1

Evolution

The

1SUMMARY

3

A mysterious person, Satoshi Nakamoto, invented Bitcoin in 2009, thus creating the first decentralized cryptocurrency.Since its inception, Bitcoin has inspired new ideas and created new paradigms in several contexts.

Bitcoin network relies on a new technology called blockchain: a shared public ledger recording every Bitcoin executed transaction.

Registering over 300,000 daily transactions in over 120 counties, Bitcoin’s success can be measured by a market capitalization which surpassed the 20 billion dollars mark in 2017, and places itself as the first digital gold resource available on the internet

Blockchain is not limited to bitcoin or other cryptocurrencies. Its most prominent functionalities include:

• Timestamping & Notarization; this function allows to store any kind of valuable information within the transactions themselves.

• Smart Contracts; that is software that runs exactly as programmed (but) with no possibility for downtime, censorship, fraud or third party interference, and can implement logic to cryptocurrency transactions.

holds great potential, its technological revolution can

impact todays and future businesses, reshaping the finance industry as a whole, not only how

it operates.

Its decentralized system inspired a lot of disruptive use

cases in different industries that could potentially revolutionize

business models or create new ones.

NTT DATA has mastered this potential.

Through foresight and closely knit cooperation, we can evolve your business environment with the

power of Blockchain to help you meet your goals, set new ones

and create a smarter future.

BITCOIN

KEY NUMBERS

FUNCTIONALITIES

2TRENDS

5

Today, transactions are managed by traditional recognized institutions and validated by a central authority.

Each entity has its own centralized system and customers trust the current monetary system and institutions which manage money on their behalf.

Bitcoin inspired a new decentralized model that provides a distributed network of computers running algorithms which validate transactions based on a common set of rules (consensus). In a permissionless network like Bitcoin, anyone can run a node. All transactions are entirely monitored and validated by these nodes (not regulated institutions), and many people have already embraced it.

TRUSTED INTERMEDIARIES

TRUSTLESS

WHAT HASBITCOININSPIRED?

Bitcoin triggered the creation of cryptocurrencies, digital money not created by central banks, but entirely based on peer-to-peer networks which take advantage of distributed databases through different internet nodes.

MARKET TREND

6TRENDS

Blockchain enables a new value transfer systems, powered by smart contracts and digitation of traditional assets. It can also be used for other purposes such as IoT, digital identity, proof-of-existence, and more.

PUBLIC VSPRIVATEBitcoin, Ethereum and other cryptocurrency-based blockchains are permis-sionless: anyone can run a node, join or leave a network, and information is accessible to anyone.

When consulting and tech companies became interested in blockchain, they started to work on new solutions that could be suited for enterprise needs: the new idea was to create blockchains that could serve a specific purpose other than managing a cryptocurrency and that would ex-clusively allow authorized members to access the network (permissioned). This led to the differen-tiation between public and private blockchain, which gathered interest from financial institutions and other companies that were previously not comfortable with studying and experimenting with bitcoin.

PUBLIC PERMISSIONLESS PRIVATE PERMISSIONED

PERMISSION LAYER

7

REVOLUTIONIZE NEW PLAYERS, NEW IDEASNew players are leveraging distributed ledgers to create new systems, new processes, new business models from scartch. Disintermediation

REPLACE NEW PLAYERS, OLD IDEASBoth in and outside finance, new players are remodelling and recreating existing businesses and processes using distributed ledgers, achieving a dominant position.In many cases an intermediary is still necessary or convenient, the technology provider acts as an access manager and effectively becomes a new type of intermediary, replacing the old ones.

ENABLE OLD PLAYERS, NEW IDEASMainly outside the finance sector, blockchain technolgy enables new features, new business ideas for existing players regardless of the presence or absence of an intermediary. Integrating blockchain-based functionality like smart contracts and timestamping in their existing systems, existing institutions can create and add new processes to their infrastractures.

UPGRADE OLD PLAYERS, OLD IDEASMainly in the finance sector, there are incumbents that ultimately need a central authority, which in many cases is required by law. Blockchain’s most disruptive applications are threatening the very role of traditional intermediaries.These incumbents and middlemen are trying to redesign and possibly replace the architecture of their existing technologies using distributed ledgers, in order to improve the efficiency of their systems and save costs while keeping their roles and functions as intermediaries.

THE PLAYERS

DISRUPTION

INNO

VATI

ON ENABLE

UPGRADE REPLACE

REVOLUTIONIZE

and decentralization are strongly pursued as they encourage a new culture, new ways of thinking and new types of organizations. Existing institutions may become new players in a new digital frontier only if they are able to redefine their roles. Blockchain can also be foundational to another technology (Artificial Intelligence, Virtual Reality, Internet of Things, etc.) and enable the implementation of something totally new, never seen before.

