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Blockchain Founders Handbook Ed3-V4 28014128USEN
Blockchain Founders Handbook Ed3-V4 28014128USEN
Founder’s
Handbook
An introduction to building
a blockchain solution
Third Edition
1
The Founder’s Handbook
Introduction 3
Acknowledgments 55
2
Introduction
Welcome, and thank you for downloading The organization, or party, can reap its benefits only
Founder’s Handbook. You’re here because you by engaging across an ecosystem of multiple
might have a problem that blockchain can help parties—all of whom derive some benefit. So, if
you solve, and we want to give you the knowledge blockchain for business is about more than one
and tools to get started toward success. The party, the first question you might ask is: Why
following chapters will help you identify your call this document The Founder’s Handbook?
blockchain use case, learn how to mobilize your The answer is simple. Someone has to get the
ecosystem and navigate a governance model group started—namely, its founders.
that provides both the necessary controls and
flexibility for the growth of your ecosystem. This A founder drives the creation and ongoing
handbook also includes information on defining maintenance of a blockchain network. He or she
and managing smart contracts in a multiparty can be a person or people within an organization.
system, digitizing assets, legal considerations Founders can also be an organization or association
and new real-world examples. of organizations. While all members derive value
from the network, founders have the unique
Blockchain for business opportunity to lead the definition of how that
value is provided and how all current and
is a team effort. potential future participants derive value and
recognize participation benefits. If that concept
Before we begin, there’s one thought that sounds like something you’re interested in, then
should guide everything you do moving forward: this handbook is for you.
blockchain for business is a team effort. Each
3
The Founder’s Handbook | Introduction
—
blockchain for business is a team effort. Businesses traditionally re-evaluate status quo
approaches and processes to capitalize on new
advantages or overcome mounting obstacles
out of necessity. To address current unforeseen
4
The Founder’s Handbook | Introduction
challenges and be better prepared for future We’ve built the IBM Blockchain Platform to
ones, businesses have and will test status quo serve as the catalyst for creating your blockchain
processes against innovative and potentially solution. What’s more, we’ve also brought
more effective approaches. Trusted, timely and together IBM Blockchain and IBM Cloud® experts
After you’ve precise information under privacy controls will to help you apply best practices as you design,
finished reading prove paramount for businesses. And assessing develop and deploy a blockchain solution.
this handbook, the value of new approaches in governing Our worldwide IBM Blockchain Services team
we’d love to hear multiparty information exchange will prove has specific skills to assist you; they drive
your feedback essential in addressing these challenges. transformative business outcomes by applying
through this the right expertise and proven methodologies
short survey. At IBM, we’ve worked with Hyperledger, wherever you are on your blockchain journey.
an open source project hosted by The Linux To help make your founding a blockchain network
Foundation, to reimagine blockchain from the journey easier, we’ve chronicled some of
ground up. It’s why technical innovators turn these best practices and outcomes in this
to the IBM® Blockchain Platform. The IBM founder’s handbook.
Blockchain Platform is optimized for Red Hat®
OpenShift®, but thanks to Kubernetes-based The world has seen only the tip of the iceberg
architecture,it’s the leading Hyperledger Fabric when it comes to blockchain for business;
platform to build, operate, govern and grow there are untold opportunities for more value
blockchain solutions across virtually any and more use cases that could change the face
computing environment. In other words, we’ve of every industry—including yours. Quite simply,
created a new breed of blockchain suitable for we believe that blockchain will do for business
business use across industries and the regulatory what the internet did for communication, and
environments they operate in. there has never been a better time to use this
rapidly maturing technology.
With thousands of global engagements and
hundreds of active networks, we’ve helped our What will we solve together? Let’s find out.
clients learn what it takes to go from a good idea
on paper to a value-producing blockchain network.
5
A Identify your business problem
A Identify your business problem
“We found a use case that was a real problem. It wasn’t a ‘hey I
could use blockchain for this’—it was a real problem that had to get
solved—where the best technology for the problem was blockchain.”
— Greg Wolfond, Founder, CEO and Chairman, SecureKey Technologies
Identifying the right problem is the first step takes to conduct business between parties like
in solving it. When it comes to blockchain as a transaction. A lack of trust can be due to an
a solution, however, it’s best applied when the absence of accurate, or timely, information to
problem exists for multiple parties, and each verify data authenticity, resolve disputes or more.
party can benefit by addressing it. In other If you’ve found a process with these types of
words, the problem you identify must be one problems, then you have the beginnings of a
you share with other parties in your business blockchain use case.
network. These problem sharers make up
your ecosystem. In this chapter, we’re going to answer
these questions:
Whether it affects a private ecosystem—like – How do you identify potential business problems?
your own supply chain for instance—extends – How do you prioritize which problems to solve?
across your industry or spans multiple industries, – How do you calculate the benefits of solving
the business problem could be friction or a those problems?
lack of trust. Friction can come in the form of
inefficiencies that increase the time or cost it
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The Founder’s Handbook | Identify your business problem
—
of actions, feelings and thoughts
as that user moves through a 3. W
hy is this a problem? remittance application. As a founder, you could
process. It identifies specific interview an accounts receivable representative
phases of interest and helps
who routinely experiences friction in reconciling
articulate areas where users
feel pain most. payment data. Or perhaps you want to better
understand pain points in a cross-border supply
chain application instead. In this case, you could
interview customs officials and bankers to better
understand their experiences.
