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© 2016 IBM Corporation 1© 2016 IBM Corporation

Blockchain ExplainedBtSym ‘16

Percival Lucena IBM Research slideshare.com/plucena

V3.3, 12 July 16

IBM Research

▪ World’s largest IT Research organization ▪ 3000+ researchers ▪ 12 labs in the world - Rio, Sao Paulo ▪ +70.000 patents - 7355 patents in 2015 ▪ Nobel Prizes

▪ 1973 Leo Esaki, of the Thomas J. Watson Research Center, earned the Nobel Prize in Physics for work in semiconductors

▪ 1986 Gerd Bining and Heinrich Rohrer, of IBM Research – Zurich for the scanning tunneling microscope

▪ 1987 Georg Bednorz and Alex Müller, of IBM Research – Zurich for research in superconductivity ▪ 2014 - Dr. William E. Moerner Former IBM Research scientist has been awarded the 2014 Nobel

Prize for Chemistry “surpassing the limitations of the light microscope.”

IBM Research Areas

IntroductionBitcoin

Blockchain Hype-cycle

Source: Bart Suichies – December 21, 2015

Introduction

Key Concepts:

Benefits:

Key Concepts and Benefits

Introduction

Problem - Inefficient, expensive, and vulnerableSolution - Consensus, provenance, immutability and finality

Party A’s records

Bank records

Party A’s records

Party C’s records

Auditor records

Party B’s records

Party D’s records

Party C’s records

Auditor records

Party B’s records

Party D’s records

Bank records

Party A’s records

Shared, replicated, permissioned

Problem and Solution

Use Cases

▪ Securities ▪ Post-trade settlement▪ Derivative contracts

▪ Syndicated Loans ▪ Supply Chain ▪ Healthcare ▪ Digital Rights Management ▪ Financial Audit:

Triple Entry Accounting

▪ Retail Banking ▪ Cross border remittances▪ Mortgage verification & contracts▪ Fidelity Points

▪ Public Records ▪ Real estate records ▪ Vehicle registrations▪ Citizen Identity

▪ Digital Property Management

Financial Use Cases

Letter of Credit Microfinance▪ Increase the speed of

transactions execution

▪ Reduce cost and risk.

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

SmartContracts can be combined with IoT:

▪ Peer-to-peer money lending for subprime

▪ Social and conomic inclusion for development Countries

Non-Financial Use Cases

Media Publishing Electronic Medical RecordsCollect and distribute money to songwriters and copyright holders

▪ Patients have full access to their own data

▪ Grant access to health-care providers

Introduction

Time

Ledger

Blocks of Transactions

Block 11

Proof of work: 0000005647kjp

Previous block: 000000432qrza1

Transaction lk54lfvx

Transaction 09345w1d

Transaction vc4232v32

Block 12

Proof of work: 000000ahpoka9

Previous block: 0000005657kjp

Transaction dd5g31bm

Transaction 22qsx987

Transaction 001hk009

Block 13

Proof of work: 00000090b41bx

Previous block: 000000ahpoka9

Transaction 94lxcv14

Transaction abb7bxxq

Transaction 34oiu98a

Block 13

Block 12

Block 11

Blocks of Transactions

Consensus Algorithms

Process work to validate

transactions

Node ....Transactions to be processed Transactions already validated (and in the chain)

NodeNode Node

...

Example of work: find right code to open the lock. Difficult to find the code, easy to verify it.

Algorithm

1. Retrieve group of transactions from pending transactions to be validated

Group to be validated

2. Process work to generate proof (e.g. lock code) 3. Broad cast proof-of-work to all nodes (e.g. code to open the lock)

4. Write transactions into the blockchain if proof-of-work is valid for majority of nodes (e.g. nodes can open the lock)

Proof of Work

Introduction

Source: CoinDesk and IBM LA Client Center

LA Blockchain Mkt (estimate) in M$

0.0

75.0

150.0

225.0

300.0

2016 2017 2018 2019Conservative Somewhat Bullish Bullish

Blockchain & Bitcoin – Addressable Market

Bitcoin & Blockchain

Hardware & Storage

Merchants

Investments & Banking

Wallets

Payment Processors Blockchain Technology

Exchange

Blockchain Enterprise Solutions

Blockchain Development

Financial Services

Mining

Media & Advocacy

EcosystemOverview

Ecosystem

Reference: fintechinfo.com

EcosystemBlockchain Related Startups

▪ Collaborative program ▪ Headed by the Linux Foundation

▪ Announced December 17 2015 w/ 17 founders ▪ Now w/ 100 members

▪ Members are IT and/or Financial players ▪ IBM is a key contributor

▪ Work together to improve Blockchain technology ▪ As a cross-industry open standard for distributed ledgers ▪ On the path to rewrite how we do business transactions

▪ Open source ▪ Open standards ▪ Open Governance

Linux Hyperledger Project

Linux Hyperledger Project

Community + Code Linux Hyperledger Project

Open Source Code: Blockchain for business; Consensus | Provenance Immutability | Finality Open Governance – 40 member cross industry board

Cloud IBM Blockchain

Blockchain managed service on IBM Cloud and z Systems; Identity | Consensus | System Integration | Hardware-assist for Performance & Security IBM Blockchain on Bluemix

Clients Blockchain SolutionsBlockchain Garage

Making Blockchain real for business Blockchain Garage; New York | London | Singapore | Tokyo Blockchain Services Practice

Blockchain for Business – Our Point of View

Future Trends▪ DAPPS: dUbber, dCarzip, dAirBnb ▪ Multiple Chains Integration

▪ Proof of stake implementations for consensus

▪ Analytics

▪ Search engine

▪ Oracles, Autonomous Agents

▪ Natural language contracts

▪ Proof of stake

"On the Blockchain, no one knows you're a fridge"

Richard Brown – IBM Executive Architect for Banking and Financial

Future Trends

▪ DAOs – Decentralized Autonomous Organizations

▪ No central control

▪ Virtual

▪ Transparent

▪ Delegative democracy

▪ Proposal based

▪ Device Democracy ▪ Autonomously managed

▪ Device to device messaging

▪ Agreement between devices

3134

Future Trends

Pratical Example:Explore Watson IoT with Blockchain

Businnes Contract

Pratical Example:Explore Watson IoT with Blockchain

Demo Link

Pratical Example:Explore Watson IoT with Blockchain

Recommendations & Closing RemarksPatterns for Customer Adoption

Closing Remarks ...Do You Even Need a Blockchain?

Source: Bart Suichies – December 21, 2015

24Page© 2016 IBM Corporation

Not for all …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