3POC ENABLERS

10POC ENABLERS

Blockchain is an adaptative and innovative technology that holds potential to change current systems or businesses.

Its potential would not only impact banking and financial industries. Infact, Blockchain’s applications range over multiple industries and fields.

TELCO & MEDIA• Micropayments (music or news)• Royalty assurance• Cryptocurrencies Portfolio & Payments• Digital Identity• Trade Finance• Digital Assets• IoT Data Timestamping• Strong Authentication

ENERGY• Smart Grids• Charging Station• Cryptocurrencies Portfolio & Payments• Digital Identity• Trade Finance• Digital Assets• IoT Data Timestamping• Strong Authentication

FINANCE & INSURANCE• Charity Platform• Loans 2.0• Policies Automation• Cryptocurrencies Portfolio & Payments• Digital Identity• Trade Finance• Digital Assets• IoT Data Timestamping• Strong AuthenticationPUBLIC & HEALTH

• Healthcare Data• Educational Storage and Verification• Identity card as Blockchain account • Cryptocurrencies Portfolio & Payments• Digital Identity• Trade Finance• Digital Assets• IoT Data Timestamping• Strong Authentication

RETAIL & SERVICES• Agreement with Vendor• Martketplace Platform• Supply Chain• Cryptocurrencies Portfolio & Payments• Digital Identity• Trade Finance• Digital Assets• IoT Data Timestamping• Strong Authentication

11

The wide variety of blockchain’s possible benefits (immutability, auditability, near real-time settlement) and use cases cannot satisfy everyone’s needs indistinctly, sometimes in stark contrast with what some actors need (bitcoin-like blockchain’s provide transparency, while financial institutions need confidentiality). This research is slowly changing the idea of blockchain as it is interpreted according to what an entity needs and what it doesn’t need: Public institutions might need transparency and auditability, financial institutions might need fast settlement and many transactions per second but not disclosing every piece of information to every participant. Some use cases might need both privacy and transparency; some might not even need immutability.

SUMMARYThe media industry has traditionally been highly intermediated: artists’ contracts written years ago do not necessarily reflect the way that music is now consumed, and royalty payments depend upon airplay statistics gathered by music labels and copyright databases maintained by licensing bodies.

TELCO & MEDIAROYALTY ASSURANCE

DESCRIPTIONBlockchain could resolve this challenge by connecting authors, musicians and videographers directly with consumers, as well as by making the organizations at the heart of the industry operate more efficiently. It could help identify digital rights, a more effective management across the industry and assure proper compensation to artists and content owners.

TO TRULY UNDERSTAND ITS POWER, LET’S SEE HOW BLOCKCHAIN COULD REVOLUTIONIZE SOME BUSINESS MODELS IN DIFFERENT INDUSTRIES.

12

SUMMARYSmart grids are the evolution of electrical grids; controls, computers, automation and new technologies working together to better meet electrical demand.This includes smart meters, smart appliances, renewable energy resources and communication protocols.

DESCRIPTIONBlockchain and in particular cryptocurrencies and Smart contracts can change the way energy is payed and managed.Smart meters can use smart contracts to store energy consumption, receive payments and provide energy to a customer calculated in cyrptocurrency available in the smart contract.Smart Contracts can be also used to pay/refund user for exceeded energy produced by renewable energy systems.

POC ENABLERS

ENERGYSMART GRID

13

SUMMARYPatients’ medications are frequently prescribed and filled by different entities (hospitals, provider offices, pharmacies, etc.). Each one maintains its own “source of truth” regarding the patients medications, frequently with outdated or simply wrong information. As a result, providers in different networks, may not have complete visibility of prescriptions. Additionally, electronic prescriptions must be directed to specific pharmacies and paper prescriptions can be duplicated or lost.

DESCRIPTIONBlockchain can transparently track the provenance of goods as they pass from one organization to the next, building trust and awareness in the process. Blockchain provides a permanent record of transactions which are then grouped in blocks which cannot be altered. When applied to the supply chain, digital product information is digitally tied to food items and the information is then inserted in the blockchain, along with every other step of the process.

PUBLIC & HEALTHEALTHCARE DATA MANAGEMENT

RETAIL & SERVICESSUPPLY CHAIN TRACEABILITY

SUMMARYSupply chain tracking and authentication, understanding food provenance and condition, is critical in finding and helping address sources of contamination and unexpected variances in the worldwide supply chain. The main challenge is setting up technology for every supply chain actor, in order to collect data and insert it in an IT system. For example, innovative data entry tools running on smartphones, with Cloud technology back-ends, are expected to allow field workers share relevant data, improving supply chain efficiency, identify bottlenecks and reduce waste.

