Making Blockchain Real for Business - Kathryn Harrison (IBM, Middle East and Africa Payment and Blockchain Leader)

IBM Blockchain Team :: © 2016 IBM Corporation
Making Blockchain Real
for Business
Kathryn Harrison
Payments Leader
Middle East and Africa
1

IBM Blockchain Team :: © 2016 IBM Corporation 2
Agenda
Introduction
What is Blockchain?
How are companies thinking about Blockchain?
What is the IBM Blockchain?
Q&A

Every CEO, from every industry,
wants to know about Blockchain
Blockchain will fundamentally
change the way we do business

Blockchain in Financial Markets

What is Blockchain?

Blockchain is an emerging platform
for transaction services
Party A’s
records
Bank’s
records
Auditor’s
records
Party B’s
records
Digitally
signed/encrypted
transactions and
ledger
All parties have same
replica of the ledger
Party A
Bank
Auditor
Party B
Blockchain technology has the potential to radically transform multi-party business
networks, enabling significant cost and risk reduction and innovative new business models
Inefficient, expensive, vulnerable Consensus, provenance, immutability, finality

Business Networks, Markets & Wealth
• Business Networks benefit from connectivity
– Connected customers, suppliers, banks,
partners
– Cross geography & regulatory boundary
• Wealth is generated by the flow of goods &
services across business networks
• Markets are central to this process:
– Public (fruit market, car auction), or
– Private (supply chain financing, bonds)

Transferring Assets, building Value
• Anything that is capable of being owned or
controlled to produce value, is an asset
• Two fundamental types of asset
– Tangible, e.g. a house
– Intangible e.g. a mortgage
• Intangible assets subdivide
– Financial, e.g. bond
– Intellectual e.g. patents
– Digital e.g. music
• Cash is also an asset
– Has property of anonymity

Participants, Transactions & Contracts
• Participants - members of a business
network
– Customer, Supplier, Government, Regulator
– Usually resides in an organization
– Has specific identities and roles
• Transaction - an asset transfer
– 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)

Ledgers are Important
• Ledger [1] is THE system of
record for a business
– records asset transfer between
participants.
• Business will have multiple
ledgers for multiple business
networks in which they
participate.
[1] The principal book (or computer file) for recording and
totaling financial transactions by account type, with debits and
credits in separate columns and a beginning monetary
balance and ending monetary balance for each account.

Privacy
• Ledger is shared, but participants require
privacy
• Participants need:
– Transactions to be private
– Identity not linked to a transaction
• Transactions need to be authenticated
• Cryptography central to these processes

Validation
• Transaction verification & commitment
• When participants are anonymous
– Commitment is expensive
– Bitcoin cryptographic mining provides verification
for anonymous participants but at significant
compute cost (proof of work)
• When participants are known & trusted
– Commitment possible at low cost
• Multiple alternatives
– proof of stake where fraudulent transactions cost
validators (e.g. transaction bond)
– multi-signature (e.g. 3 out of 5 participants agree)
• Industrial Blockchain needs “pluggable”
consensus
1

Market
Participant
Certificate
Authority
Blockchain
Developer
Blockchain
Network
Operator
Business
Network
Traditional
Processing
Platforms
Traditional
Data Sources
Blockchain
B2B transactions
connects market
participants
access to
existing logic
access to
existing data
creates applications
and solutions
operates
Creates security
certificates
Regulator
performs
oversight
The Participants in a Blockchain Network

Market
Participant
Business
Network
participates in
1.Ledger
2.Processes
shares
Blockchain – the Uberization of Ledgers
• A shared network ledger
– Rather than a set of individual ledgers
– From owned to shared
• Permissioned Access
– Appropriate privacy
– For transaction content and transaction
ownership
• Smart Contracts
– Elevate business processes to the network
1
1.Ledger
2.Processes
owns
Increased Trust
Decreased Friction
Improved Discoverability
Business network processes

Smart
Contract
Privacy
Shared
Replicated
Ledger
Validation
Ensuring appropriate
visibility; transactions are
secure, authenticated &
verifiable
Business terms embedded
in transaction database &
executed with transactions
All parties agree to
network verified
transaction
Append-only distributed
system of record shared
across business network
Broader participation, lower cost, increased efficiency
Blockchain for Business

Improve discoverability Shared trusted processes
Trusted recordkeepingReduce costs & complexity
Dramatic
Improvements
To Existing
Business
Processes
Creation
of New
Business
Models
Blockchain for Business - Benefits

How are companies
thinking about
Blockchain?