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The Founder’s Handbook | Identify your business problem
Verified
Blockchain’s core value proposition Consensus
origin of
data Blockchain can increase privacy, enhance trust Blockchain consensus allows organizations
and remove friction within a business network, to have the same data set view even when the
but its core value proposition rests on two key data set can be changed or updated by individual
Trusted
processes elements: the verified origin of data and trusted parties. If one party changes or updates the data
processes, such as workflows. set, all parties can see the changes and updates.
Industries that rely on shared reference data, such
1. Verified origin of data: While blockchain as bank routing codes, employment records, title
doesn’t guarantee data veracity, it does insurance and others, benefit from consensus.
make it clear who put what data onto
the ledger and when. Provenance
All transactions on a blockchain are tied to one
2. T
rusted processes, such as workflows: another through an append-only process called
Blockchain creates the ability to track each hash chaining. Each transaction is tied to those
step in a workflow so that permissioned that came before it, resulting in a tamper-proof
parties can understand and track how data audit trail. The trail allows participants to know
flows through the process. where an asset was first logged and how its
ownership has changed throughout its lifecycle
Blockchain’s value proposition also hinges on on the blockchain.
providing consensus, provenance, immutability
and finality to participants’ data in a business Industries like manufacturing, transportation
network. A good blockchain use case will deliver and supply chain can benefit from blockchain’s
one or more of these benefits. provenance capability. They need to track how
often and through how many parties an asset
changes hands, especially in cases where
recalls are commonplace and costly.
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The Founder’s Handbook | Identify your business problem
Finality
Participants complete and finalize transactions
when they meet specified contractual conditions.
When the blockchain executes these transactions,
it makes them complete and final immediately.
So, if one party sends an erroneous transaction,
reversing it would require an equal transaction in
the opposite direction, but both transactions will
be visible. This visibility is why, when assessing
the need for finality, you should consider whether
the ability to create instantaneous and tamper-
proof transactions would benefit all parties.
For example, banks and corporations in the global
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The Founder’s Handbook | Identify your business problem
—
like a piece of fruit, digital like an electronic
even further.
file or data, or intangible like a letter of credit
or contract. Blockchain is used to record the
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The Founder’s Handbook | Identify your business problem
Key phases and next steps In the second phase, conduct a broader pilot to
First
prove the business case and the business model
phase Assuming your use case aligns with blockchain’s
for the solution, keeping the end state in mind.
value proposition, you can now consider the
Consider what types of participants will likely join
scope of your first project. There are two critical
Second your future network, as well as what geographies
phase phases to shaping your solution.
and other characteristics you must design for.
While you should start with a participant subset,
In the first phase, you need to prove that the
understanding how the whole network will
technology is fit to ensure that blockchain can
benefit from the solution will be critical in
provide the benefit you envision. Start with
designing one that can scale to the opportunity
a small number of assets and a select group
you envision.
of participants—for instance, a ledger with a
real-time view of compliance, audit and risk
data for auditors and regulators.
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The Founder’s Handbook | Identify your business problem
“We heard about blockchain Syniverse use case Watch how Syniverse and IBM have created
like everybody else. And a successful proof of concept (POC) and are in
Syniverse started its journey with the IBM
we were like, we don’t know a position to transform clearing and settlement
Garage™ team to uncover what business
what we don’t know. You in the wireless industry.
problems it saw out in the market. Through
can either hire people who a two-day IBM Design Thinking Workshop,
do, or you can work with a Watch here
the IBM Garage team and Syniverse worked
partner that does know.” side by side to step through the process of
—D
ennis Meurs identifying a use case and diving into pain
Vice President and General points for Syniverse’s users. Together,
Manager Transaction and
Syniverse and IBM plan to build the next
Clearing Services, Syniverse
generation of clearing and settlement for
telco carriers.