14

SUMMARYInsurance policies are contracts between the insurance company and the insured (policyholder). The contract determines the conditions where the policyholder can benefit from a financial coverage in case of a specific event.Today policies are created and managed through the use of insurance companies’ proprietary platforms and through detailed human resources analysis of conditions and events in order to decide on proper refunds and payments.

FINANCE & INSURANCEPOLICY AUTOMATIONDESCRIPTION

Blockchain technology has the potential to transform health care, placing the patient at the center of the health care ecosystem and increasing the security, privacy, and interoperability of health data. This technology could provide a new model for health information exchanges by making electronic medical records more efficient, disintermediated, and secure.

DESCRIPTIONSmart Contracts and Oracles can improve the policies. Smart contracts can encode the logic of the policy and oracles can provide trigger events from reliable information sources.

POC ENABLERS

15

CROSSMARKETTRADE FINANCE

SUMMARYTrade finance is the process of financing trade activities between exporters and importers, reducing the risks for all the participants involving third intermediaries like banks, insurances, etc.FIs serve to cover issues of liquidity, currency fluctuations, political instability, non-payment. Current solutions are letter of credit and banks guarantee that have a cost and are rely in contracts.

DESCRIPTIONSmart Contracts and cryptocurrency can totally change this process. The rules of the trading can be encoded in a smart contract, that manages the payment process in a transparent and immutable way when trigger events happens (Delivery, customs check, goods inspection, etc).If lack of liquidity is a problem, FIs can finance it by providing loans based in cryptocurrencies and smart contracts in a transparent way connecting the financing to the trading smart contract.

16

4REGULATORY

18

Regulators all over the world are struggling to define the nature of virtual currencies and the appropriate set of rules to be applied. Not surprisingly, laws vary a lot depending on the country and the context.

• The definition of cryptocurrency. Is it a currency, a commodity, a payment method, a technology, a security or something else completely?

• The reference laws. Which Tax regulation should be applied? How should Anti-Money Laundering (AML), Know Your Client (KYC), Counter-Terrorist Financing (CTF) be applied?

REGULATORY

• The differentiation of rules applied to individuals or companies (like digital currency exchanges and custodial wallet providers). What kind of regulation should digital currencies be subject to? How to deal with noncustodial wallets and multi-signature

MAIN ISSUES POLICY MAKERS FACE

RECENTLY, THE EUROPEAN UNION HAS ACTED IN REGARD TO CRYPTOCURRENCIES IN FEBRUARY 2017The European Parliament committee has proposed to ban geo-blocking of digital currency users.

The European Parliament released a draft legislation outlining the plan to monitor Cryptocurrency users by associating virtual currencies addresses to the identities of the owners of virtual currencies. In addition, it is evaluating the possibility to allow users to self-declare to proper authorities on a voluntary basis.

Japan is set to begin recognizing bitcoin as a legal method of payment starting 1st April 2017. The country’s legislature passed a law, following months of debate that brought bitcoin exchanges under anti-money laundering/know-your’s-cus-tomer rules, while also categorizing bitcoin as a kind of prepaid payment instrument.

19

Blockchain is far more than a ledger for cryptocurrencies, yet lawmakers have not been able to keep up. Authorities will soon begin to look beyond cryptocurrencies to understand the legal implications of other applications of blockchain technology. There must be a dedicated effort to identify gaps in current regulations and determine how to fill those gaps without prematurely or overly burdensome regulation.

Lawmakers may even see opportunities to use blockchain in regulatory work, rather than just seeing it as something to be regulated. The key factors that make this technology so interesting for law makers are:

• Decentralized proof of validity• Improved speed• Reducing friction• An immutable public ledger with all relevant

history.

THE MAIN OPEN ISSUES THAT HAVE TO BE ADDRESSED BY REGULATORS ARE:

20REGULATORY

WITH REGARDS TO BLOCKCHAIN REGULATION, THE LATEST ANNOUNCEMENTS FROM THE END OF 2016 ARE THE FOLLOWING:

In December 2016, the Illinois Blockchain Initiative was formed and designed to propose policy that will address not only the regulation of blockchain technologies in the State, but also the simplified incorporation of the technology in government. Illinois is requesting proposals regarding the creation of identity, attestation and ownership registries, compliance and reporting ledgers, and benefit and entitlement ledgers.

