Making Blockchain Real for Business · • BetterBuilder Place key transactions on the blockchain...

1© 2017 IBM Corporation© 2017 IBM Corporation

BlockchainExplainedAdapted for Beirut Conference Aug 2017

Kaoutar El Maghraoui [email protected] @KaoutarTechSusan Malaika [email protected] @sumalaika

Explained Solutions Architected ExploredComposed

Blockchain education series

Next Steps

V4.06, 28 July 2017

Contents

is Blockchain?

is it important?

to get started?

2

3© 2017 IBM Corporation

Business networks, wealth & markets

– Business Networks benefit from connectivity

• Participants are customers, suppliers,

banks, partners

• Cross geography & regulatory boundary

– Wealth is generated by the flow of

goods & services across business

network in transactions and contracts

– Markets are central to this process:

• Public (fruit market, car auction), or

• Private (supply chain financing, bonds)


Transferring assets, building value

Two fundamental

types of asset

Intangible assets

subdivide

Cash is also

an asset

– Tangible, e.g. a house

– Intangible, e.g. a mortgage

– Financial, e.g. bond

– Intellectual, e.g. patents

– Digital, e.g. music

– Has property of anonymity

Anything that is capable of being owned or controlled to produce value, is an asset


Ledgers are key …

Ledger is THE system of record for a business.

Business 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)


Introducing Blockchain

with shared

business

processesA trusted,

distributed

ledger


Problem …

… inefficient, expensive, vulnerable

Insurer

records

Auditor

recordsRegulator

records

Participant

A’s records

Bank

records

Participant

B’s records


A shared replicated, permissioned ledger…

… with consensus, provenance, immutability and finality

Insurer

records

Auditor

recordsRegulator

records

Participant

A’s records

Bank

records

Participant

B’s records

Blockchain


– An unregulated shadow-currency

– The first blockchain application

– Resource intensive

Blockchain underpins Bitcoin …

9Page

– Blockchain for business differs in key areas:

– Identity over anonymity

– Selective endorsement over proof of work

– Assets over cryptocurrency

is:


Requirements of blockchain for business

Append-only

distributed system of

record shared across

business network

Business terms

embedded in

transaction database

& executed with

transactions

Transactions are

endorsed by

relevant

participants

Ensuring appropriate

visibility; transactions are

secure, authenticated

& verifiable Privacy

Shared

ledgerSmart

contract

Trust


• Shared between participants

• Participants have own copy through replication

• Permissioned, so participants see only appropriate transactions

• THE shared system of record

Records all transactions across business network

Shared ledger


Smart contract

• Verifiable, signed

• Encoded in programming language

• Example:

– Defines contractual conditions under which corporate Bond transfer occurs

Business rules implied by the contract … embedded in the Blockchain

and executed with the transaction


Privacy

• Participants need:

– Appropriate confidentiality between subsets of participants

– Identity not linked to a transaction

• Transactions need to be authenticated

• Cryptography central to these processes

The ledger is shared, but participants require privacy


Trust

• Participants endorse transactions

– Business network decides who will endorse transactions

– Endorsed transactions are added to the ledger with appropriate confidentiality

• Assets have a verifiable audit trail

– Transactions cannot be modified, inserted or deleted

• Achieved through consensus, provenance, immutability and finality

The ledger is a trusted source of information

© 2017 International Business Machines Corporation 15

30 entitiesinvolved in one typical shipment

1 lost documentcan leave a container stuck in port

for more than a month

Global trade logistics with blockchain

90% of goodsin global trade carried by ocean freight

© 2017 International Business Machines Corporation

Research leadership for IBM Blockchain

16

Leadership in

cryptography

for blockchain

Advanced

consensus

algorithms

AI +

blockchain

IoT devices

designed

around

blockchain

Transactions are secure,

authenticated and verifiable

Business terms embedded in

transaction database and

executed with transactions

All parties involved in a

given transaction verify

agreement

Distributed system of record

shared across business

network

Smart Contracts

PermissionsSharedLedger

Consensus

Blockchain Hackathon in Riyadh Feb 2017• ChainedBond Manage land assets – with live demo

• CarinChain Improve car insurance claims and repairs

• CharityChain (**) Manage donations across institutes, banks, governments

• MailonChain (**) Manage and persist critical emails

• FactChain (**) Authenticate real news – with live demo to authenticate tweets

• Vekipedia Place used car information on the blockchain to track provenance and help car buyers

• NoChainNoGain (CareerStamp) (**) Authenticate work records for job seekers to help employers and applicants

