Idea Transcript
BLOCKCHAIN DECODED WHAT’S IN IT FOR YOU?
BLOCKCHAIN – NOT JUST A TECHNOLOGY, THE WAY FORWARD
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lockchain is arguably the most disruptive technological innovation in decades post the internet era. It is built on the concept of distributed consensus ledger, which leverages a network of computers that jointly create, evolve, and keep track of one immutable history of transactions. In simple words, it provides a distributed and decentralized digital infrastructure that empowers transactions or exchange of value — including financial assets and auto-executable contracts — in a secure and trusted environment. Having emerged from the shadows of Bitcoin, Blockchain is now in danger of being positioned as the panacea of all ills. However, while expert opinions about the extent to which it will disrupt the existing ecosystems vary, there is definitely a consensus that it has the potential to pave way for business models.
BLOCKCHAIN: THE MODUS OPERANDI Transaction definition
Block creation
Sender uses receiver’s public key and his own private key to digitally sign the transaction and broadcasts to the network.
The pending transactions are added into available new blocks and a new Hash is computed (part of the Merkle tree) using a SHA256 algorithm. The miner computes various permutations and combinations to append the Hash with hexadecimal string until the block level criteria are satisfied. Such hexadecimal string is then called a “Nonce”. All these hashes with Nonce and timestamp are then broadcasted to the entire network.
Transaction authentication Receiver uses its private key and sender’s public key to decrypt the transaction and authenticate. It is then placed into a pool of pending transactions. The entire process is depicted in the figure below:
Merkle Tree 2
Block validation
Block chaining
Based on the configuration, other nodes validate this Hash and Nonce through an iterative process, adhering to the consensus framework (e.g. Proofof-work, Proof-of-stake or distributed consensus) and provide acknowledgement.
Post successful validation, the transaction is committed into the Blockchain – ledgers are updated, block is committed and synching is performed.
THE LITMUS TEST FOR BLOCKCHAIN ELIGIBILITY The following workflow traverses if a use case is eligible for Blockchain impact, at a particular instance:
WHAT MAKES BLOCKCHAIN UNIQUE? • Digitally distributed data: The copy of the entire ledger, i.e. data as well as smart contracts, is available at each node of the entire network. Updates are replicated in close to real time, ensuring everybody is referring to the same source of the shared truth. This guarantees data integrity, quality and almost retires reconciliation efforts. • Digitally distributed consensus: The participants (miners) use their compute power and algorithm to establish validity of any transaction, post which they are accepted. Blocks are committed to the chain only post successful consensus and have reference to the previous blocks. • Full traceability and immutability: Participants or trusted third-parties are able to trace information flow through the entire chain at any and every stage. Entries can be added to, but not deleted from, the distributed ledger, making ledger information immutable.
• Trusted dissemination: A public/private key and hashing algorithm guarantees ownership, authentication and encryption, thereby providing a very secure transaction mechanism. • High resilience: Distributed processing allows participants to seamlessly operate in case of failure of any node. Data on the ledgers is pervasive and persistent, creating a reliable and distributed storage. This allows the transaction data to be recovered from any node in case of a local system failure. • Time-stamped: Each data element in the chain is time-stamped. Therefore, all the transactions can be traced back to their origins. • Programmable: Business logic or workflow rules can be programmed into “smart contracts” that allow certain actions to be carried out if programmed conditions are met without any manual or 3rd party trigger. 3
A summary of the key pillars:
BLOCKCHAIN: FROM THE INDUSTRY’S LENSES:
BLOCKCHAIN: SAPIENT GLOBAL MARKETS’ STANDPOINT Evolution of Blockchain: • The regulatory thumbs down to bitcoin tainted early adoption of Blockchain in 2015. But the technology has now evolved and managed to get out of bitcoin’s shadow.
