Blockchain@Business

Making Blockchain Real for Business: Explained with Use Cases

Esra I. UFACIK, z Systems Lead Architect - IBM Systems, Asia [email protected]

Blockchain@Business

Table of contents§ Preface

§ Blockchain Explained

§ Fabric of Blockchain for Business

§ Use Cases

§ Early Adopters

§ How can IBM help you apply Blockchain?

For centuries, global trade has been the single greatest creator of wealth in human history

Barter6000 BCE

600 BCEMinted coins

Spice trade325 BCE

130 BCESilk road

Paper money1000 CE

1397 CEBanking

1776 CECapitalism

Globalization1986 CE

Imperial trade1500 CE

“Market friction: An inability of capital, labor and technology to move forward to create economic success.” –Adam Smith, The Wealth of Nations, 1776

Source: See speaker notes

Business networks, wealth and markets§ Wealth is generated by the flow of goods and services across a business network

§ Business networks benefit from connectivity– Participants are customers, suppliers,

banks, partners – Cross geography and regulatory boundary

§ Markets are central to this process:– Public (fruit market, car auction), or– Private (supply chain financing, bonds)

Transferring assets, building valueAnything 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

Ledgers are key…Ledger is THE system of record for a business. Businesses will have multiple ledgers for multiple business networks in which they participate.

Transaction – an asset transfer onto or off the ledger

§ 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)

Institutions and instruments of trust emerged to reduce the risk inherent in business transactions

1776 CECapitalism

1397 CEBanking

1750 BCEHammurabi code

Barter6000 BCE

Spice trade325 BCE

130 BCESilk road

Paper money1000 CE

Globalization1986 CE

Imperial trade1500 CE

600 BCEMinted coins

1300 CELetters of credit

1952 CEUniform Commercial

Code (UCC)

1995 CETrade Agreements (WTO)New innovations in trust


Technology innovations helped overcome distance and inefficiencies in the era of modern capitalism

1837Telegraph

New innovations in technology

Capitalism1776

Industrial Revolution1820

1837Telephony

Commercial Aviation1938

1950Credit cards

Globalization1986

1981PC

1989Internet

Social Media2006

2009Bitcoin

1994Mobile


Today’s asset transfer processes can be inefficient, expensive, vulnerable

Party D’s recordsParty A’s records

Bank records

Party C’s recordsParty B’s records

Auditor records

Key business frictions drive delays, costs and risks

2 | Interaction 3 | Innovation

1 | InformationImperfect informationInaccessible informationInformation risks

Transaction costsDegrees of separationInaccessible marketplaces

Restrictive regulationsInstitutional inertiaInvisible threats

FRICTIONS

Source: IBM Institute for Business Value analysis

Time

Many business transactions:

§ are time sensitive

§ require much settlement andreconciliation time

§ are process-delay prone

Cost


§ include overheads frommultiple intermediaries

§ are costly to manage and execute

§ require extensive documentation

Risk


§ are ambiguous and non-verifiable

§ are prone to errors and tampering

§ have no single source of truth

©2016 IBM Corporation12

Source: IBM Institute for Business Value analysis

As a result of frictions many business transactions remain inefficient, expensive and vulnerable

A mechanism for “digital trust” is required

Consensus, provenance, immutability, finality

Shared, replicated, permissioned

Party D’s recordsParty A’s records

Bank records

Party C’s recordsParty B’s records

Auditor records




§ Use Cases

§ Early Adopters


Blockchain defined`

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

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

IBM is adopting Blockchainto a very broad range of business applications

Total Bitcoin opportunity

Total Blockchain 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.

Blockchain 101

“Blockchain is a team sport”

Jerry Cuomo, IBM Fellow & VP Blockchain Technologies

“Blockchain is the Sharpie® for the

Internet”John Wolpert, IBM Blockchain

Operating Director

“Banks Need to Form Consortiums For Blockchain to

Work”Deloitte

How Blockchain Will Change Your Life?“The blockchain will do for transactions what the internet

did for information”Ginni Rometty, IBM CEO

“Blockchain Is Foundational, Not

Disruptive”Harvard Business Review

“A parallel foundational technology is distributed

computer networking technology, seen in the adoption of TCP/IP”

