blockchain for first timers with use cases
TRANSCRIPT
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Industry Case StudyBlockchain and Use-Cases
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UnlockTranslate
Blockchain and Distributed
Ledger Technology
(DLT) into plain English
InformCurrent status of the sector
IllustrateDLT use cases
ToolsA simple
process for you to determine the merits of DLT for your industry and
company
In the next 30 minutes
3Acknowledgements
Co-founder, CTO and Director
Finhaus Labs
Nick Addison George SammanTyro
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What people say
“Blockchain” – to describe a wide range of innovations
around blockchain, distributed and shared ledgers
What it actually means
Distributed ledger technology (DLT) • a consensus of replicated,
shared, and synchronized digital data
• across multiple sites, countries, or institutions (nodes)
• public, private or hybrid • no central administrator or
centralised data storage
BLOCK CHAIN
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1. “Transactions and assets recorded across multiple databases…often with a lack of consistency and confidence about the true position
2. Enormous resources are deployed to reconcile data and records and ascertain the true position …while the risks of errors and inconsistencies still remain
3. Manual reconciliation processes and fact checking are costly, timely and subject to many errors between the corporations, counterparties”.
DLT applies best in the following circumstances:
The 21st Century’s “paperwork crisis”
7The benefits?
Each node validates new information via cryptographic processes before it is added
to the ledger
Reliable
The same data is stored locally in every node
Replicated
Distributed means no single point of failure
Available
Visible to all participantsTransparent
“Source of truth” - impossible to make changes without detection
Immutable
Any document or asset can be expressed in codeDigital
Creates trust and reduces cost
8Billions of dollars of investment to date…
9DLT market structure today
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Traditional Clearing House Fully Decentralised
Reliance on central intermediary or
custodian
Public blockchain model (e.g. Bitcoin)
Trusted shared ledger for private consortiums
Hybrid Private Model
The Models
Significantly compromises confidentiality
Costly and time consuming
11Vast number of use cases
13Applications
Replacing its CHESS post-trade cash equities system with a private, permissioned distributed ledger system solving two big problems fractured data and double spending.
Australian Stock Exchange
Rich variety of trials and concepts underway
Australian banks
Automatic payment upon title transfer or physical delivery of grain, removing the risk to growers of buyers becoming insolvent or having problems with payments.
Agribusiness
• Alternative payment platforms for retail
• Simplifying car buying & leasing enabling automatic lease payments
• Loyalty programs simplifying settlement
Consumer & industrial
Creates trust and reduces cost
Estonian government using shared ledgers to verify and manage digital identity
Public sector
Enabling low cost micropayments e.g. newspaper website charging per article or per page
Media
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Blockchain technology is a “solution looking for a problem” - a “completely backwards” approach to innovation.Nobody really knows how long it’s going to take to get to [mainstream adoption]. And I think that’s the key for distributed ledger technologies - if they only make it a little bit better than what we have today, I don’t think any of us are going to be able to justify the cost, the time, and the effort to bring it to market.
Don’t believe everything you hear about blockchain. It is ridiculously hyped. If you can solve your problem without distributed ledger technology, continue to do so. I’ve had people in large organisations say they need to put blockchain in the business case because that’s how they’ll get the money. Not a good reason.
Cliff RichardsGeneral Manager of Equity Post Trade Services, ASX
Mike Baldwin Head of Innovation and Implementation, Westpac Institutional Bank
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A Decentralised Autonomous Organisation (DAO) whose goal is to codify the rules decision making of an organisation: • eliminating the need
for documents and people in governance
• creating a structure with decentralised control
Lessons learned:• Technical problems in
coding errors plus complexity of what they were trying to achieve
• Poor governance
Lessons from DAO
Raised $150m in April 2016
An unknown attacker took $50m due to coding errors in the Smart Contract.
16Critical success factors
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Setting the consortium strategy
Choosing the right shared ledger platform
Choosing the solution design
Planning to mitigate potential pitfalls
Establishing the consortium framework
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Trial re shipments of cotton abroad - a humidity monitor inside a cotton container, linked to GPS technology connected to the "internet of things", can provide the insurer of the goods and the buyers with real-time status of the physical condition of the commodity. .
Linkage to other tech
Internet of Things (IoT) Smart Contracts
Hellosent monitors the condition of French wine being exported to Singapore, allowing insurers to receive automatic, real-time data feeds about the temperature inside the container and conditions at sea that might spoil the wine
Programmable contracts that automatically execute on the shared ledger when pre-defined conditions are met
Self executing and self enforcing
Contracts with standard commercials models e.g. mortgages, insurance
Some challenges that are being resolved include interoperability, scaleability and governance frameworks
18Do you even need Blockchain?Do you need a
database?
Does it require shared write access?
Are writers known and trusted?
Do you want / need to use a trusted 3rd
party?
Do you need to control functionality?
Do you want transactions to be private or public?
USE A PUBLIC BLOCKCHAIN USE A HYBRID BLOCKCHAIN USE A PRIVATE BLOCKCHAIN
DON’T USE BLOCKCHAIN
Are writers’ interests unified?
no
yes
no
yes
yes
no
intra firm
inter firm
Where is consensus determined?
no
no
public
yes
yes
yes
no
private
19Where to from here?
Overcoming technical challenges – scaleability and transaction processing speed
Overcoming challenges
New age of consortium and collaboration will likely solve the “the paperwork crisis”
New age
Governance frameworks are developing - e.g. The CODE
(Centrally Organised Distributed Entity) where a real world
governance board manages real world activities, in parallel with
automated processing (via smart contracts on the public blockchain).
Governance frameworks
21ReferencesSLIDE SLIDE TITLE SOURCE6 21st Century’s “paperwork
crisis”• Gilbert & Tobin, Private Shared Ledgers, The New Age of the Consortium,
9 November 2016• “Paperwork Crisis” is sourced from Richard Gendal Brown, R3 Corda:
What makes it different” on Richard Gendal Brown, Thoughts on the Future of Finance, 25 October 2016
8 Billions of Dollars of Investment to date
World Economic Forum (WEF), The Future of Financial Infrastructure, August 2016
10 The Models Gilbert & Tobin, Private Shared Ledgers, The New Age of the Consortium, 9 November 2016
11 Vast number of use-cases George Samman 201616 Critical Success Factors Gilbert & Tobin, Private Shared Ledgers, The New Age of the Consortium, 9
November 201617 Linkage to other tech AFR, “why trade finance is a good use case for blockchain”, James Eyers, July
25 2016, Cap Gemini, Smart Contracts in Financial Services, 2016