Blockchain technology amplify your enterprise / IBM

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Making Blockchain Real for Business

Explained

1V2.01 29 Oct 15https://ibm.box.com/BlockExp

IBM Blockchain 2015

Investment Interest in Blockchain• Blockchain has the potential to reduce infrastructure

cost by up to $20 billion a year.• P2P money Transfer across international borders -

segment worth $500 B.• Anderseen Horowitz ( VC firm) has invested over USD

$100 million into Blockchain technology• All time Public/VC investment into Blockchain startups -

$894 million.• Over 4000 active fintech startups in the NY arena and

investment in the sector tripling last year to $12 billion.

Source – LTP,Finextra

IBM Blockchain 2015 Source: Lets talk Payments

Blockchain Adoption – Understanding the Disruption

IBM Blockchain 2015 Source: EverisDigital/LTP

FinTech Landscape – Disruptive Forces in Financial services

IBM : Systems Group :: © 2015 IBM Corporation 5

Blockchain in a nutshell

Smart Contract

Smart Contract

CryptographyCryptographyShared LedgerShared Ledger

ConsensusConsensus

Ensuring secure, authenticated & verifiable transactions

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

What?

IBM Blockchain 2015

BLOCKCHAIN ESSENTIALS


Business Networks, Markets & Wealth

• Businesses don’t exist in isolation– Connected to customers, suppliers, banks,

partners etc. through Business Network– Networks cross geography & regulatory

boundary• Wealth is sum total of value of goods & services

across business network– Growth constrained if silo’d or inefficient

• Flow goods & services across business network is a Market– OPEN (fruit market, outcry commodities, or– CLOSED (supply chain financing, bonds)


Transferring Assets, building Value

• Anything that is capable of being owned or controlled to produce value, is considered an asset – can be tangible or intangible – value can be converted into cash.

• Cash also an asset.• Asset examples:

– Cars, value clothes (physical)– Bonds, securities, repurchase agreements

(intangible)– Licenses & patents (intangible assets)– Music, video, games (intangible, digital)


Participants, Transactions & Contracts

• A participant is a member of a business network– Customer, Supplier, Government, Regulator

– Usually reside in an organization

– Have specific identities and roles

• A transaction is an asset transfer between two or more participants, for example– John gives a car to Anthony (simple)

– John gives a car to Anthony, Anthony gives money to John (more complex)

• A contract is set of conditions under which transactions occur, for example– 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 independent third party arbitrator)

$


Blockchain in a nutshell

Shared ContractShared

Contract

CryptographyCryptographyShared LedgerShared Ledger

ConsensusConsensus

Ensuring secure, authenticated & verifiable transactions

Business terms embedded in transaction database & executed with transactions

All parties agree to network verified

transaction

Append-only system of record shared across

business network

Broader participation, lower cost, increased efficiency


When is Blockchain useful?Many companies are jumping on the blockchain bandwagon, but do not have fully vetted use cases. Blockchain can work best when ALL of the following conditions are met:

Shared Database

Transaction Interaction

Disinter-mediation

Absence of Trust

Multiple Writers

• There is a need for a structured repository of information, whether the data is structured in spreadsheet like tables or like a filing system

• Databases are modified via “transactions” which represent a set of changes to the database whiuch must be accepted or rejected as a whole

• Blockchains truly shine where there is some interaction or dependency between the transactions created by different writers

• Blockchain transactions can be created collaboratively by multiple writers without either party exposing themselves to risk

• There needs to be a lack of a trusted intermediary or central gatekeeper to verify transactions• Blockchains enable databases with multiple non-trusting writers to be modified directly• Transactions can be independently verified and processed by every node which maintains a copy of the

database

• There needs to be a level of mistrust between entities writing to the database• Mistrust arises between separate organizations, but can also exist within a single large organization,

such as between departments or operations in different countries• Mistrust means that one user will not accept the “truth” as reported by another user

• There needs to be more than one entity which is generating the transactions that modify the database

• In most cases the writers will also run “nodes” which hold a copy of the database and relay transactions to other nodes in a peer-to-peer fashion (but not required)


Public Network Fabric

Business Adoption Challenges

1. Designed for public network 2. Slow and inefficient 3. Built‐in virtual currency4. Difficult to push upgrades5. Heavily forked6. Lack enterprise support

Private Network Fabric

Business Adoption Challenges

1. Incomplete & usually untested 2. Usually too simple & inflexible 3. Still lack critical enterprise features

such as identity management system4. Generally lack community support5. Not standardized

There are two options for building private network for businesses 1) Reconfigure a public network fabric for private use, or 2) Build on top of a untested private network fabric that’s available

Is blockchain ready for business?


Industrial Blockchain – IBM’s Perspective

Private & permissioned (not public)

• Private = known set of participants, known identity

• Permissioned = members need to fulfill criteria to join

• (Public = open set of participants, potentially unknown identity)

Privacy through Cryptography

• Transaction privacy

• Participant identity & trading privacy

Appropriate consensus

• Mechanism by which participants agree on state of shared ledger.

• Public needs heavyweight consensus for anonymous participants

• Known participants opens up other forms (e.g. participant bonds)

Compliance & audit

• Current spend can be vastly reduced

• Automated processes possible

What?


Blockchain vendors – Offer specialization

Each Vendor – Offers 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.

- Crates fragmented blockchainmodels for enterprise.


How can IBM Blockchain be Different?

How Do we differentiate ?

- 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.


Blockchain – Transaction Processing vehicle

Enterprise Integration Considerations- Integration with incumbent SoR- Compliance and regulatory

requirements- Data formats – ISO20022, EDI

820 etc.- Blockchain to enable transaction

processing, and preserve the enterprise SoR systems.

- Design Intent - Path of least disruption- Accelerate Enterprise

adoption


Our Approach


Our support for HYPERLEDGER


InfoGraphic


Summary

• Disruption – Everywhere there is Friction AND costs.

• P2P Network – Exploit underutilized Capacity

• Business Network – Emergence of New Networks

• New Payment Models – P2P, Virtualized Financial Services, Overlay services

• Discern between Virtual, cyber and Cryptocurrency.

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Silos of the Financial Services Industry

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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 efficiencies and increase accessibility

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

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

Blockchain technology amplify your enterprise / IBM

Technology

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