Harvard Business Review

Blockchain benefits

Saves time

Transaction time from days to near instantaneous

Removes cost

Overheads and cost intermediaries

Reduces risk

Tampering, fraud and cyber crime

Increases trust

Through shared processes and recordkeeping

Blockchain Will Become ‘Beating Heart’ of the Global Financial System

Blockchain Promise…

Blockchain underpins Bitcoin…

First Blockchain application

Blockchain underpins Bitcoin…

First Blockchain application

But

Blockchain

is not

Cryptography 10123 Feb 2017

'First ever' SHA-1 hash collision calculated. All it took were five

clever brains... and 6,610 years of processor time *

Sample'sentence'to'explain'how'SHA256'works

Sample'sentence'to'explainhow'SHA256'works.

79e8a584005254f7717547b5829fd01fa6c6831bd92a2d28c93305636c71b499

c19617618972f1dc643b2bb7075c7cacac3aea970581ca5c6ec30aee59a74c07

Extra'dot

Input'data

Hash'value(32'bytes)

Hashing Hashing

Confidential+text+to+be+secured+by+encryption a66b311c9b158c1e55d4e6cc555016d2e554ac….

Encryption

Confidential+text+to+be+secured+by+encryption

Decryption

Private+key+recipientPublic+key+recipient

2100f86450888dc01725af78a0e70415… 2626043be7d913ff5d8520b39253eef6240e31d…

Encryption

2100f86450888dc01725af78a0e70415…

Public=key=senderPrivate=key=sender

Hash%of%data%to%be%secured Hash%to%be%checked%with%original%data

Decryption

Hashing Guaranteesintegrityofdata

Encryption Guaranteesconfidentialityofdata

Digitalsignature Guaranteestheauthenticityofthesenderofdata

How it works

1. It all starts with one node

4. Users submit transactions

2. Each node has the shared ledger

5. Consensus and leader election

3. Nodes form a peer network

6. Execution & Recovery

Each block has a digital fingerprintof the previous block

Has an Owner Issues Transaction

ID = Digital Cert Copy of Ledger

Sign Transactions

Answer Validated

UpdateA = 100

ThenA=10

NowA=100

Blocks

Shared Distributed LedgerØ Distributed

ledger is implemented as a chain of blocks

Ø Transactions are recorded in each block

block 1020

Hash of previous block

transaction(TX)

Create vehicle registration

TX's hash value

block time stamp

● ● ●

● ● ●

block 1021


transaction(TX)

Transfer vehicle registration

TX's hash value

block time stamp

block 1022


transaction(TX)

TX's hash value

block time stamp

block 1023


transaction(TX)

TX's hash value

block time stamp

Update vehicle registration


block 1024


transaction(TX)


TX's hash value

block time stamp

block 1025


transaction(TX)


TX's hash value

block time stamp

block 1026


transaction(TX)

TX's hash value

block time stamp

block 1027


transaction(TX)

TX's hash value

block time stamp


Dispose vehicle registration

DistributedLedger

This result is Blockchain

Block 1575

Transaction: Hash: 76f0ec56ce04423

Block Hash: 0000057ec2fda71

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

ConsensusNode

Node

NodeNode

Node

Distributed to all nodes by Peer2Peer

Smart ContractShared LedgerBlockHash

Regulator1. Manufacturer

2. Dealer

3. Lease Company4. Lessee

5. Scrap Merchant

Node

Hash of TX

nonce

Hash of TXnonce

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Create V5C(Send transaction)Proof of WorkDiscover nonce!

OK

OK

OKOK

V5CDataOwner: RegulatorVIN:Make:Model:Method Create

TransactionCreate V5C

Create BlockConsensusCreate V5C(Execute transaction)

635840321837

000000012345OK

BlockHash

Transfer V5C(Send transaction)

Hash of TX

nonce

OK

Proof of Work

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Hash of TXnonce

Timestamp

759710275638

000000067890

Discover nonce!Create BlockConsensus

OK

OK

OKOK

OK

OK

Transfer V5C(Execute transaction)

BlockHash

Manufacturer

Transfer

Update V5C(Send transaction) Transaction

Update V5CProof of Work

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Hash of TX

nonce

Discover nonce!Create Block

Hash of TXnonce

Timestamp

387291845274

000000037648

OK

OK

OKOK

OK

OK

Consensus

Update

123Alfa RomeoMiTO

Update V5C(Execute transaction)

SharedLedger Smart

Contract

TransactionTransfer V5C

Timestamp

Proof of Work - Consensus For Public Blockchains:§ Proof of Work asks for nodes to demonstrate they have burned CPU in order to win the right

to create the next block

§ Mining is usually the process by which this proof occurs

§ Nodes attempt to solve mathematics problems

§ Called ‘miners’ because they receive payment for being the first to solve a problem.

