterprise partners ‒ How complex is business process – how many blockchain processes ‒ Is it replacing an existing process ‒ How many nodes will there be – and how many will operate them ‒ Processing time requirements

§ Return on investment

‒ Reduction of number of systems supporting business process ‒ Improved liquidity through faster settlements

§ Improved compliance § Reduced operational risk

Rational for Project Selection

§ Maturity of platforms § Availability of developers and architects § Operational experience in production § Scalability metrics not well understood § Integration tools are lacking Remaining Hurdles for Blockchain

§ Hysteresis signature research from ~2000 § Hitachi holds basic patent of blockchain in Japan. § Bitcoin was introduced in 2008 Hitachi’s Blockchain History § Premier Member Hyperledger

‒ Leading source code contributor

Thank You