13
B Form your ecosystem
B Form your ecosystem
As a founder, the organizations you bring together success for the blockchain solution, so make
will make up your blockchain network and sure to include all essential players. Some of the
determine its success. Members of your blockchain most disruptive use cases might cross traditional
network will likely include participants with industry lines. Also, keep in mind key geographies,
whom you already have an existing relationship. regulatory environments and other factors to
You might deem these potential participants vital assure future scalability.
within your organization today. When working
with existing partners in a new multiparty A common question asked by new founders is:
interaction model—the blockchain solution— “When forming a blockchain ecosystem, whom
you’ll find that adhering to status quo approaches should I include?” Depending on your use case,
is an inherent challenge. So, a founder must you could consider participants from your
convey and promote the advantages of pursuing existing business networks. Your established
and applying a new multiparty interaction model relationships and processes with them might
early and often. be a good starting point.
Founders will want to thoroughly scope a However, a more fitting question to ask is:
participant’s potential for solving the shared “What types of participants could help pioneer
problem and evaluate how that member fits in an effective ecosystem?” The answer? Anchor
the new ecosystem. Nontraditional members participants.
might fundamentally impact the business model’s
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The Founder’s Handbook | Form your ecosystem
Anchor participants can act as a springboard to This industry-wide involvement proved that
encourage additional key member participation. sharing information on a single trusted system
They can bring industry credibility and provide could work with collaborators and direct
financial, human, physical and intellectual competitors alike. In other words, blockchain
resources. made it easy for diverse parties to transact
with one another without requiring a central
Take the IBM Food Trust™ network, for example. authority—especially when there were varying
In its earliest stages, Walmart served as the levels of trust between them.
primary anchor to prove the blockchain technology.
It added invaluable industry-specific knowledge, Many different forums and approaches exist
Nontraditional partnerships applied resources and thought leadership to help for bringing organizations together to form a
During the COVID-19 global build the solution and provided an active supply blockchain ecosystem. However, it might be
pandemic, unlikely partners
chain for testing. easier to start from the context of an industry
joined forces to address
shared humanitarian needs. association or working group. One working
Nontraditional suppliers—apparel Our initial joint success led to additional group where we’ve seen the strongest results,
and auto manufacturers—began
participation from key industry players, for example, came within the framework of
producing personal protective
equipment (PPE) and medical including: an IBM Design Thinking Workshop.
devices to become full production
manufacturers. Federal, state
– Dole
With the following tips, we’ll share our thoughts
and local governments became – Driscoll’s
on what it takes to build the right ecosystem, how
nontraditional mass-scale buyers – Golden State Foods
of PPE and medical devices. to grow it, and what special factors to consider
These nontraditional suppliers
– Kroger
when getting started.
and buyers will need to – McCormick and Company
collaborate to address shared – McLane Company
supply chain challenges.
– Nestlé
– Tyson Foods
– Unilever
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The Founder’s Handbook | Form your ecosystem
—
in gridlock.
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The Founder’s Handbook | Form your ecosystem
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The Founder’s Handbook | Form your ecosystem
1. C
ost reduction from increased When recruiting new participants, prioritize
operational efficiency network growth and focus on the benefits of your
solution instead of the technology. In most cases,
2. Improved customer experience organizations only care if you can help them solve
their business problems in a secure and cost-
3. R
evenue opportunities to help effective way. If you’ve successfully developed
reach new customers the solution and business model, each added
—
participant should yield additional value.
4. P
otential cost avoidance through
operational risk reduction
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The Founder’s Handbook | Form your ecosystem
Founder’s tip → long term. You must also plan for interoperability
Drive additional network adoption to ensure that other solutions in this domain
in five key areas. can operate with your network. Interoperability
will help accelerate the pace of innovation for
IBM has identified five key areas that can
your solution.
drive additional network adoption: value
proposition, enterprise grade, standards,
Usability
usability and future vision.
You must provide a user-friendly solution
Value proposition for a Fortune 50 company IT department,
a smartphone-only-using small business owner
Founders want to attract segment members with
and everyone in-between. Deliver a variety of
a resonating value proposition to reach maximum
tools and access points, so the solution works
adoption. Companies will join the network and
for all groups.
participate only if they see a tangible return on
their investment of time and resources.
Future vision
Enterprise grade How you pitch the future direction of the solution
will likely sway the adoption of it. When we talk
Participants must feel like they can trust the
about extended value, we mean it concretely:
solution with their business-critical systems.
once you place data and transaction partners on
They'll place special emphasis on data security,
a single, distributed system, consider how to use
auditability, resilience, reliability and scalability.
the data and connectivity to unlock more value
for participants. Value examples include extending
Standards
geographic reach, functionality, participants and
You must use existing standards and ensure more. A functionality value example could be new
—
long-term interoperability. This practice avoids analytic tools.
reinventing existing capabilities and custom
technology that can be difficult to maintain in the
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The Founder’s Handbook | Form your ecosystem
—
in the next iteration.