§ Hash functions make it easy for other nodes to validate solutions– Difficult to find (Brute Force)– Easy to Check

Very CPU intensive process!

Management Entity None Multiple Organizations Single Organization

Network Type Public Consortium Private

ParticipantsFree Permissioned

Anonymous, could be malicious Identified and trusted

Consensus Mechanisms

Mining(Proof-of-Work) Voting / multi-party consensus algorithm

• Large energy consumption

• No finality• 51% attack

• Lighter, faster• Low energy consumption• Enable finality

Transaction Approval Frequency Long (e.g., 10 min) Short (100x msec)

Use Cases Crypto Currency Transactions in business networks, e.g., cross-border payment, securities transactions, etc.

Comparison of consensus approaches

In business use, it is important the the platform supports different consensus mechanisms depending on the use case




§ Use Cases

§ Early Adopters


What is required to make blockchain ready for business?

Shared ledger

Append-only distributed system of record shared across business network

Smart contract

Business terms embedded in transaction database and executed with transactions

Privacy

Ensuring appropriate visibility; transactions secure, authenticated and verifiable

Consensus

All parties agree to network verified transaction

Broader participation, lower cost, increased efficiency

Same ingredients, different qualities, different Use Cases

Permissionless

§Design points:– Public network with no 3rd

parties– Trustless environment– “Censorship-Resistance”

§Consensus:– Expensive, slow– Incentives intrinsic to platform

“Industrial”

§Design points:– Private / Semi-private network– Actors known / knowable– Regulated Industries

§Consensus:– Protocol assumes known actors– Incentives extrinsic to platform

Based on:- Swanson, T. (2015). Consensus as a service: a brief report on the emergence of permissioned, distributed ledger systems. - Brown, R. G. (2015) Towards an unified model for replicated, shared ledgers.

Industrial Blockchain Characteristics

Confidentialpermission

control

Privateun-linkable identity

Sharedsingle source of truth (ledger)

Securetamper proof

Auditable prove identity &

ownership

Scalablearchitecture

Introducing the Linux Foundation’s Hyperledger Project

§ Create an enterprise grade, open source distributed ledger framework and code base.

§ Create an open source, technical communityfocused use cases that will work across a variety of industry solutions.

§ Promote participation of leading members of the ecosystem, including developers,service and solution providers and end users.

§ Host the infrastructure for Hyperledger, establishing a neutral home for community activities and providing structure around the governance of Hyperledger.

Building a blockchain for business – details matter

Permissioned network

Collectively defined membership and access rights within your business network

Confidential transactions

Gives businesses the flexibility and security to make transactions visible to select parties with the correct encryption keys

No cryptocurrency

Does not require mining and expensive computations to assure transactions

Programmable

Leverage the embedded logic in smart contracts to automate business processes across your network

How is the Hyperledger Fabric different from other blockchain implementations?

Bitcoin Ethereum Hyperledger

Cryptocurrency required Bitcoin Ether, user-createdcryptocurrency None

Network Public Public or permissioned Permissioned

Transactions Anonymous Anonymous or private Public or confidential

Consensus Proof of work Proof of work PBFT

Smart contracts(business logic) None Yes (Solidity, Serpent, LLL) Yes (chaincode)

Language C++ Golang, C++, Python Golang, Java

How is the Hyperledger Fabric different from other blockchain implementations?