• OrganChain Manage blood and organ donations on the blockchain helping those in need

• DocChain (**) Preserve certificates and important documents on the blockchain to overcome loss, theft, and disasters

• BloodChain Manage blood supplies across hospitals

• Yaseer سير Manage the initiation of startups and the provision of associated documents

• HealthChain Place and manage patient records on the blockchain

• BetterBuilder Place key transactions on the blockchain when dealing with building contractors

• Medtrack Track medications via the blockchain

• LifeChain Maintain health check records on the blockchain to avoid repeating checks

• Minvest Manage crowd-sourcing on the blockchain

• BorderBlock (**) Manage visa processing across participating countries

• CamelChain Manage the buying and selling of camels on the blockchain

More Info:https://developer.ibm.com/opentech/2017/02/19/first-blockchain-hyperledger-hackathon-riyadh-sold/

Split into Teams to Identify Blockchain Use Cases

• Split into teams

• Brainstorm blockchain use cases & select use case (5 minutes)

• Prepare presentation (5 minutes)• What is the blockchain use case

• Why is it a good use case

• What are your next steps to getting started with the use case

• Teams present (1 minute for each team)


Contents

is Blockchain?

is it important?

to get started?


Blockchain benefits

Savestime

Removescost

Reducesrisk

Increasestrust

Transaction time

from days to near

instantaneous

Overheads and

cost intermediaries

Tampering, fraud

& cyber crime

Through shared

processes and

recordkeeping


Benefits

1. Consolidated, consistent

dataset reduces errors

2. Near real-time access to

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

How • Each participant maintains their own codes within a Blockchain network

• Blockchain creates single view of entire dataset

Example:Shared reference data


Benefits

1. Trust increased, no authority

"owns” provenance

2. Improvement in

system utilization

3. Recalls "specific"

rather than cross fleet

What • Provenance of each component part in complex system hard to track

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

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

Example:

Supply chain


Benefits

1. 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 • 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

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

Example:

Audit and compliance


Benefits

1. 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

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

How • Blockchain provides common ledger for letters of credit

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

Example:

Letter of credit

Letter of credit

Republic of A

Buyer’s bank issues

LC and sends to

seller’s bankBank A Bank B

Seller’s bank authenticates

LC and credits Company B

Sales contract

Company B:

Seller/beneficiary

Company A:

Buyer/

applicant

B-land

Buyer applies

for LC


Financial Public Sector Retail Insurance Manufacturing

Trade Finance

Cross currency payments

Mortgages

Asset Registration

Citizen Identity

Medical records

Medicine supply chain

Supply chain

Loyalty programs

Information sharing (supplier – retailer)

Claims processing

Risk provenance

Asset usage history

Claims file

Supply chain

Product parts

Maintenance tracking

Potential use casesFurther examples by (selected) industry


Patterns for customer adoption

COMPLIANCE

LEDGER

CONSORTIUM

SHARED LEDGER

ASSET

EXCHANGE

HIGH VALUE

MARKET

• Created by a small set of participants• Share key reference data• Consolidated, consistent real-time view

• Sharing of assets (voting, dividend notification)• Assets are information, not financial• Provenance & finality are key

• Transfer of high value financial assets• Between many participants in a market• Regulatory timeframes

• Real-time view of compliance, audit & risk data• Provenance, immutability & finality are key• Transparent access to auditor & regulator


Key players for Blockchain adoption

Regulator Industry Group Market Maker

– An organization who enforces the rules of play

–Regulators are keen to support Blockchain based innovations

–Concern is systemic risk – new technology, distributed data, security

–Often funded by members of a business network

–Provide technical advice on industry trends

–Encourages best practice by making recommendations to members

– In financial markets, takes buy-side and sell-side to provide liquidity

–More generally, the organization who innovates

- Creates a new good or service, and business process (likely)

- Creates a new business process for an existing good or service


Contents

is Blockchain?

is it relevant

for our business?

can IBM help

us apply Blockchain?


How IBM can help

Technology

Hosting and Support

Making blockchain real

for clients

High Security

Business NetworkIBM Bluemix

EngagementGarages

Hyperledger

Fabric

Hyperledger

Composer


Hyperledger: A Linux Foundation Project

– A collaborative effort created to advance cross-industry

blockchain technologies for business

– Announced December 2015, now over 150 members

– Open source, open standards, open governance

– Five frameworks and three tools projects

– IBM is a premier member of Hyperledger

www.hyperledger.org

Brian Behlendorf

Executive Director

Blythe Masters

Board Chair

Chris Ferris

TSC Chair

http://www.hyperledger.org/


Hyperledger Members

Source: https://www.hyperledger.org/about/membersUpdated 28 July 2017

Premier General

Associate

https://www.hyperledger.org/about/members


Hyperledger Fabric: Distributed Ledger Platform

– An implementation of blockchain technology that is

a foundation for developing blockchain applications

– Emphasis on ledger, smart contracts, consensus,

confidentiality, resiliency and scalability.

