Making Blockchain real for business

Jürgen Lang

IBM Blockchain

Blockchain will fundamentally change the way we do businessViewed simultaneously as Opportunity & Threat

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

IBM Blockchain is underway and open for business in 2016

IBM is an early mover and investing ahead of the curve.

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Introducing Blockchain

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Blockchain is a design pattern made famous by its use in bitcoin. But it’s uses go far far beyond.

Blockchain can reimaginethe world's most fundamental business interactions and open the door to invent new styles of digital interactions.

We are adopting Blockchainto a very broad rangeof business applications

Total Blockchain opportunity

Total Bitcoin opportunity

Blockchain is a technology for a new generation of transactional applications that establishes trust, accountability and transparency while streamlining business processes. Think of it as an operating system for interactions. It has the potential to vastly reduce the cost and complexity of getting things done.

Contents

What

Why

How

. . are Blockchain technologies ?

. . is it relevant for our business?

. . can IBM help us apply Blockchain?

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What is the context of Blockchain?

Transferring Assets, building ValueBusiness Networks, Markets and Wealth

Ledgers [1] are important Participants, Transactions and Contracts

What?

[1] The principal book (or computer file) forrecording and totaling financial transactions byaccount type, with debits and credits in separatecolumns and a beginning monetary balance andending monetary balance for each account.

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What’s the difference with Blockchain?

All parties have same replica of the ledger

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

Without Blockchain

What?

With Blockchain

Block 1575

Transaction: Hash: 76f0ec56ce04423

Block Hash: 0000057ec2fda71

What is a Blockchain ?

Block 1574

Transaction: Hash: 8d0df86ffc15cd62

Transaction: Hash: feb359ad27c907d

Previous Block Hash:000000d68b2f0a3b

Previous Block Hash00000057ec2fda71

Block Hash:0000087ea2ffe94

Block 1576

Previous Block Hash0000087ea2ffe94

Block Hash:0000044bf2efe32

Made up of a series of blocks added in chronological order

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What?

Key Concepts - What’s Blockchain for Business?

Smart Contract

Privacy

Shared Ledger

ConsensusEnsuring 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

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What?

Not for all today . . .

Blockchain is NOT

Suited to high performance (millisecond) transactions

For just one participant (no business network)

A replicated database replacement

A messaging solution

A transaction processing replacement

Suited for low value, high volume transactions

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Why?

Financial Services Payments

Securities registration & processing

Lending

Property Real estate

Intellectual property

Cars

Governmental services Voting

Registrations (passports, driving license)

Permits

Identification & Security Party/device registration

Authentication

Access control

Trade Document exchange

Asset exchange

Escrow services

Trade agreements

Internet of Things (IoT) Autonomous devices, such as

Cars

Drones

Robots

Potential of Blockchain extends across a wide range of application areas

Why?

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Consensus Use Case – Shared Routing Codes

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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

Why?

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

Why?

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Immutability Use Case – Financial LedgerWhat?

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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Why?

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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

1. Increase speed of execution (less than 1 day)

2. Vastly reduced cost

3. Reduced risk, e.g. currency fluctuations

4. Value added services; e.g. incremental payment

Why?

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Regulator Industry Group Market Maker

– An organization who enforces the rules of play

–Regulators are keen to support Blockchain based innovations

–Concern is systemic risk – new technology, distributed data, security

–Often funded by members of a business network

–Provide technical advice on industry trends

–Encourages best practice by making recommendations to members

– In financial markets, takes buy-side and sell-side to provide liquidity

–More generally, the organization who innovates

- Creates a new good or service, and business process (likely)

- Creates a new business process for an existing good or service

Key players for Blockchain adoption

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How?

– Linux Foundation project announced December 17, 2015 with 17 founders, now 40 members

– The Hyperledger Project is a collaborative effort to advance Blockchain technology by identifying and addressing important features for a cross-industry open standard for distributed ledgers that can transform the way business transactions are conducted globally

– Open source and open standards-based

Enable adoption of shared ledger technology at a pace and depth not achievable by any one

company or industry

QUICK FACTS

Chairman: Blythe Masters/DAH

Executive

Director:Brian Behlendorf

Tech

Committee:Chris Ferris/IBM

Contribution:44,000 lines of code

in February 2016

Accept:

2Q IBM Open Code

accepted into

incubation

Sprint to one

codebase with

unified thinking:

Target 3Q release

www.Hyperledger.org22

Linux Foundation’s Hyperledger Project How?

https://www.hyperledger.org/about/members as of 13 June 2016

How?

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IBM Blockchain – more than the Linux Hyperledger Project

Smart contract execution

environment,

ledger data structures,

Membership services,

modular validation framework,

modular identity services,

network peer services

Application development facilities

specialized extensions,

specialized validation algorithms

integration gateway,

operations dashboard

Custom built applications for specific use cases

App Layer

Value Added

Systems

Scope: Linux Hyper-ledger project

IBM Block-chain Plat-form

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How?