Hyperledger Ethereum Ripple Bitcoin

Description General purposeBlockchain

General purposeBlockchain

PaymentsBlockchain

PaymentsBlockchain

Governance Linux Foundation Ethereum Developers Ripple Labs Bitcoin Developers

Currency None Ether XRP BTC

Mining Reward N/A Yes No Yes

State Key-value database Account data None Transaction data

Consensus Network Pluggable: PBFT Mining Ripple Protocol Mining

Network Private or Public Private or Public Public Public

Privacy Open to Private Open Open Open

Smart Contracts ‘Go’ programminglanguage

‘Solidity’ programminglanguage

None Possible, but notobvious

QUICK FACTS

Chairman Blythe Masters/DAH

Executive Director Brian Behlendorf

Technical Chair Chris Ferris/IBM

Contribution 44,000 lines of code in February 2016

Sprint to one codebase with unified thinking

Staged releases

AssociateUpdated Jan 2017

PremierGeneral

Hyperledger Project Members

Current Architecture (v0.6)

41

membership

keysConsensusLedgerEventsChaincode

state

peerSDK

ECA, TCA, TLS-CA

v1.0 Architecturemembership

keys

EndorserCommitterLedgerEventsChaincode

state

Proposal

No SPoFNo SPoT

peerSDK ordererOrder TXs in a batch according to consensus

Relay

Batch

Latest News from Hyperledger




§ Use Cases

§ Early Adopters


Federal Reserve

Stress TestThe Stock Exchange

Trade Finance

Foreign Exchange Payments

Assets that Pay

Dividends or Interest

Structured Finance

Banking & Finance Use Cases

Insurance Industry Use Cases

Sales and Underwriting

Claims Processing

and Settlement

Assessment of Possible

Settlement Costs

Regulatory Compliance

Underwriting Expense

Healthcare Industry Use Cases

Patient Profile Patient Data Security

Validation & Payment of

Claims

Prescription & Drug

Information

Historical Data – Outcome-

Based Payments

Automotive Industry Use Cases

Supply Chain Markets

Navigating Regulatory Boundaries

Minimizing Vehicle Recalls

Auto Repair & Services

Buying & Selling on The

Secondary Market

Consensus use case – Shared routing codes

How§ Each participant maintains their

own codes within a Blockchain network

§ Blockchain creates single view of entire dataset

Benefits1. Consolidated, consistent

dataset reduces errors

2. Near-real-time of reference data

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

What§ Competitors/collaborators in a

business network need to share reference data, e.g. bank routing codes

§ Each member maintains their own codes, and forwards changes to a central authority for collection and distribution

§ An information subset can be owned by organizations

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

Immutability use case – Financial ledger

How§ Blockchain collects transaction

records from diverse set of financial systems

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

§ Privacy features to ensure authorized user access

Benefits1. 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

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

Finality use case – Letter of credit

How§ Blockchain provides common

ledger for letters of credit

§ Allows all counter-parties to have the same validated record of transaction and fulfillment

Benefits1. 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

Customer Documentation Provenance Use CaseKYC (Know Your Customer)

Customer creates public identity on the blockchain,

then puts certain documents to prove

identity on the blockchain.

Customer gives Company A permission to view the

documents – the permission is recorded on

the blockchain.

Financial Services Provider A verifies identity

and signs the person’s identity on the blockchain.

Customer applies. Instead of filling out all of the forms required, the

customer simply permissions the bank to

access the verified identity. The bank trusts

Financial Services Provider A and therefore

accepts the identity attestation and saves on

KYC verification cost.

A business network of financial services

providers cooperate to cut down KYC costs in the

long run. Customers are saved from having to

enter thousands of forms in their life.

Stock Exchange use case

§ Business Architecture:– Trading platform capable of handling 300

participants. Decentralized Peer-to-Peer architecture with nodes consisting of market participants (Banks, Securities Firms).

§ Client Value:– Reduce operating costs and settlement time.

Improved availability, through distribution of infrastructure

§ How it will transform the business:– Reduced costs by removing intermediate systems

and processing

§ End Game:– Listed products trading, clearing and settlements.

