digital transformation a focus on blockchain files/pdf/event... · 2018-08-13 · digital...

Digital Transformation A Focus on Blockchain

June 2018

Tristan Relly

Director, Financial Advisory

Digital

Transformation

in action

3

The Fourth Industrial Revolution

© 2018 DCB Holding Ltd. and its affiliates

1

• Steam power

• Rail

• Mechanisation of Production

2

• Electrification

• Linear / Mass Production Processes

3

• Computers

• Telecoms

• Automation

• Internet

4

• Cyber – Physical Systems

• IOT

• Smart Devices & Robotisation

• Virtual Reality

• Analytics

• Artificial Intelligence

• Blockchain

Late 18th Century Late 19th Century 1960’s NOW

4

New business models

Platform lifecycle

Borderless growth

Shared economies

Customer• Constantly connected &

experience driven

Competition• Reduced Barriers to

Digital Entry & Non Traditional Sources & ecosystems

Configuration

• Reduced Ownership of Assets &Infrastructure

Disruptors highlighted

Drivers & Impact of Digital Transformation

Globalization

Internet of Things

Value chaininefficiencies

Exponential technologies

Cognitive intelligence

Drivers Disruptors Impact


When considering disruption we can look at 4 broad areas of potential impact.

StrategicDisruptors

Technologies,

business models,

operating models,

competitors, andecosystems.

Experiences

The human

interactions,

emotions,

feelings,influences that

drive visual,

behavioral, and

contextualengagement of

employees and

customers

alike.

OperationalEvolution

Operational

structures,

compositions,

and mindsetchanges

required to

adapt and

createopportunities

in the digital

era.

EngagementPlatforms

Understand

infrastructure,

data,

harvestinginformation

from many

sources and

providingcustomers

access to better

information

with greater

transparency.

Elements of Digital Transformation

© 2018 DCB Holding Ltd. and its affiliates8

• Exponential technologies

• Blockchain

• Cognitive intelligence

• Customer-centric design

• Analytics and Data

• Internet of Things + Sensors

• Crowdsourcing

• Robotics

• Shared economies

• Talent ecosystems

• Globalization

• Like competitors

• Business drivers and trends

• Evolving ecosystems

• Value chain inefficiencies

• Blurred industry boundaries

Transformation demands a different type of conversation.

Technologies, business models, operating models, competitors, andecosystems that disrupt the status quo.

Strategic Disruptors

Potential Digital Layers


7© 2018 DCB Holding Ltd. and its affiliates

Focus on blockchain

8

Three Innovations Laid the Groundwork for Blockchain’s Invention

Public key cryptography is a method for verifying digital identity with a high degree of confidence, enabled by the use of private and public keys

Proof-of-work is a piece of code appended to data that validates that data’s authenticity and controls when it can be written into the system

Public key cryptography Proof-of-work

In a peer-to-peer model, every peer in the network is a server and client, both supplying and consuming resources

Enables the facilitation of a currency without a central, privileged third party

Allows for individual ownership and exchange of tokens among users

Prevents double spend by ensuring data is recorded chronologically

The first blockchain was created through the formation of bitcoin

In its bitcoin application, a blockchain is a continuously growing database of transactions, organized in chronological blocks, that is shared between multiple nodes in a network

Blockchain

Transaction 1

Transaction 2

Transaction 3

Transaction 4

Transaction 5

Transaction 6

Transaction 10

Transaction 11

Transaction 12

Past Future

Transaction 7

Transaction 8

Transaction 9

In a blockchain, data is captured chronologically in blocks

Peer-to-peer network

1 2 3

Bitcoin


9

Blockchain myths & facts

Although Blockchain is many things, it is important to understand what blockchain can and cannot do

Bitcoin


Fundamentally a digital ledger system for recording business transactions and events

Near real timeThe blockchain enables the near real time settlement of recorded transactions, removing friction and reducing risk, but also limiting ability to charge back or cancel transactions.

Trustless environmentBlockchain technology is based on cryptographic proof, allowing any two parties to transact directly with each other without the need for a trusted third-party.

Distributed ledgerThe peer-to-peer distributed network records a public history of transactions. The blockchain is distributed and highly available. The blockchain retains a secure source of proof that the transaction occurred.

IrreversibilityThe blockchain contains a certain and verifiable record of every single transaction ever made. This mitigates the risk of double-spending, fraud, abuse, and manipulation of transactions.

Censorship resistantThe crypto-economics built into the blockchain model provide incentives for the participants to continue validating blocks, reducing the possibility of external influencers to modify previously recorded transaction records.


What is Blockchain?

11

…a shared ledger among a network

What is Blockchain?

• Blockchain based on participants’ consensus

• Shared ledger of blocks of transactions

• Cryptographically linked

Network of participants engaged in transactions

No consensus reached on validity of hashed transactions, block not added, retry with corrected or different transactions

Consensus among all participants on validity of hashed transactions in the new block, then add to the chain

Input

Cryptographic hashing function

Hash output

Add participant public key

Sign with private key to

add timestamp

Previous block # + Hashed transactions = New block #

Transaction data

XHO59D

(XHO59D, KEY)

(XHO59D, KEY, TIME)

= Hashed transaction

Ab

ABc

ABCd

ABCDe

ABCDEf

ABCx


12

What is it good for?

