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MCCRC 4TH ANNUAL SYMPOSIUM
A BRIEF HISTORY OF BLOCKCHAIN
JOHN PALFREYMAN
V3, 12 Sep 17PALFREYMAN VENTURES
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CONTENTS
1. BLOCKCHAIN EXPLAINED
2.“FOUR AGES” OF BLOCKCHAIN
3.PROJECT PITFALLS (& HOW TO AVOID THEM)
2
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BLOCKCHAIN EXPLAINED
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. . 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)
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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
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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)
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MEET BLOCKCHAIN
• Trusted, distributed ledger
• Shared business process
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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
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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
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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
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BENEFITS
Saves TIME
• Near instantaneous transactions
Removes COST
• In overheads & intermediaries
Reduces RISK
• Tampering, fraud, cyber crime
Increases TRUST
• Shared processes & records
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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
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“FOUR AGES” OF BLOCKCHAIN
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HYPE CYCLE FOR EMERGING TECHNOLOGIES(C) GARTNER, INC
http://www.gartner.com/technology/research/methodologies/hype-cycle.jsp
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NICHE
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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
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• “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
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. . . 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
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TALK
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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
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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
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EXPERIMENT
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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
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. . . 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
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USE
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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
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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
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. . . & 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)
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PROJECT PITFALLS AND HOW TO AVOID THEM
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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
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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
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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
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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
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CONCLUSIONS
• Blockchain: trusted distributed ledger with shared business process
• Just entered USE phase - production
• Learn lessons from projects to improve
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THANKS [email protected]
@JOHNP261
PALFREYMAN VENTURESThanks to IBM for the inspiration and for use of graphics elements in this presentation