AnAPStockExchangeislookingtointroduceaTradingPlatformforlowliquidityequityandbondtransactionstoreplaceexistingmanuallyintensiveapproach

Issuers/Investors

AP Stock Exchange

Bank(Securities)

Bank(Securities)

• Apply for capital• Buy/Sell Securities (Equities, Bonds)

Shared Ledger(Low Liquidity Trading Platform)

• Issue Equities/Bonds• Buy/Sell Trades• Pay/Rec dividend/interests

• Clear/Settle Trades• Manage Platform

Scheduled Personal Property Claims Processing

Dealer

Insurer

Manufacturer

1

2

5, 10

3

4, 7

6

1 Dealer provides custom guitar specification

2 Manufacturer ships to dealer warehouse

3 Buyer purchases guitar online

4 Buyer obtains quote from insurer

5 Insurer adds scheduled item to homeowner policy

6 After 3 policy periods, guitar is stolen and police report filed

7 Buyer files claim

8 Insurer verifies police report

9 Insurer determines payout or replacement

10 Insurer communicates claim determination to insured

Insured

Insurer

Police

Dealer/Buyer

Scheduled Personal Property; Police Report; Claim

1 Serial number, description, photos, etc registered on blockchain when manufacturer builds guitar

2 Shipping info to dealer warehouse added to blockchain

3 Warehouse inventory control info added to blockchain

4 Electronic payment information is added when guitar is purchased

5 Smart contract initiates quote preparation based on market price to add scheduled item to homeowner policy

6 Quote accepted and new premium payment info recorded

7 In each policy period, current value of guitar recorded

8 Police report registered by insured on blockchain

9 Claim registered on blockchain, smart contract validates claim using police report evidence

10 Value determined by limit or tracked value; Payment or replacement provided; Guitar tracking information updated

Manufacturer

Buyer (Insured)

Police

8

9

Blockchain for government: Building trust, demolishing bureaucracy

What§ Provenance of each component

part in complex system hard to track

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

Provenance use case – Vehicle maintenance

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

Benefits1. Trust increased, no authority

"owns” provenance

2. Improvement in system utilization

3. Recalls "specific" rather than cross fleet

Commodity leaves ‘ABC’ Farm. Data from sensors (time, handling conditions)

Commodity leaves Processing center @place.Data from sensors (time, handling conditions).

Commodity leaves Storage /Ware house @place.Data from sensors (time, handling conditions)

Commodity loaded on Storage truck.Data from sensors (time, handling conditions)

Commodity reaches Market Center.Data from sensors (time, handling conditions)

BLOCKCHAIN

Customer queries Hyper Ledger to confirm correct product handling

Parties queries the blockchain before accepting the food to check handling conditions

Parties writes periodically to the blockchain (Read/Write Access)

Public health centers and Quality assurance entities

Entities queries Hyper Ledger to check mishandling and/or identify contaminated batches

Supply Chain

Explore Watson IoT with Blockchain

Smart Refrigerator § 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– business value from connected

technology– efficiencies in network and supply

chains.– status transparent to all network

members

On Line Gaming§ 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– Efficiencies through elimination of

intermediaries– Increased trust for all involved parties.

More use cases here...Other potential use cases§ Securities

– Derivative contracts– Securities issuance

§ Trade Finance– Bill of Lading– Cross-currency payment

§ Industrial– Manufacturing Process

§ Government– Government Tender Process– Voting

§ IOT– Decentralized device registration, management,

and communication– Auto insurance -- e.g., driver habits tracking – Manufacturing provenance– Device-to-device transactions

§ Retail Banking– Cross border remittances– Mortgage verification & contracts

§ Public Records – Real estate records – Land Registry– Citizen Identity– Birth/death records, inheritance– Business license and ownership records

§ Media & Gaming– Micro-payments, Content licensing, Virtual goods

exchange – Digital Rights Management

§ Cross Industry– Identity Management– Trusting Industry– Capital Asset Management

More…§ /Users/esra/z/Blockchain/Use Cases/Industry/Consumer Industry/Blockchain - Consumer

Industry conversation starter - Sep 2016.pptx




§ Use Cases

§ Early Adopters


Compliance ledger§ Real-time view of

compliance, audit & risk data

§ Provenance, immutability & finality are key

§ Transparent access to auditor & regulator

Patterns for customer adoption

Consortium shared ledger

§ Created by a small set of participants

§ Share key reference data

§ Consolidated, consistent real-time view

Asset exchange

§ Sharing of assets (voting, dividend notification)

§ Assets are information, not financial

§ Provenance & finality are key

High value market

§ Transfer of high value financial assets

§ Between many participants in a market

§ Regulatory timeframes

Blockchain for IBM Global Financing

What

Improve the efficiency of our commercial financing business by sharing data in a secure and transparent manner on Blockchain

