Business Opportunities in Fintech and BlockchainBY

Dr. Saeed Al Dhaheri

Chairman,

@DDSaeed

De-centralizing the world

Removing Intermediaries

Increasing transparency

Real-time transaction processingSmart contracts

Increased security

Reducing transaction cost

Distributed ledger technology Peer-to-peer trusted network

Etisalat Academy Blockchain Seminar, March 23, 2017

Business Opportunities in Fintech and Blockchain

AgendaFintech and Blockchain: review & Definitions

Benefits

Market size

applications

Types of blockchain

Ethereum vs. Hyperledger

Major world initiatives

UAE Initiatives

Business opportunities

Challenges

The Current Reality

• “The Global financial industry, network and ecosystem are in urgent need of an overhaul of infrastructure and architecture. It is very difficult to facilitate payments efficiently through bank systems and regulated financial networks”.

we need think of new technologies that can address current challenges and bring added values

What is fintech?

• “Fintech is a new financial industry that applies technology to improve financial activities”, professor Patrick Schueffel of the School of Management Fribourg

• Traditional services renewed with faster speed, with more accessibility, and at less cost: Bank, insurance, money remittance, and payment

• New services equipped with micro transaction, with better intelligence, and at less cost: micro financing, mobile wallets, and personal finance services

• Engagement in forms of B2B, B2C,in addition of C2C

What is Blockchain

• Represents a paradigm shift in how software is written and developed

• It is a decentralized consensus making platform

• Data is stored in the form of a transaction in blocks, and the blocks are chained and signed (immutable).

• Blockchain acts as a value transfer system: transferring assets within a network

• In reality, it is a platform that enables “making contracts” among untrusted parties without the traditional method of “guaranteeing the legitimacy” of the agreements stored in the contracts.

• It is NOT

Log-in based.

Request and response based.

Server-client model based.

• Blockchain is a catalyst for building decentralized applications - Dapp

What is Blockchain

Internet of Information

TCP/IP = Communication Protocol

Revolutionized the way we exchange information

Aka information data highway

1st use case: email

Internet of value

Blockchain = value exchange protocol

Can transform business, economy & politics with smart contracts as a bases for peer-to-peer transactions

1st use case: Bitcoin

Why does this matter?

• Financial transaction requires trust to be settled.

• The trust is usually provided by trustworthy bodies such as governments, central banks, or highly reputable organizations.

• One of fundamental goals of blockchainis to bypass the trust providers, a.k.aintermediaries.

• Trust by technology is the new hegemony.

• Trust by technology enables more frequent, cheaper, and micro transactions.

• More importantly, the new technology can automate settlement of financial transactions.

• Blockchain fits perfectly as the trustworthy technology for the purpose.

Smart Contracts

• is equivalent to a little program that you can entrust with a unit of value (as a token or money), and rules around that value

• Assuming third-party intermediaries not needed for transaction between two or more parties

• Smart properties: digital assets (or things) that know who their owners are, and linked to the blockchain.

• Smart contracts are the building blocks for Dapps

• Smart contracts can save the banking industry billions of dollors spent on executing contracts

Benefit of Blockchain

• Real-time processing

• Reduced transaction costs

• Increased security

• Transparency and auditability

• Fairness advantage

• Everywhere is the same

• The record is permanent

• Nobody is in charge

Blockchain: market size, vendors, and startups

IBM blockchain on Bluemix Ethereum blockchain as a service by MS Azure Rubix by Deloitte

• Market size to grow from $210 Million in 2016 to $2,3 Billion by 2021,at a (CAGR) of 61.5% during the forecast period. Markets & Markets

• Top 3 companies leading blockchain as a service

Blockchain applications: Four emerging segments

Other non-financial applications:• Real estate and land registration (asset registry)• Precious metals trading (asset registry)• Secure record management (e.g, healthcare)• Digital content (arts, music, video,,)

Types of blockchain

Public Private Consortium

Current interest from fintech industry

Low High ?(Was high but subsiding)

Maturity of technology Mature Pre-mature ?

Form of deployment Public miners BaaS(Backend as a service), cloud, or private servers

Whitelisted servers from participants

Notable examples Bitcoin, Ethereum, DASH Ripple, Eris, Hyperledger R3

Ethereum VS. Hyper ledger

• Public

• Provide decentralized VMs

• Token: ether

• Adoption: MS partnership with Consensys

• Applications: digital signature, secure identity systems, digital rights management for music

• Can be Permissioned ledgers: examples: RBS and JP Morgan

• Private (permissioned blockchain)

• Cross-industry collaborative effort

• Develop open protocols and standards for supporting blockchain

• No miners or coins

• a variety of blockchains (hyperledgers) with their own consensus and storage models, and services.

