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MCCRC 4TH ANNUAL SYMPOSIUM
A BRIEF HISTORY OF BLOCKCHAIN
JOHN PALFREYMAN
V3, 12 Sep 17PALFREYMAN VENTURES
CONTENTS
1. BLOCKCHAIN EXPLAINED
2.“FOUR AGES” OF BLOCKCHAIN
3.PROJECT PITFALLS (& HOW TO AVOID THEM)
2
BLOCKCHAIN EXPLAINED
. . WEALTH & MARKETSBUSINESS NETWORKS . .
Business Networks need connectivity
• Between customers, suppliers, banks, partners
• Operate cross geography & regulatory boundaries
Wealth generated by flow of goods & services in transactions, according to contacts
Markets are core to process
• Public (fruit market, car auction • Private (supply chain, bonds)
TRANSFERRED ACROSS NETWORK TO BUILD VALUEASSETS
Two types:
• Tangible, e.g. a house
• Intangible, e.g. a mortgage
Intangible assets subdivide: • Financial, e.g. a bond
• Intellectual, e.g. a patent
• Digital, e.g. video
Cash is also an asset • property of anonymity
BUSINESS’ “BOOK OF RECORD”LEDGER
Ledger
• Updated on asset transfer in or out of business
• Multiple Ledgers
Transaction - asset transfer between ledgers • e.g. John gives Matt a car (simple)
Contract - condition for asset transfer
• If Matt pays John money, then car passes from John to Matt (simple)
• If car won't start (as decided by third party arbitrator) funds do not pass to John (more complex)
MEET BLOCKCHAIN
• Trusted, distributed ledger
• Shared business process
PROBLEM - DIGITISATION OF AGE OLD PROCESS
Participant A’s records
Insurer records
Participant B’s records
Auditor records
Regulator records
Bank records
. . INEFFICIENT, EXPENSIVE, VULNERABLE
SHARED REPLICATED PERMISSIONS LEDGER
Participant A’s records
Insurer records
Participant B’s records
Auditor records
Regulator records
Bank records
Blockchain
CONSENSUS, PROVENANCE, IMMUTABILITY, FINALITY
BLOCKCHAIN FOR BUSINESS
Privacy
Shared ledger
Smart contract
Trust
Append-only distributed system of
record, shared across the business
network
Appropriate visibility; transactions are
secure, authenticated &
verifiable
Business terms embedded in transaction database & executed with transactions
Transactions are endorsed by relevant participants
Differs from bitcoin in key areas: • Identity over anonymity • Selective endorsement over proof of work • Assets over cryptocurrency
BENEFITS
Saves TIME
• Near instantaneous transactions
Removes COST
• In overheads & intermediaries
Reduces RISK
• Tampering, fraud, cyber crime
Increases TRUST
• Shared processes & records
SELECTED USE CASES
Shared Reference Data
• Collaborators share critical information
• Tamper proof record of changes, control over who updates
Supply Chain
• Complete history of who’s owned what, and when
• Held in tamper proof records, control over who can change
Audit & Compliance
• Efficient way to inspect dispersed, trusted transactions
• Auditor is part of blockchain network with access to all
Letter of Credit
• Efficient way to implement supply chain financing
• Blockchain allows counterparts to validate transaction
“FOUR AGES” OF BLOCKCHAIN
HYPE CYCLE FOR EMERGING TECHNOLOGIES(C) GARTNER, INC
http://www.gartner.com/technology/research/methodologies/hype-cycle.jsp
NICHE
2009 (OR EARLIER) - 2014AGE 1 - NICHE
• Cryptography in hieroglyphs, 1900 BC
• 19th Century - becomes “scientific” - cryptanalysis • WW II - mechanical cypher machines
• Early 2000 - encryption through public key algorithms
• Bitcoin born in 2009, Wikileaks accepted in 2011 . .
A Brief History of Cryptography". Cypher Research Laboratories. 24 January 2006. Retrieved 18 September 2013. https://en.wikipedia.org/wiki/History_of_bitcoin
• “an innovative payment network and a new kind of money”
OR . . . • An unregulated shadow-currency • The first blockchain application • Resource intensive (for anonymity)
https://bitcoin.org/ https://www.imf.org/external/pubs/ft/sdn/2016/sdn1603.pdf
. . . IN RESEARCH DIVISIONIBM INCUBATES . . .