In December 2016, the Federal Reserve released a research paper on distributed ledgers exploring the possibilities of integration in the financial industry, including legal and governance challenges future proofs-of-concept will have to face. Key considerations regarding the application of distributed ledgers in cross-border transactions emerged:

• Alleviate the friction caused by the credit chain in payments, clearing and settlement.

• Combat the problem of an ever-increasing amount of frauds by making real-time audit at a peer level a reality.

21

5WHAT NTT DATA

OFFERS

23

NTT DATA WILL FOLLOW AND ASSIST ITS CLIENTS IN THE BLOCKCHAIN ADOPTION, FOLLOWING METHODOLOGY APPROACH DESCRIBED BELOW:

Find specific opportunities for use, where technology can

make a difference, emphasizing the distinction of the company

towards the competition.

Explore the feasibility and availability, with practical

hypothesis. Considering how much technology is apparent to

end users. Respecting regulatory and legislation.

Considering what the competitive scenario and its

capacity for innovation.

Achieve good prototypes, with a view to Continuous Improvement. Coming to

measure immediate results and trying to assess how to release new services, calibrating efforts and objectives with appropriate

scale. Aware of how to make the fair return, likely scenario of

cooperation.

24

Blockchain is indeed an innovative solution, but it should not be hailed as a panacea. Nevertheless, it encourages research and development to first envision a LOGICAL idea of how Blockchain could be used and then go through the steps for its TECHNOLOGICAL implementation.

Following methodology approach, is needed to rethink processes, redesign architectures, core applications, question methods and compare with existing technology. Understand how to adopt, adapt, and harness blockchain in order to benefit business, as well as understanding any eventual cost for its adoption.

“The transformation has to make sense.”The key word is TRADE-OFF, between costs and benefits, and between business and how the technology will be implemented in that business. It is important to fully comprehend actors, roles, and goals when identifying use cases.

NTTDATA is well aware of the multitude of uses cases, infinity of ideas and numerous contrasting visions, but also knows what can and cannot be achieved.

Through solid knowhow, skills and core competencies NTTDATA acknowledges where technology is heading and most especially it has the ability to foresee future problems and consequently prepare solutions.

NTTDATA’s approach is to apply a comprehensive framework, able to identify innovative solutions which emphasize competitive advantage, meeting and possibly exceeding current market demands by leveraging on thoroughly evaluated efficient Business solutions.

WHAT NTT DATA OFFERS

25

THE BLOCKCHAIN VISIONIn the context of continuous evolution, NTTDATA proposes an end-to-end MODELLING solution; starting from Business requirement gathering, to defining and analyzing any eventual impact, up until use case implementation.Rationalization and solution implementation will occur in the midterm, with full impact on pro-cesses and business models, at least for those

solutions which have been identified to effectively yield advantages for both time and costs. Starting from a clear, on-point, business require-ment to innovate and a consciousness knowledge of scalability and capacity requirements, both startup and corporate businesses alike, will have to crucially assess the benefits of adopting new technology in a practical way.

26

DEFINE SCOPE

FEASIBILITY AND IMPACT

BUILD AND RELEASE OF POC

Identifying problems and characteristics of blockchain and propose ideas that could solve them. Choices made in regard to Blockchain will succeed only if they will be effective enough to emphasize the distinctiveness of the companies that adopt it (differentiation in the market).

A good “yardstick” is to evaluate these solutions compared to effective compliance with a business issue. If Client solution effectively directs a process by automating and speeding up, avoiding larger and potential costs, it will succeed.Vice versa, interesting experiments in technology without a clear answer to business problems will encounter major difficulties and will probably not succeed.

Illustrate solutions that NTTDATA can provide for defined POC ENABLERS.

1

2

3

WHAT NTT DATA OFFERS

NTT DATA WILL FOLLOW AND ASSIST YOU WITH:

Contact us

NTT DATA ITALYViale Cassala 14/a, 20143 MilanoPhone: + 39 02 8312 51

http://emea.nttdata.com/it/home/it/index.htmlhttp://emea.nttdata.com/it/contattaci/it/index.html

NTT DATA UK1 Royal Exchange, London, EC3V 3DG, United Kingdom Phone: + 44 20 7220 9200 - Fax: + 44 20 7283 8944

http://emea.nttdata.com/ukhttp://emea.nttdata.com/uk/who-we-are/contact-us-locations/contact-form/index.html

NTT DATA DEUTSCHLAND GMBH Hans-Döllgast-Straße 26, 80807 München

http://emea.nttdata.com/de/startseite/index.html

Authors

Consulting Finance Business InnovationMaria Cione: maria.cione@nttdata.com Tiziana Marra: tiziana.marra@nttdata.com

Iot Blockchain ChampionFrancisco Spadafora: francisco.spadafora@nttdata.com