• Members: blockchain and tech. companies and financial institutions

• Industries: finance and healthcare

Ethereum

Major world initiatives

• Blockchain Insurance Industry Initiative B3i: Members are collaborating to explore the ability of blockchain to increase efficiencies in the exchange of data between reinsurance and insurance companies.

• Illinois Blockchain Initiative: a consortium of five government agencies and companies, aimed at removing barriers for the government to build with blockchain.

• Dubai Blockchain Initiative: Aims for Dubai to become the first blockchain-powered city by 2020

• Other countries initiatives: UK, Japan, China, Singapore, Hong-kong, Estonia,,,etc

UAE Initiatives supporting blockchain

• The Blockchain Virtual GovHack• is challenging participants to innovate their

public sectors by using blockchain technologyto tackle one of the challenges:

• Re-inventing global identity• Reducing paper footprint• Fighting fraud and crime• Future of health• Building smart cities

www.GovTechioneersRace.com

Dubai Blockchain Strategy

• Aims for Dubai to become the first blockchain-powered city by 2020

• For Dubai government to become paperless by shifting all transactions to Blockchain,

and empower Dubai Smart city experience for all

• Based on Three pillars:

Government Efficiency: implementing blockchain technology in government services

Industry Creation: supporting the creation of a blockchain industry through empowering start ups and businesses

International Leadership: leading global thinking on blockchain techonolgy

• the Smart Dubai Office SDO launched Blockchain Challenge in partnership with global accelerator 1776

• aims to identify the most innovative blockchain ideas from startups around the world and bring them to Dubai

• SDO launched a city-wide effort to implement blockchain in city services

• Partnerships with IBM as a Blockchain Lead Strategic Partner, and Consensys as Blockchain City Advisor.

Dubai Blockchain Strategy

• Global Blockchain Council: A Dubai Future Foundation initiative

• highlight the implications of blockchain innovations on the future of business and finance sectors

• help UAE authorities and corporations better understand this technology

and consider its regulatory implications, and conduct pilot projects

• 46 members from the industry

• Hosting annual conference: world blockchain forum

• Proposal for a blockchain academy

• Build skilled resources and attract talents

• Establish a hub in the region

Dubai Blockchain POC Project

• Pilot Project: Trade finance and logistic solution

• Dubai customs, Dubai trade, DU, EmiratesNBD, Banco Santander, Aramix, and IBM as a technology provider

• Blockchain solution for goods importing and re-exporting in and out of Dubai

• Using hyperledger fabric as an open source cross-industry trade finance solution and IBM infrastructure

• Aim to replace paper-based contracts with smart contracts

• This integrates all the key trade process stakeholders from ordering stage, in which the importer obtains a letter of credit from their bank, through the intermediary stages of freight and shipping, and ending with customs and payment clearance

Opportunities for business

• A new fintech business: UAE is a flourishing place for new fintech business. For example, Dubai International Financial Centre(DIFC) launches ‘FinTech Hive at DIFC’, the region’s first fintech accelerator, supported by Accenture.

• Education and training: Developing a service on blockchain requires different set of skills from legacy technology, not to mention understanding of the blockchain technology itself. People related to blockchain based fintech industry will need education and training at all levels ranging from operation and management to actual coding.

• Consulting: Banks, and traditional financial institutes seek eagerly the way to ride the tide with fintechand blockchain. They need expertise from various fields of work, such as financial engineering, business modeling, corporate strategy, and programming, and hence consulting services.

• Engineering: Widely accepted blockchain 2.0 is not available yet, the standard set of technologies that constitute the next generation blockchain. There is plenty of engineering work to be done. It is similar to AJAX technology before Web 2.0 arrived. Ranging from inventing new consensus methods to building service framework or service itself.

Challenges in adopting blockchain technology

• Policies and regulations

• We are at early stage of technology

• "to pinpoint and build robust use cases and business cases for investment in blockchain capabilities".

• Confusion state in Understanding blockchain and related vocabulary (The devil is in the details)

• Lack of skilled and trained resources

• Technical challenges (scalability, consensus, privacy)

• Challenges are different for each stakeholder and implementation

Outlook

We are in the early stage of the technologySeveral years before the blockchain’s full potential becomes clear

But the future will very likely be more

#Decentralized#Serverless