– V1.0 released July 2017

– 159 developers from 27 organizations

– IBM is one contributor of code, IP and

development effort to Hyperledger Fabric

http://hyperledger-fabric.readthedocs.io/

http://hyperledger-fabric.readthedocs.io/


Hyperledger Composer: Accelerating time to value

Business Application

Hyperledger Composer

Blockchain (Hyperledger Fabric)

– A suite of high level application abstractions for business networks

– Emphasis on business-centric vocabulary for quick solution creation

– Reduce risk, and increase understanding and flexibility

– Features

– Model your business networks, test and expose via APIs

– Applications invoke APIs transactions to interact with business network

– Integrate existing systems of record using loopback/REST

– Fully open and part of Linux Foundation Hyperledger

– Try it in your web browser now: http://composer-playground.mybluemix.net/

https://hyperledger.github.io/composer/

http://composer-playground.mybluemix.net/

https://hyperledger.github.io/composer/


Low liquidity securities

trading and settlement

Cross Border

Supply Chain

Contract

Management

FX Netting Settlements through

digital currency

Identity management

Food Safety Private Equity Channel Financing

Selected References


IBM Engagement model overview

1. Discuss Blockchain technology

2. Explore customer business model

3. Show Blockchain Application demo

1. Understand Blockchain concepts & elements

2. Hands on with Blockchain on Bluemix

3. Standard demo customization

1. Design Thinking workshop to define business challenge

2. Agile iterations incrementally build project functionality

3. Enterprise integration

1. Scale up pilot or Scale out to new projects

2. Business Process Re-engineering

3. Systems Integration

Remote Digital Face to face Face to face

Let’s

TalkBlockchain

Hands-onFirst

ProjectScale


Continuing your education journey…

Explained Solutions Composed Architected Explored Next Steps

– What is blockchain for business

– Why is it relevant

– What is IBM doing

– Use cases, patterns and references

– How IBM can help

– What is Hyperledger Composer

– Assets, transactions & participants

– Learn key blockchaintechnical concepts

– Designing a solution

– Technical deep dive on Linux Foundation Hyperledger Fabric

– Covers V1 content

– How to proceed with a first project

– Design Thinking Workshop logistics

Thank you!

www.ibm.com/blockchain

developer.ibm.com/blockchain

www.hyperledger.org


Further Information – Use case LinksNorthern Trust: http://www-03.ibm.com/press/us/en/pressrelease/51655.wss

Maersk: http://www-03.ibm.com/press/us/en/pressrelease/51712.wss

HSBC, Bank of America, IDA: http://www.coindesk.com/hsbc-bank-america-blockchain-supply-chain/

ABN AMRO: https://www.abnamro.com/en/newsroom/blogs/arjan-van-os/2016/walking-the-walk-exploring-

the-power-of-blockchain.html

Crédit Mutuel Arkéa: http://www.coindesk.com/ibm-completes-blockchain-trial-french-bank-credit-mutuel/

JPX: http://www.ibm.com/press/us/en/pressrelease/49088.wss

Kouvola Innovation: http://www.ibm.com/press/us/en/pressrelease/49029.wss

London Stock Exchange: http://www.ibtimes.co.uk/linux-foundation-blockchain-consortium-digital-asset-

ibm-credits-london-stock-exchange-board-1533798

Mizuho: http://www.coindesk.com/mizuho-digital-currency-powered-blockchain-settlement/

IBM Global Finance: http://www.coindesk.com/ibm-building-blockchain-dispute-resolution-system/

Everledger: https://www-03.ibm.com/press/us/en/pressrelease/50169.wss

Bank of Tokyo Mitsubishi: https://www-03.ibm.com/press/us/en/pressrelease/50544.wss

China UnionPay: http://www.coindesk.com/ibm-china-unionpay-blockchain-loyalty-exchange/

CLS: http://www.coindesk.com/cls-to-develop-blockchain-payment-service-on-ibm-fabric/

UBS: http://www.coindesk.com/ubs-blockchain-prototype-trade/

Making Blockchain Real for Business · • BetterBuilder Place key transactions on the blockchain...

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