How

Blockchain enables comprehensive view of key operational data:Purchase Order > Transaction Approval > Shipments > Invoices > Remittances

Benefits1. Fewer disputes & faster settlement

2. Reduction in dispute resolution time: 40+ days to under 10 days

3. Improved capital efficiency; freer flow of capital

Full Demo on YouTube

Commercial Financing business provides working capital to IT suppliers, distributors and partners through financing of inventory and accounts receivables

Partners SuppliersIGF

Orders IGF world-wide statistics4000+

Partners and Suppliers

2.9MInvoices / year

$44BFinanced / Year

$100MCapital tied up

any time!

25,000Disputes /

year

$31KAvg.

disputedinvoice value

44 daysAvg. time to

resolve a dispute

Dubai government, companies team up with IBM on blockchain project

Real-time Financial Audit and Compliance Ledger Use Case§ Business Architecture:

– A shared ledger for asset quality inspectors. Future step extends ledger access to a variety of external inspectors

§ Client Value:– Cost effective audit and compliance

process.

§ How it will transform the business:– An efficient and cost-effective Asset Quality

Review (AQR) process provides real-time, accurate insight on key assets.

§ End Game:– Full regulatory and audit access in real-time

to all financials. IBM establishes leadership in auto-compliance technologies. Ledger data helps existing IBM Algorithmic Credit and Asset Inspector solutions

What?• Reimagine current expensive audit process requiring

integrating data – often inconsistent and outdated -from various sources on the blockchain

How?• Shared replicated ledger serves as single point of truth• Auditors are guaranteed that no one has tampered the

data via immutability of blockchain

Benefits1. Clients, bank and regulators all see single version of

truth2. No data inconsistencies => clear audit trail3. Enables efficient lower-cost Asset Quality Reviews

(AQR)

Financial Audit and Compliance Ledger

Walmart – Food Safety, Supply Chain, Provenance, Pedigree…

FreshTurf, Singapore – logistics app for Federated Lockers Network

Everledger uses Blockchain on IBM LinuxONE™

ADEPT: IBM + Samsung: trustful P2P IoT transactions with blockchain in 2015!

Supply ChainSmart Object

Retailer

Project ADEPTIBM + Samsung

1. Autonomous detergent reorder

2. Autonomous power usage negotiation

3. Autonomous service parts reorder

ASamsungW9000washerparticipatedautonomouslyinconsumables,serviceandenergymarketplaces

+ +

BikeBlockchain – Vehicle registration

Plastic Bankmaking plastic waste a safe and secure digital currency with the power to alleviate global poverty and ocean plastic through an ethically sourced Social Plastic recycling supply chain.

Some Other Public References

Developing application for securities lending using blockchain to securely trade and transfer assets

logistics / supply chain

FX Netting

Reward points management

Contract Management

novel, digital trade finance instrument

Know Your Customer

supply chain finance

cotton trading consortium

secure, efficient and scalable exchange of health data

asset custody system

“CLS Netting is a significant step forward in reducing risk and providing further efficiencies and resilience across the

global FX market.”David Puth

CEO, CLS Group

Post Trade: Foreign Exchange Payment Netting§ The need:

Lack of standardized payment netting process for trades not settled within current CLS environment

§ Institutions intervene manually and inconsistently to complete netting process

§ Higher costs and increased intra-day liquidity demands.

§ Solution: CLS Group has partnered with IBM

§ Payment netting service, CLS Netting, for buy-side and sell-side institutions’ FX trades that are settled outside the CLS settlement service.

