Blockchain and distributed ledgers
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Transcript of Blockchain and distributed ledgers
Blockchain and distributed ledgers-------
So much more than just bitcoin
Professor Robin Teigland Stockholm School of Economics
www.slideshare.net/eteiglandwww.funnovation.se
[email protected] @RobinTeigland
Sept 2016www.hhs.se
Time will tell…..
The Blockchain is the glue that is going to drive a productivity revolution across the globe on par with what Henry Ford did with the automobile.— Paul Brody, Americas Strategy Leader, Technology Sector, Ernst & Young
Considerable investments by VCs and Corporates
>USD 1 bln VC investment
Significant attention from established players
What is the blockchain?
A combination of several technologies, arranged in a novel way
• Distributed systems• Peer-to-peer networks• Hashing functions• Public-private key cryptography• Cryptographic signatures• Elliptic curve cryptography
A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it
among a distributed network of computers.
It uses cryptography to allow each
participant on the network to manipulate the ledger in a secure way
without the need for a central authority.
So again, what is the blockchain?
A means to digitalize trust?
Trust
A belief by one party that the other party will behave in an expected manner in a transaction
Uncertainty about the other’s actions in the future
Control cannot be exerted
Interpersonal trust
Institutional trust - brand
Institutional trust - platform
–What is money?
“Trusted third parties”verify and secure digital payments
http://dataconomy.com/fintech-explained-payments/
How well does the system work?
High fees chargedSlow process Chargebacks
possibleMicrotransactions
cost prohibitive “Walled gardens”,
e.g., SwishFraud not
prevented despite KYC, AML extensive regulations
>USD 200 bln in fines
Trust is the “currency of the sharing economy”
-Botsman
All kinds of digital transactions increasing!
TodayRemittancesSME retailersEcommerce
Online bankingSharing economy
Gig economy
TomorrowInternet of ThingsM2M payments
38% of world are unbanked
But if we were to start over and design for
today’s world of digital transactions….?
Banking is essential,
but banks are not.
-Bill Gates
https://bitcoin.org/bitcoin.pdf
“…an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly
with each other without the need for a trusted third party.”
The beginnings of Bitcoin on the Internet in 2008-2009
Institutions
Emergent Collective VS
E.g., Central Bank~ Long-standing financial
institutions and regulations
E.g., Bitcoin Community ~ Self-organizing community of strangers across globe connected through Internet
Teigland, Yetis, Larsson 2013
Continued growth of Bitcoin
On September 19, 2016• 1 BTC = USD 609 • 15.9 mln bitcoins in circulation• Market capitalization of ≈USD 9.5
bln• ≈245,000 transactions daily
https://blockchain.info/charts
Bitcoin – one of 100s of cryptocurrencies
http://coinmarketcap.com/
- Andreas Antonopolous
Saying that Bitcoin is a currency is like saying that the Internet is email.
Currency is just the first app!
http://startusingbitcoin.com/blog/1-what-is-bitcoin/
http://www.iftf.org/blockchainfutureslab/
Procedural trust
No third party overseeing
• Timestamped, public distributed ledger
• Decentralized, P2P network
• Permanent record of all transactions
• Chronology and integrity enforced by cryptography
Procedural trust
Digitalization of trust?
The practical consequence [..is..] for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that.. the transfer is guaranteed to be safe and
secure, everyone knows that the transfer has taken
place, and nobody can challenge the legitimacy of
the transfer. The consequences of this breakthrough are hard to overstate.
- Marc Andreessen, Inventor of the Internet browser
Benefits of blockchain for financial services
Lower costs through shared infrastructure
Faster settlement that leads to lower capital and liquidity needs
Increased transparency, especially with cross border payments
Greater security through cryptography, transparency
Citi Research, Jan 2016
> 50 financial institutions join forces
Blockchain technology (DLT) vs The Blockchain
http://www.slideshare.net/CoinDesk?utm_campaign=profiletracking&utm_medium=sssite&utm_source=ssslideview
Blockchains represent a trade-off in which disintermediation is gained at
the cost of confidentiality.
Hyperledger: 81 members and counting
Blockchain insurance
Smart contracts
Weather dataalgorithm
Insuranceclaim payout
Software code run on a blockchain that enables external data to modify some other data
DAO: Decentralized autonomous
organization
Democratizing ownership of
organization through smart contracts on
blockchain
Four basic use cases Lightweight financial systems
− Crowdfunding − Gift cards, loyalty points, local currencies − P2P trading between asset managers not in direct
competition− Internal accounting systems
Provenance tracking− Tracking origin and movement of items, e.g., luxury goods,
pharmaceuticals, cosmetics, electronics− Critical items of documentation, e.g., bills of lading, letters
of credit Interorganizational recordkeeping
− Collectively recording and notarizing any type of data, e.g., healthcare, legal documents
Multiparty aggregation− Sharing of databases− IoThttp://www.coindesk.com/four-genuine-blockchain-use-cases/
https://letstalkpayments.com/blockchain-use-cases-comprehensive-analysis-startups-invoved/
Blockchain risks and challengesTechnology risks
−Scalability−Mining centralization−Hacking scandals−Interoperability−Flexibility
Perception risks−Terrorists, criminal activity
Regulatory risks−Government regulation,
bansAdapted from 12 Sep 2016m Blockchain Smartnetworks
Other issues
Competition vs standardization? −R3CEV
Immutability?−Ethereum hard fork
Supply of blockchain plus distributed systems skills?−Hyperledger’s call
Energy usage?−24 billion smart devices by 2020
Will blockchain recede like virtual reality in the 1990s? A technology over-hyped and still decades away
from mainstream?
http://www.coindesk.com/making-sense-blockchains-summer-stupid-perfect-illusions/
In 1996
Enablers of a “true” Collaborative Economy?
IoT/sensors
Sharing/ Collaborative
Economy
Blockchains
P2P/M2M micropayments
Big data
http://bluzelle.com/ripple-versus-the-blockchain/
Robin [email protected]
www.slideshare.net/eteiglandwww.funnovation.se
@robin.teigland
If you love knowledge, set it free…
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