• 2017 will be the year for early adopters including banks and FinTech firms experimenting with Blockchain. We believe they will have a significant first-mover advantage. • Real value proposition can be experienced post 2018. 4
Blockchain, the game-changer: • Blockchain will completely transform the existing business and operating models, starting with redefining the role and construct of intermediaries, CCPs and exchanges in the not-so-distant future. • Blockchain can enable big data analytics as “network of networks” and empower cloud as “distributed and decentralized micro-services”. Key pillars of its success: • The real success of Blockchain will be witnessed only when governments, regulators, banks, other financial services players and technology companies come together and drive the change. Needless to say, this is the biggest challenge. • If Blockchain functions as the backbone of the entire technology stack across enterprises, a common standard is the key to integrate Blockchain apps with the internal or propitiatory applications. • To achieve these goals, the current Blockchain
infrastructure, which is in its infancy, needs to go through a lot of “laboratory testing and real-life experimentation” to improve its latency, scalability, reliability, computing power, governance, security, running costs and maintenance overheads. An outlook on its adoption: • Banks will adopt Blockchain technology across quick wins such as KYC, AML, remittances, payments, trade finance, clearing and settlements by 2018. Once proven, 2019-2022 will see exchanges, electronic and algorithmic trading, stealth trader, surveillance, and risk and regulatory mandates adopting Blockchain, coupled with artificial intelligence, IoT and robotics. This will not only save transaction costs of about USD 1 trillion by 2025 but will also nullify some of the current states of industry players and business models. • Outside financial services, Blockchain technology (with IoT) can disrupt a lot of other industries and regulators, starting from the voting process to air miles, from vending machines to crowdsourcing and many more.
HOW IS SAPIENT GLOBAL MARKETS RIDING THE BLOCKCHAIN WAVE? Sapient Global Markets has set up a multi-functional team with a clear, market-driven roadmap to empower research, development and implementation of various use cases on Blockchain platforms. The team focuses on the following dimensions: Industry Advisor team
Implementation team
Track market trends, customer tractions and industry dialogues to identify potential use cases, define value proposition and overall functional construct. Work with various consortiums and clients to develop Blockchain strategy and market initiatives has started.
Technology team to build POCs, integrate with clients’ internal systems, drive production parallel and support for go-live.
Platform team Engage with various open source and proprietary Blockchain firms/platforms. Research, evaluate and build infrastructure/sandboxes.
Training Conduct workshops and classroom sessions for technology and functional teams to bring client teams up-to-speed for Blockchain technologies.
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GETTING STARTED Getting started with top Blockchain platforms: Private permissioned Blockchain
• Ethereum Ethereum is one of the first programmable Blockchains. It continues to be the platform of choice for developers to start with Blockchain. Smart contracts are written in a Turing complete language similar to JavaScript called Solidity • Eris Eris is a Permissible, smart contract optimized Blockchain Platform. It provides microservices necessary to build, test, and run the Blockchain ecosystem. Platform: https://monax.io/platform/ • Hyperledger Cross-industry collaborative effort to advance Blockchain. IBM has contributed software known as Hyperledger Fabric. Designed for enterprises. Permissioned Blockchain; Smart Contracts can be written in Go/Java/JavaScript IBM Hyperledger Fabric: https://github.com/ IBM-Blockchain/getting-started Other open source Blockchain platforms:
Setup: http://www.multichain.com/gettingstarted/ Smart Contracts – Writing Blockchain applications: • Ethereum / Eris / Solidity: - http://ethereum.stackexchange.com/ questions/2940/where-can-i-find-somesolidity-smart-contract-source-codeexamples - http://solidity.readthedocs.io/en/latest/ - https://learnxinyminutes.com/docs/solidity/ - https://github.com/fivedogit/solidity-babysteps • Hyperledger: - https://github.com/hyperledger/fabric/tree/ master/examples - http://www.ibm.com/Blockchain/for_ developers.html • Forums/Q&A/News Feed: - http://www.coindesk.com/
• Chain https://chain.com/
- http://www.Blockchainster.com/news/
Enterprise-grade Blockchain infrastructure; Private/Permissioned Blockchain;
- https://www.reddit.com/r/Blockchain
Docs: https://chain.com/docs/core/get-started/ introduction • Multichain
- http://www.the-Blockchain.com/ • Tweeter: @Blockchain, @Bitcoin, @coindesk, @ ethereumproject, @Blockchainster
http://www.multichain.com/
©2016 Sapient Global Markets
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