§ Hyperledger based platform which delivers a standardized suite of post-trade and risk mitigation services for entire FX market

§ Car Leasing Demo– https://console.ng.bluemix.net/docs/services/block

chain/ibmblockchain_tutorials.html

§ Mortgage Demo– https://www.dropbox.com/s/7iqwacwa9m5u7ev/Mo

rtgage%20Demo%20on%20Bluemix.docx?dl=0

§ Nostros/Vostros Demo– https://github.com/mcenatie/nv-chaincode

§ Supply Chain - Watson IoT Clickable Demo§ Blockchain in IBM Global Financing

– https://developer.ibm.com/tv/blockchain-in-ibm-global-financing/

§ Trade Finance Logistics§ IBM Blockchain: Getting Started with Marbles

App

§ Trading Commercial Paper§ Open Points Reward Program Application§ Crowd Funding demo§ IOT - and Blockchain Explainer Video§ IOT - Carbon Trading§ IOT - Smart Contract Development (simple

aviation smart contract for hyperledger)§ International Trade Solution on Blockchain§ Cognitive Shopping with Blockchain, Deep

Analytics, IoT

Publicly Available IBM Blockchain Demos




§ Use Cases

§ Early Adopters


Differentiation in the fabricDifferentiation in the infrastructureDifferentiation in the experience

How can IBM help us apply Blockchain?

Overview – IBM Blockchain offering in Bluemix

§ One IBM Blockchain Offering with two service plans

§ Same IBM Cloud & Bluemix user experience

§ IBM offers unique security and compliance differentiation for Blockchain via high security plan

Starter Plan

High Security Plan

Client Acquires IBM Blockchain Service through Bluemix X X

Network Connections through Softlayer X X

Cloud Provisioning & Self Service Enablement X X

Service Management and Billing through Bluemix X X

Customer Support through Bluemix X X

Secure Service Container X

Highest levels of isolation in industry X

Compliance for highly regulated industries (tamper proof keys in HSM) X

Importance of Security and Key Management

“… If you can’t trust your hardware, you cannot trust

anything …”Joi Ito,MIT Media Lab

High security business networkService Plan on Bluemix

§ Protection against misuse of privileged user credentials Blockchain operating environments and data are protected against access and abuse by root users, system administrator credentials and other privileged user access.

§ Malware protectionBlockchain data and software is protected from malware being installed.

§ Protection of peers from one anotherBlockchain peers are able to run in protected, isolated environments to prevent deliberate or unintentional leakage of information from one party's environment to another.

§ Key safetyIdentity, communications, and data privacy are safeguarded by having all keys held by a tamper-resistant Hardware Security Module (HSM) certified to FIPs 140-2 Level 4.

Blockchain security like no otherHigh Security Business Network

No system admin access, ever§ Once the appliance image is built, OS

access (ssh) is not possible

§ Only Remote APIs available

§ Memory access disabled

§ Encrypted disk

§ Debug data (dumps) encrypted

Protects against misuse of privileged user credentials, leakage of information from one party's environment to another, with keys secured in HSM

Secure ServiceContainers

Consensus Algorithm

Cryptographic Protocols

Smart Contracts

Shared Replicated Ledger

API Layer

App 1 App 2 App 3 …

High security business networkService Plan on Bluemix

Additional expected benefits§ Performance

Hardware accelerators: Crypto optimization supports an environment that moves hashing and symmetric encryption to accelerators and optimizes digital signatures to reduce drain on CPU performance.

§ ComplianceHighly auditable operating environment: Hardware and firmware audit logs provide information about any critical actions done to system such as replacing hardware or changing configurations. This allows such changes to be audited, including verification of unauthorized actions.

§ SimplicityOpen-source Hyperledger code along with a single, integrated stack.

High-Security Plan User

Other User

Public Internet Bluemix

Secure Service Container

Hyperledger

95

High Security Business NetworkArchitecture – Overview

EAL5+levelseparation

Infrastructure matters more than ever with Blockchain

Up to 10x improvement with Linux on z Systems technology

Up to 30x improvement with Linux on z Systems technology

Building a secure blockchain – details matter§ Everledger is a digital global ledger that

tracks the provenance of diamonds and protects against fraud

§ They use blockchain to record ownership and origin, and the IBM Blockchain service powered by LinuxONE provided the right level of security to prevent thieves and cyber hackers from accessing and then altering the digital ledger

§ The ledger makes it harder for thieves to sell the diamonds without re-cutting them to obscure their identifying features or serial code — and lowering their value in the process

“We have to deliver this technology with security, from the ground up, from the root source to the front end. IBM has taken the time to sew together the right security fabric.” Leanne Kemp, CEO Everledger

Differentiation in the fabricDifferentiation in the infrastructureDifferentiation in the experience

How can IBM help us apply Blockchain?