Blockchain is a technology for

shared databases –

there is a need for a structured

repository of information

Shared Data

Blockchain removes the need

for trusted intermediaries –no gatekeeper is required to verify transactions and authenticate the

source

Opportunity for Dis-

intermediation

Blockchain is a technology for multiple non-

trusting writers –there needs to be a level of mistrust

between the entities writing to

the database

Absence of Trust

Blockchain is a technology for databases with

multiple writers –multiple entities

generating transactions that

modify the database

Multiple Writers

Blockchain provides value when there is

interaction between the transactions

created by the writers, meaning the transactions depend on one

another

Transaction Dependency


13

What are the Different Types of Blockchain?

Public Blockchain

• Fully decentralized – requires very low trust

• Fully transparent – Anyone can read, send transactions and participate in the consensus process

• Blockchains are secured by economic incentives and cryptographic verification

• No transaction reversal or modification possible

• Possibility of collusive actors

• Slow confirmation of transactions

• Limited privacy protections – anyone can read the blockchain

• Low cost for transactions

Permissioned Blockchain

• Quasi decentralized – hybrid

• Consensus process controlled by preselected set of nodes (M out of N)

• Read permission of the blockchainrestricted to participants

• Options for the public to do limited queries

• Participants can agree to rule changes, transaction reversals and modification

• Low chance of collusion

• Near-real time confirmation of transactions

• Greater degree of privacy protections as only preselected entities are allowed to read the blockchain

• Transaction costs agreed to by the consortium

Majority of Corporate Solutions

Private Blockchain

• Centralized– requires ‘high trust’ entity

• Write permissions are centralized to one entity

• Read permissions restricted to participants

• Only the centralized authority has the capability to agree to rule changes, transaction reversals and modification

• No collusion possible

• Real-time confirmation of transactions

• Greater privacy protection as the centralized entity can control who has access to read which part of the blockchain

• Transaction costs dictated by one entity

Do you really need blockchain?

bitcoinethereum


14

Industries are talking…

Future of Blockchain

Warranty tracking

Aircraft leasing

Healthcare data management

Public health -pharmaceuticals

Hotel room booking

Digitized charity

Shareholder proxy votinghi

Whistleblower case management

Digital asset trading

Supply chain traceability

Loyalty & rewards points

Identity management & verification

Fine art tracking

Bonded loans

Smart lending

Regulatory compliance reporting

Claims processing

Trade finance

Cross border payment processing


15

DRAFTWhat makes it disruptive?

A technology becomes truly disruptive based on the impact it has on core underlying economicattributes

Internet

Reduces cost ofSearch

Semiconductors

Reduces cost ofComputation

Machine Learning

Reduces cost ofPrediction

Blockchain

Reduces cost ofTrust

In the real business operations today, we need intermediaries to validate and

establish trust between parties . . . Blockchain replaces that using technology & math


16

The auditor role is important

Accounting on the Blockchain

Public (cryptocurrency) vs Private blockchain: primary difference is user acceptance, identity verification and node controls

Term

Term

Term

External data

(e.g. LIBOR, FX rate)

Entity A Entity B Business activities

PUBLIC/PRIVATE BLOCKCHAIN NETWORK

Participants use a uniform interface

to establish agreement terms…

…which are translated into smart contract

code…

…and recorded on a blockchain

Triggered by terms recorded on the blockchain…

…in combination with ERP and external data…

…agreement is executed by business functions

CREATION EXECUTION

ERP

(transaction data)

Manual entries, accruals, estimates

Top side entries

Trial balance

Financial statements

AUDITOR

*The blockchain is immutable once a transaction is complete (value via cryptocurrency was transferred), the other side can be illicit, real, related party, etc. Not a perfect system…..


17

Blockchain summarized

Ledger at its core

Distributed

Supercharged via smart contracts

Based on cryptography

Records double entry when transferring a value, single entry

when recording a fact

No single owner or single point of failure

Enables to define rules of engagement among ecosystem partners, provides business logic to be applied to control or execute transactions automatically

Embeds cryptography with the use of private and public keys


How Companies can embrace Digital Transformation

GET STARTED

Look OutsideCross-industry influencecombined with industryexpertise drivesinnovation

Get AgileSet your sights onDigital Agility for yourmental and “doing”models

Bring ValueEmphasizing valuecreation early fuels theongoing engine oftransformation

Think and Actwith AgilityImagine the Future, thendetermine how to pursue transformation to create agility inyour organization


Requires Both Left & Right Brain

Left Brain

• Codified methodologies

• Data-driven andevidence based

• Analytical andstructured thinking

• Financial impact andvalue creation

Right Brian

• Human centered,emotive response

• Agile philosophyand methodology

• Prototyping – rapidreal life testing ofstrategic choices


Creating value – through revenue, costs, relationships and expectations - occurswhen ideas are stretched across areas of digital impact.

Connectivity Data InsightsExperienceInnovation

Digitization

Target Intended Business Value


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digital transformation a focus on blockchain files/pdf/event... · 2018-08-13 · digital...

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