Blockchain

essentials

2017 IBM Corporation

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Contents
is blockchain?

is it relevant
for our business?

can IBM help

you apply blockchain?

2
Business networks,
wealth, and markets
Business Networks benefit from connectivity
Participants are customers, suppliers,
banks, partners
Cross geography & regulatory boundary

Wealth is generated by the flow of

goods & services across business
network in transactions and contracts

Markets are central to this process:

Public (fruit market, car auction), or
Private (supply chain financing, bonds)
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 Transferring assets, building value
Anything that is capable of being owned or controlled to produce value, is an asset

Two fundamental Intangible assets Cash is also

types of asset subdivide an asset
Tangible, e.g. a house Financial, e.g. bond Has property of anonymity
Intangible, e.g. a mortgage Intellectual, e.g. patents
Digital, e.g. music
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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)

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Introducing blockchain

with shared
business
A trusted, processes
distributed
ledger

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Problem
Participant
Bs records
Participant Bank
As records records

Insurer Regulator Auditor

records records records

inefficient, expensive, vulnerable

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A shared replicated, permissioned ledger
Participant
Bs records
Participant Bank
As records records

Blockchain

Insurer Regulator Auditor

records records records

with consensus, provenance, immutability and finality

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Blockchain underpins Bitcoin

is:
An unregulated shadow-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 Shared Smart Business terms

distributed system of ledger contract embedded in
record shared across transaction database
business network & executed with
transactions

Ensuring appropriate Transactions are

visibility; transactions are endorsed by
secure, authenticated relevant
& verifiable participants
Privacy Trust

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Shared ledger

Records all transactions across business network

Shared between participants

Participants have own copy through replication
Permissioned, so participants see only appropriate transactions
THE shared system of record

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Smart contract

Business rules implied by the contract embedded in the Blockchain

and executed with the transaction
Verifiable, signed
Encoded in programming language
Example:
Defines contractual conditions under which corporate Bond transfer occurs

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Privacy

The ledger is shared, but participants require privacy

Participants need:
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

The ledger is a trusted source of information

Participants endorse transactions
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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Contents
is blockchain?

is it relevant
for our business?

can IBM help

us apply blockchain?

2017 IBM Corporation

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 Blockchain benefits

Saves Removes Reduces Increases

time cost risk trust
Transaction time Overheads and Tampering, fraud Through shared
from days to near cost intermediaries & cyber crime processes and
instantaneous recordkeeping
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 Example:
Shared reference data

What Competitors/collaborators in a business network need Benefits

to share reference data, e.g. bank routing codes
1. Consolidated, consistent
Each member maintains their own codes, dataset reduces errors
and forwards changes to a central authority for
collection and distribution 2. Near real-time access to
An information subset can be owned by organizations reference data

How Each participant maintains their own codes within a 3. Naturally supports code
Blockchain network editing and routing code
Blockchain creates single view of entire dataset
transfers between participants

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 Example:
Supply chain

What Provenance of each component part in complex Benefits

system hard to track
1. Trust increased, no authority
Manufacturer, production date, batch and even "owns provenance
the manufacturing machine program
2. Improvement in
How Blockchain holds complete provenance details system utilization
of each component part
3. Recalls "specific"
Accessible by each manufacturer in the production rather than cross fleet
process, the aircraft owners, maintainers and
government regulators
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 Example:
Audit and compliance

What Financial data in a large organization dispersed Benefits

throughout many divisions and geographies
1. Lowers cost of audit and
Audit and Compliance needs indelible record of all regulatory compliance
key transactions over reporting period
2. Provides seek and find
How Blockchain collects transaction records from diverse access to auditors and
set of financial systems regulators
Append-only and tamperproof qualities create high
confidence financial audit trail
3. Changes nature of
compliance from
Privacy features to ensure authorized user access
passive to active
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 Letter of credit
Republic of A B-land
Sales contract
Company A:
Example: Buyer/
applicant
Company B:
Seller/beneficiary

Letter of credit Buyer applies

for LC
Sellers bank authenticates
LC and credits Company B
Buyers bank issues
Bank A LC and sends to Bank B
sellers bank