• 12 labs on 6 continents, 3,000 researchers
• Primary research & transition to mainstream
• Typical Projects
• Quantum computing
• Artificial Intelligence
• Neuromorphic computing
• Cryptographyhttp://research.ibm.com
TALK
2015AGE 2 - TALK
• Gradual realisation that blockchain IS NOT bitcoin • Broader industry applicability - “blockchain for
business” • Banks view as both threat & opportunity
• Part of FINTECH movement • Technical discussions (lashings of gobbledygook) • Hype around blockchain starts as potential clarifies
IBM . . TO EMERGING BUSINESS
• Evaluate potential - initially in Finance Industry • Investigate fabric (aka plumbing) alternatives • Explaining blockchain in business terms • Business demonstrations - what can blockchain
do? • Start customer discussions, offering “hands on”
REF
EXPERIMENT
2016 (- AND CONTINUES)
AGE 3 - EXPERIMENT
• Banks & financial institutions start to experiment
• Other industries see potential & follow • Cross industry consortia arise, disrupt • Crazy use cases “blockchain’s the answer, what’s the
question”
• Hype hits fever pitch - customer confusion on business value
. . . AND PREPARE FOR MAINSTREAMIBM SUPPORT EXPERIMENTS
• Key contributor to Linux Foundation project
• Engagement approach - making blockchain real
• Hyperledger Fabric code for customer use • Customer projects (80 in year) and references • Other industries embrace, find core use cases
USE
2017 (- AND WILL CONTINUE)
AGE 4 - USE
• Banks & financial institutions move to production • Other industries experimenting, planning to use • Value for business accepted, understanding lags
• Need for basic awareness continues • Still crazy use cases . . . • Hype fever pitch continues - maturity & applicability
Ten things blockchain is not: http://bit.ly/BlockchainNOT
IBM - SCALE & GROW
• Contribution to Linux Foundation project continues
• Grow project capability - in delivery cells
• Usage in all industries, some more mature than others
• Continue with customer project & references
• Business network enablement (hard!)
• Digital education, certification - multiple channels
REF
. . . & BACK TO HYPE CYCLE THOUGHTS . .
• Gartner, hype cycle & blockchain [report, late 2016]
• Close to peak of inflated expectations, 5-10 years from plateaux
• Trough of Disillusionment
• Actions for success? (vendor, customer)
• Plateau of Productivity
• What will it look like? (vendor, customer)
PROJECT PITFALLS AND HOW TO AVOID THEM
KNOW YOUR BLOCKCHAIN FROM YOUR BITCOIN?
RISK
• Familiarity with bitcoin & non-permissioned ledger
• Not fully understanding permissioned blockchain for business
MITIGATION
• Educate
• Don’t jump over awareness steps
BLOCKCHAIN VALUE OR RELIGION?
RISK
• Hype confuses: blockchain is solution to all problems
• Project gets off to wrong start, then hard to correct
MITIGATION
• Test fit: Network | Consensus | Immutability | Provenance | Finality
• Test early, continue through project
SHARED CLARITY OF PURPOSE?
RISK
• Not all network members have same goals in mind
• Value for all members not clear or accepted
MITIGATION
• Joint workshop - use case - debate value until clear
• Business network members agree governance approach
REFS
DISCUSS COOPERATION, OR MAKE TRANSFORMATION?
RISK
• Easy for network members to discuss how they work together . .
• . . at expense of focusing on transformational opportunity
MITIGATION
• Don’t rush - allow time for discussion - careful facilitation
• Design Thinking: persona analysis, current methods, improvement opportunities
CONCLUSIONS
• Blockchain: trusted distributed ledger with shared business process
• Just entered USE phase - production
• Learn lessons from projects to improve
THANKS JPALFREYMAN@ME.COM
@JOHNP261
PALFREYMAN VENTURESThanks to IBM for the inspiration and for use of graphics elements in this presentation
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