Consensus Use Case – Shared Routing Codes
What?
• Competitors/collaborators in a business network need to
share reference data, e.g. bank routing codes
• Currently each member maintains their own codes, and
forwards changes to a central authority for collection and
distribution
How?
• Each participant maintains their own codes within a
blockchain network
• Blockchain creates single view of entire dataset
Benefits
1. Consolidated, consistent dataset reduces errors
2. Near-real-time of reference data
3. Naturally supports code editing and routing code
transfers between participants

Provenance Use Case – Vehicle Maintenance
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
Benefits
1. Trust increased no authority "owns” provenance
2. Improvement in system utilization
3. Recalls "specific" rather than cross fleet

Immutability Use Case – Financial Ledger
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
• Use privacy features to ensure authorized access
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
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Finality Use Case – Letter of Credit
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
Benefits
• Increase speed of execution (less than 1 day)
• Vastly reduced cost
• Reduced risk, e.g. currency fluctuations
• Value added services; e.g. incremental payment

IBM Blockchain

Many Blockchain Vendors Offer Specialization …
- Variant trust systems –
Consensus, Mining, Proof of
Work etc.
- Lock into single trust system
- Purpose built infrastructure
components for a specialized
use case
- Design being field tested in
form of POCs.
- Creates fragmented blockchain
models for enterprise.

Enterprise Blockchain Deployment
2
- Driving synergies between
blockchains
- Invisible Blockchain infrastructure
- Inter and Intra enterprise connections
- Concept Introduction
- Interledger
- Intraledger
- Cross the trust systems for
transactions
- Fractal visibility of ledger data
- Enterprise visibility – control systems

IBM Blockchain Architecture
2
- Open Design
- Providing flexibility with pluggable
and modular trust system
- Open for specialized blockchains
e.g. Ripple
- Trust Intermediary – a trust system
provisioning layer
- Enterprise blockchain platform
concept
- Separate Business domain with
technology that supports it.

Integration with Existing Systems

Open Ledger Project
 Linux Foundation - announced 17th December 2015
 Current Situation: Blockchain systems are being built in a
variety of industries
 The project members understand that an open source,
collaborative development strategy supporting multiple
players in multiple industries is required
Enable adoption of shared ledger technology at a pace and depth not
achievable by any one company or industry

Open Ledger Project Members [1]
IC3
[1] Small sample
How?

Open Ledger Project –Scope
Code execution environment,
ledger data structures,
modular consensus framework,
modular identity services,
network peers
API libraries & GUIs for app development
specialized extensions,
specialized consensus algorithms
membership policies,
gateway, operations dashboard
Custom built applications for specific use
cases
App
Layer
Shared
Ledger
Value
Added
Systems
In-
scope
Out of
scope
Core
APIs
How?

Blockchain on IBM Cloud
3
Linux Foundation creates demand and
a funnel for developers on Bluemix
ON BLUEMIX NOW!
Blockchain DevOps
Start working on a Blockchain
in seconds
Blockchain DevOps for Developers on Bluemix
plus Value Added Services and Solutions soon
LINUX
Hyperledger Project
Working to create an industry
standard Blockchain for business

Summary
1. Blockchain is a shared, replicated ledger technology
2. IBM supports an open standards, open source, open
governance Blockchain
3. Blockchain can open up business networks by taking out
cost, improving efficiencies and increase accessibility
4. Blockchain addresses an exciting and topical set of business
challenges, which cross every industry
5. Linux Foundation Open Ledger project developing open
source, open standards shared ledger technology
6. IBM has an easy to access, proven and incremental
engagement model giving customers the confidence to get
started NOW

Making Blockchain Real for Business - Kathryn Harrison (IBM, Middle East and Africa Payment and Blockchain Leader)

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