What Bank handling letters of credit (LOC) wants to offer Benefits

them to a wider range of clients including startups
1. Increase speed of execution
Currently constrained by costs & the time to execute (less than 1 day)
2. Vastly reduced cost
How Blockchain provides common ledger for letters of credit
3. Reduced risk,
Allows all counter-parties to have the same validated e.g. currency fluctuations
record of transaction and fulfillment
4. Value added services,
e.g. incremental payment
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 Potential use cases by (selected) industry
Further examples

Financial Public Sector Retail Insurance Manufacturing

Trade Finance Asset Supply chain Claims Supply chain
Cross currency Registration Loyalty programs processing Product parts
payments Citizen Identity Information Risk provenance Maintenance
Mortgages Medical records sharing (supplier Asset usage tracking
Medicine supply retailer) history
chain Claims file
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 Patterns for customer adoption
Transfer of high value financial assets
HIGH VALUE Between many participants in a market
MARKET Regulatory timeframes

Sharing of assets (voting, dividend notification)

ASSET Assets are information, not financial
EXCHANGE Provenance & finality are key

Created by a small set of participants

CONSORTIUM Share key reference data
SHARED LEDGER Consolidated, consistent real-time view

Real-time view of compliance, audit & risk data

COMPLIANCE Provenance, immutability & finality are key
LEDGER Transparent access to auditor & regulator

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 Key players for blockchain adoption

Regulator Industry Group Market Maker

An organization who enforces Often funded by members of a In financial markets, takes buy-
the rules of play business network side and sell-side to provide
Regulators are keen to support Provide technical advice on liquidity
Blockchain based innovations industry trends More generally, the organization
who innovates
Concern is systemic risk new Encourages best practice by - Creates a new good or service,
technology, distributed data, making recommendations to and business process (likely)
security members - Creates a new business process
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for an existing good or service
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Contents
is blockchain?

is it relevant
for our business?

can IBM help

us apply blockchain?

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How IBM can help

Technology
Hyperledger Hyperledger
Fabric Composer

Hosting and Support

High Security
IBM Bluemix
Business Network

Making blockchain real

for clients
Garages Engagement
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Hyperledger, a Linux Foundation Project

A collaborative effort created to advance cross-industry

blockchain technologies for business Brian Behlendorf
Executive Director
Announced December 2015, now over 140 members
Blythe Masters
Open source, open standards, open governance Board Chair

One active framework (Fabric) and seven projects in

incubation Chris Ferris
TSC Chair

IBM is a premier member of Hyperledger

www.hyperledger.org

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 Hyperledger members
Premier General

2017 IBM Corporation Associate Source: https://www.hyperledger.org/about/members

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Updated June 2017
Hyperledger Composer: Accelerating time to value
Business Application
A suite of high level application abstractions for business networks
Emphasis on business-centric vocabulary for quick solution creation
Reduce risk, and increase understanding and flexibility
Hyperledger Composer

Blockchain (Hyperledger Fabric)

Features
Model your business networks, test and expose via APIs
Applications invoke APIs transactions to interact with business network
Integrate existing systems of record using loopback/REST

Fully open and one of eight Hyperledger projects

Try a demo now! - http://composer-playground.mybluemix.net/

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 Selected references

FX Netting Settlements through Identity management

digital currency

Food Safety Private Equity Channel Financing

Low liquidity securities Cross Border Contract

trading and settlement Supply Chain Management

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IBM engagement model overview

Lets Blockchain First

Talk Scale
Hands-on Project

1. Discuss Blockchain 1. Understand Blockchain 1. Design Thinking 1. Scale up pilot or Scale

technology concepts & elements workshop to define out to new projects
2. Explore customer 2. Hands on with business challenge
2. Business Process
business model Blockchain on Bluemix 2. Agile iterations Re-engineering
incrementally build
3. Show Blockchain 3. Standard demo project functionality 3. Systems Integration
Application demo customization
3. Enterprise integration

Remote Digital Face to face Face to face

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 Continuing your education journey

Explained Solutions Composed Architected Explored Next Steps

What is Use cases, What is Learn key Technical deep How to

blockchain for patterns and Hyperledger blockchain dive on Linux proceed with a
business references Composer technical Foundation first project
Why is it How IBM can Assets, concepts Hyperledger Design
relevant help transactions & Designing a Fabric Thinking
What is IBM participants solution Covers V1 Workshop
doing content logistics
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