IBM knows blockchain

§ IBM has amassed a wealth of real experience with scores of real customers across industries

§ We know that blockchain usage only makes sense if a business network involved, and we’ve experimented with different approaches to network formation

§ We offer objective advice on what, how, when to build business network

§ Choice of first use case is critical! Our ideation approach quickly cuts through the hype

Supporting serious blockchain deployment!

Hyperledger fabric on Docker Hub

Fastest development of blockchain solutionsCertified Hyperledger fabric instancesSupported by IBM – available cross platform

High security business blockchain on Bluemix

Dedicated compute power – isolated partitionSecure key management (FIPS 140-2 Level 4)

Tamper resistant service containerPerformance optimized (Operating System & Privacy Services)

Bluemix blockchain service

Fast blockchain network on Bluemix – also now ChinaSamples for deployment, customization & usageTool support for development and deployment

Blockchain NOW

IBM is prepared to engage on any level

Let’s talk§ Client Center Briefings§ Customer visits§ Industry Conferences§ Blockchain Application

demonstrations

Blockchain detailed§ Blockchain Exploration Days

(IT Focus)§ Use Case Exploration

Workshop (Business Focus)

First projectBlockchain Garage Engagement:§ 2-3 day detailed use case

workshop using design thinking,

§ 2-8 wk agile application development

ScaleLarge Scale deployments supplemented by§ Use case expansion,

costs and benefits analysis

§ Design Workshops deployment and integration

Onsite, virtual or in Client CenterFree of charge

Onsite or in Client CenterFree of charge

Face to faceFor fee

Face to faceFor fee

IBM Design :: IBM Confidential :: ©2013 IBM Corporation IBM Design :: IBM Confidential :: ©2013 IBM Corporation 16

— Thomas Watson Jr., 1973

“Good design is good business.”“Good design is good business”

~ Thomas Watson Jr. 1973

“There’s one key to our future growth: the client experience”

- Ginni Rometty

IBM Design Thinking is a framework for delivering great user experiences

to our clients.

Is this a user experience?

Seat

WheelGear

s

Bars

Chain

NO - this is a user experience!

AND MORE LIKE THIS

THE AIM IS TO BE LESS LIKE THIS

SummaryBlockchain …§ is a shared, replicated, permissioned ledger

technology

§ can open up business networks by taking out cost, improving efficiencies and increase accessibility

§ addresses an exciting and topical set of business challenges, which cross every industry

IBM …§ supports the Linux Foundation Hyperledger

open standard, open source, open governance blockchain

§ delivers an enterprise-grade blockchain service underpinned by the industry’s most secure Linux server

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

ibm.com/blockchainibm.com/systems/linuxone/solutions/blockchain-technology.html

Thank you!

Backup: Additional References

§ Blockchain is a new technology that allows businesses to work together with a lot more trust. It is a revolutionary way to do business – and IBM is in the forefront of it. Blockchainhas the ability to change the world in the same way that the Internet did and redefine how business happens. We are in the early days of this technology but IBM saw the potential and got in early to help develop blockchain and build solutions to solve real business problems. IBM has the most comprehensive offering in blockchain and we are working with clients and developers across multiple industries to explore how blockchain can transform how business is done in areas as diverse as banking and financial services, supply chain, healthcare, travel and transportation, media and entertainment and energy and utilities.

– http://www-03.ibm.com/press/us/en/presskit/50610.wss

IBM Blockchain, News, Demos, Infographics

§ Blockchain benefits for electronics: Taming complexity with better supply chain visibility– https://www-01.ibm.com/common/ssi/cgi-bin/ssialias?htmlfid=GBE03809USEN&

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

§ Trust in trade – The modern supply chain is long on data and short on trust, but blockchainscan bring breakthroughs in visibility, optimization and demand.

– https://www-01.ibm.com/common/ssi/cgi-bin/ssialias?htmlfid=GBE03771USEN&

§ blockchain-quick-start– https://developer.ibm.com/linuxone/wp-content/uploads/sites/57/blockchain-quick-

start.pdf

§ Hyperledger Project Meetups – https://www.meetup.com/pro/hyperledger/

More Bookmarks

Blockchain@Business

Presentations & Public Speaking

Transcript of Blockchain@Business