Capabilities

Complete DevOps Lifecycle via Bluemix

Smart contract language and API standards

Enterprise-grade identity, security and privacy

Seamless hybrid integration with legacy systems

Market leading performance and scalability

IBM Blockchain Platform –Powering Always-On Business Networks

IBM

DevOps

Service

IBM

Identity

Service

IBM

Consensus

Service

IBM

Smart Contract

Service

Public | Dedicated | Local : Bluemix | Softlayer | Z Cloud

IBM Blockchain PlatformReady for IBM & Partner Solutions

Linux Hyperledger Fabric

IBM Cloud

Hyb

rid

How?

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http://www.ibm.com/blockchain/

Blockchain for Business – IBM Strategy

Open Source Code: Blockchain built from the ground up for business;

Permission | Privacy Confidential | Auditable

Open Governance – 40 member board.

Blockchain value-added manged service on SoftLayer

and System Z:

Identity | Consensus | Audit | System Integration | Hardware-assist for

Performance & Security.

Blockchain Solutions for Financial Services; Trade Finance | Capital Markets

Blockchain GarageNY | London | Singapore | Japan | Böblingen

Blockchain GBS Practice

IBM BlockchainLinux

Hyperledger ProjectBlockchain SolutionsBlockchain Garage

Community + Code Cloud Clients

How?

http://www.ibm.com/blockchain/27

IBM Engagement Model overview

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

1. Scale up pilot or Scale

out to new projects

2. Business Process

Re-engineering

3. Systems integration

Remote or face to face

1 to 2 hour speech

Remote or face to face

1 day classroom

Face to face

2 to 4 weeks in Garage

Face to face

t.b.d.

Free of charge Free of charge For fee For fee

Let’s Talk! TechnologyHands-on

First Project Scale

How?

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Blockchain Garage in Böblingen

Demos / Use Cases and Prototypes making Blockchain real for business - made by IBM

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IBM Global Finance –Blockchain in Financing

Car Lease Demo

Trading Commercial Paper Demo

(click on the picture to see the video / demo)

Mortgage Demo

Trading Finance based on Blockchain @IBM z Systems

Watson IoT with Blockchain

Financial Services publications on Blockchain

Fast forward - Rethinking enterprises, ecosystems and economies with blockchainshttp://www-01.ibm.com/common/ssi/cgi-bin/ssialias?htmlfid=GBE03757USEN#

Blockchain – the road to mass adoption, on Standard Chartered's BeyondBorders site https://www.sc.com/BeyondBorders/blockchain-mass-adoption/

IBM/finextra Banking on Blockchain: Charting the Progress of Distributed Ledger Technology in Financial

Services https://www.finextra.com/surveys/survey.aspx?surveyguid=32e19ab4-2d9c-4862-8416-d3be94161c6d

International Monetary Fund:

Virtual Currencies and Beyond: Initial Considerationshttps://www.imf.org/external/pubs/ft/sdn/2016/sdn1603.pdf

UK Office of Science:

Distributed ledger technology: beyond block chain https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/492972/gs-16-1-distributed-ledger-technology.pdf

DTCC: “Embracing Disruption – Tapping the Potential of Distributed Ledgers to Improve the Post-Trade

Landscape,” http://www.dtcc.com/news/2016/january/25/new-dtcc-white-paper-calls-for-leveraging-distributed-ledger-technology

Oliver Wyman/Euroclear: Blockchain in Capital Markets – The Prize and The Journey https://www.euroclear.com/dam/Brochures/BlockchainInCapitalMarkets-ThePrizeAndTheJourney.pdf

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EURO BANKING ASSOCIATION: Cryptotechnologies as major IT innovation and technical change agent.

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EBA on real-time payments:Ongoing developments in

cryptotechnologies merit

close attention in the context

of the current European drive

towards achieving “instant

payments” and in relation to

inter-PSP payment systems

in general

https://www.abe-eba.eu/downloads/knowledge-and-research/EBA_20150511_EBA_Cryptotechnologies_a_major_IT_innovation_v1_0.pdf

ECB: Distributed ledger technologies in securities post-trading Whitepaper: https://www.ecb.europa.eu/pub/pdf/scpops/ecbop172.en.pdf

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ECB: Distributed ledger technologies in securities post-trading (2)

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ECB: Distributed ledger technologies in securities post-trading (3)

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Summary

1. Blockchain is a shared, replicated, permissioned ledger technology

2. Blockchain can open up business networks by taking out cost,

improving efficiencies and increase accessibility

3. Blockchain addresses an exciting and topical set of business

challenges, which cross every industry

4. IBM supports the Linux Foundation Hyperledger open standard,

open source, open governance Blockchain

5. 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

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IBM Deutschland GmbHWilhelm-Fay-Strasse 30-34 65936 Frankfurt

Mobile: +49 170 2280 465Phone: +49 7034 643 0631

Mail: juergen.lang@de.ibm.com

Jürgen LangSenior IT Architekt

GeschäftsentwicklungBanken, Sparkassenund Finanzinstitute