Blockchain Explained An Introduction to Blockchain
Gerhard Dinhof, IBM Österreich @gdinhof
V5.0
V1.0, 12 September 2017 © 2017 IBM Corporation
What if…
Cross-border money transfers happen in minutes rather than days, at a fraction of current costs
Supply chains were transparent and immutable?
Blockchain
There’d be no possibility for censorship? © 2017 IBM Corporation
Contracts get executed automatically and settlements reduced
Artists get fair rewards for their work? 2
Problem
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… inefficient, expensive, vulnerable
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A shared, replicated, permissioned ledger …
… with consensus, provenance, immutability and finality
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Ledgers are key Ledger is THE system of record for a business. Business will have multiple ledgers for multiple business networks in which they participate. – Transaction – an asset transfer onto or off the ledger • John gives a car to Anthony (simple)
– Contract – conditions for transaction to occur • If Anthony pays John money, then car passes from John to Anthony (simple) • If car won't start, funds do not pass to John (as decided by third party arbitrator) (more complex) © 2017 IBM Corporation
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Building a blockchain
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Source: https://www.ibm.com/common/ssi/cgi-bin/ssialias?htmlfid=XI912346USEN
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Blockchain underpins Bitcoin is: • A decentralized currency
• The first blockchain application • Resource intensive Blockchain for business differs in key areas: • Identity over anonymity • Selective endorsement over proof of work • Assets over cryptocurrency
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Requirements of blockchain for business Append-only distributed system of record shared across business network
Ensuring appropriate visibility; transactions are secure, authenticated & verifiable
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Shared ledger
Privacy
Smart contract
Trust
Business terms embedded in transaction database & executed with transactions
Transactions are endorsed by relevant participants
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Shared ledger
• Shared between participants
Records all transactions across business network
• Participants have own copy through replication • Permissioned, so participants see only appropriate transactions • THE shared system of record
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Smart contract
• Verifiable, signed
Business rules associated with the transaction
• Encoded in programming language • Example: – Defines contractual conditions under which a bond transfer occurs
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Privacy
• Participants need:
The ledger is shared, but participants require privacy
– Appropriate confidentiality between subsets of participants – Identity not linked to a transaction
• Transactions need to be authenticated • Cryptography central to these processes
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Trust
• Participants endorse transactions
The ledger is a trusted source of information
– Business network decides who will endorse transactions – Endorsed transactions are added to the ledger with appropriate confidentiality
• Assets have a verifiable audit trail – Transactions cannot be modified, inserted or deleted
• Achieved through consensus, provenance, immutability and finality
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Blockchain is creating extraordinary opportunities for businesses to come together in new ways Create New Value
Optimize Ecosystems
Reduce Risk
Exploit new business models and eliminate inefficiencies
Streamline business processes and the exchange of value along your ecosystem
Replace uncertainty with transparency and a trusted decentralized ledger
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Food Traceability in China What? • Traceability of food from “farm to fork”
How? • Blockchain holds history of food items processed through entire supply chain
Benefits 1.
Increased trust – multiplied by each participant in food supply chain
2.
Pinpoint source of compromised food, reducing the unnecessarily broad recall
3.
Improved co-ordination in food supply chain
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Trade Finance for Small and Medium Enterprises What? • Small and medium enterprises (SMEs) are a traditionally underserved segment in the market, often without access to finance options. According to the World Bank, 50 percent of SMEs don’t have access to formal credit.
How? • Digital Trade Chain (DTC) Consortium consisting of: Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Unicredit, have selected IBM to build a new blockchain network designed to simplify and facilitate domestic and cross-border trade for SMEs in Europe.
Benefits • Simplify trade finance by managing, tracking and securing international trade transactions. • Gain access to capital • Increase overall trade transaction transparency • Reduce risk © 2017 IBM Corporation
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Examples by (selected) industry
Financial • Trade Finance • Cross currency payments • Mortgages
Public Sector • Asset Registration • Citizen Identity • Medical records • Medicine supply chain
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Retail • Supply chain • Loyalty programs • Information sharing (supplier – retailer)
Insurance • Claims processing • Risk provenance • Asset usage history
Manufacturing • Supply chain • Product parts • Maintenance tracking
• Claims file
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Key players for blockchain adoption
Regulator
Industry Group
Market Maker
• An organization who enforces the rules of play
• Often funded by members of a business network
• Regulators are keen to support Blockchain based innovations
• Provide technical advice on industry trends
• Concern is systemic risk – new technology, distributed data, security
• Encourages best practice by making recommendations to members
• In financial markets, takes buyside and sell-side to provide liquidity • More generally, the organization who innovates
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Creates a new good or service, and business process (likely) Creates a new business process for an existing good or service
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Thank you Reach out to me for questions or discussing / sharing your ideas – I love to hear them and support! Gerhard Dinhof IBM / Technikum Wien / Hyperledger Vienna Meetup Co-Founder / IoT Austria Mentor mail:
[email protected] twitter: @gdinhof / web: https://dinhof.com
www.ibm.com/blockchain developer.ibm.com/blockchain www.hyperledger.org
© Copyright IBM Corporation 2017. All rights reserved. The information contained in these materials is provided for informational purposes only, and is provided AS IS without warranty of any kind, express or implied. Any statement of direction represents IBM's current intent, is subject to change or withdrawal, and represents only goals and objectives. IBM, the IBM logo, and other IBM products and services are trademarks of the International Business Machines Corporation, in the United States, other countries or both. Other company, product, or service names may be trademarks or service marks of others.
Additional Resources
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Hyperledger Fabric hosted by the Linux Foundation Ⓡ
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https://youtu.be/js3Zjxbo8TM
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Interesting Projects to follow Industry Use Cases: https://www.hyperledger.org/industries IBM Blockchain Use Cases: https://www.ibm.com/blockchain/ Hyperledger Industries: http://hyperledger.org/industries Everledger: https://www.everledger.io DECENT: https://decent.ch Follow My Vote: https://followmyvote.com/ IPFS / Keybase: https://keybase.io
Recommended wallets: • https://jaxx.io • https://electrum.org • https://trezor.io / https://www.ledgerwallet.com/
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Handpicked Resources Blockchain General: Blockchain for Dummies: https://public.dhe.ibm.com/common/ssi/ecm/xi/en/xim12354usen/XIM12354USEN.PDF WeUseCoins: https://www.weusecoins.com Mastering Bitcoin: https://github.com/bitcoinbook/bitcoinbook Julian Hosp: https://www.julianhosp.com Development: IBM Blockchain for Developers Course: https://developer.ibm.com/courses/all-courses/blockchain-for-developers/
Fabric Docs: https://hyperledger-fabric.readthedocs.io/en/latest/ Hyperledger Composer: https://github.com/hyperledger/composer
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Handpicked Resources Advanced: Hyperledger Architecture: http://hyperledger.org/wp-content/uploads/2017/08/Hyperledger_Arch_WG_Paper_1_Consensus.pdf Ethereum Mining Algorithm: - proof-of-work: https://github.com/ethereum/wiki/wiki/Ethash - proof-of-stake: https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ Bitcoin hashing Algorithm (proof-of-work): https://en.bitcoin.it/wiki/Block_hashing_algorithm Blockchain Consensus Protocols in the Wild: https://arxiv.org/abs/1707.01873
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