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The Founder’s Handbook | Form your ecosystem
“The problem that we’re Vertrax, Inc. use case Vertrax sought a trusted, secure, flexible,
trying to solve, now, with and easy-to-use way to share real-time data with
Vertrax, Inc. launched Vertrax Blockchain
the Vertrax Blockchain the supply chain network. It wanted to give its
with Chateaux Software to help prevent supply
is this lack of visibility in customers the tools to make critical supply chain
chain disruptions for its bulk liquid distribution
[the bulk liquid distribution] decisions as quickly as the weather changes.
customers through data collection and supply
supply chain.” Two challenges Vertrax faced, however, were
flow predictions. Oil, fuel oil and propane supply
that potential blockchain ecosystem participants
—V
inny Mullineaux chains are complicated and massive disruptions
could be fierce competitors, and each came with
CEO, Vertrax Inc. are common during the winter months when
its own computing environment.
demand increases, delivery trucks break down,
and trains derail due to snow issues.
For example, Vertrax’s biggest propane customer
had five suppliers willing to input their data on
“In talking to our customers and our prospects,
the blockchain network, but the suppliers are
the notion of them being able to manage through
also each other’s competitors. In other words,
disruption in that supply chain is probably the
the competing suppliers didn’t want each other
biggest thing of value,” says Vinny Mullineaux,
seeing one another’s data. IBM Blockchain
CEO of Vertrax, Inc. “They can muddle by
Platform provided the privacy the suppliers
with lack of visibility in a normal situation,”
wanted in a security-rich environment without
he continues, “But when disruption happens,
needing to migrate their IT systems.
that lack of visibility means they just lose a lot
of money.”
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The Founder’s Handbook | Form your ecosystem
“With the IBM Blockchain The results? Vertrax provided total visibility to its Get a more in-depth view of Vertrax, Inc.
Platform we don’t have to customers through its first-of-its-kind blockchain and its blockchain journey here.
worry about making the solution with the IBM Blockchain Platform. “To
technology work. Instead of get a three-day heads-up that there’s going to View here
weeks and months to build be a demand spike because of a polar vortex,
the technology, we stand up that he’s [the customer] going to be a million
in minutes.” gallons short,” Mullineaux explains about the
data collected from the blockchain ecosystem.
—V
ijay Rathna
Director of Enterprise
“He can juggle things around, he’s not going to
Applications, Chateaux lose all his margin. We’ve actually got something
Software that’s real value, that’s new technology. [And]
there’s no oil and gas company out there that
can’t be a participant.”
23
C Design your business model
24
C Design your business model
After forming your MVE, you can design your understand this spectrum, let’s think about these
business model for the blockchain network. analogies from life: a public park, a nightclub and
Also, you’ll build the investment case, justify a members-only club.
costs and demonstrate the benefits to your
company in this phase. But remember, you’re Public permissionless: Anyone can walk into
not alone. You must design an economic a public park, including you, but your behavior
model that supports value for the founders, matters. The park’s authorities might not require
the participants in your ecosystem and anyone you to provide identification (ID) to gain entrance,
else who is permissioned to join later. but you’re expected to follow the rules. Your good
behavior would be rewarded with additional time
Founder’s tip → in the park. Your bad behavior would prompt
Evaluate the permissioning level needed authorities to kick you out.
for your ecosystem.
Public permissioned: A nightclub experience
Blockchain networks vary in their permissioning
differs slightly from a public park. Although
levels, based on the unique needs of their use
it’s open to the public, additional rules and
cases. Some can be fully open—permissionless—
restrictions apply. You must gain permission to
while others can be highly configured and
enter by showing a valid ID to the club’s bouncer
controlled by the owners, participants or elected
or doorperson. Owners and clubbers trust this
subset of participants in the network. To better
process to know your presence is permitted.
Behavioral rules still apply, but membership
is not required.
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The Founder’s Handbook | Design your business model
Private permissioned: A members-only club In this section, we’ll provide insights into these
is the ultimate example of permissioning. Only questions and others as you design the business
club owners can bestow membership to give model for your network based on the type of
We won’t go into great depth you access. In addition to gaining entrance, your ecosystem you’ve decided to form.
on all the components of an membership can come with a set of privileges
enterprise blockchain network to include anonymity and the ability to connect Smart contracts
in this handbook, but you
with other members privately.
can find great primers and Smart contracts and ledgers are the foundational
educational resources here:
ibm.com/blockchain/resources
components of the blockchain infrastructure
These three previous analogies represent and operations. They help establish transparency
the key levels of permissioning possible in your and consistency for the data, rules and processes
blockchain solution. They’ll help you determine through a set of programmable contracts that
how to answer the following questions when govern the interactions between participants.
designing your business model:
– Will participants pay a membership fee? Traditionally, organizations perform contract
If so, how often will participants pay? transaction processes manually. They depend
– Will participants pay a transaction fee? on each participant to interpret and codify the
– Will select members receive more or less business rules and execute them independently.
—
of the value created? The results are often inefficient for most
business models.
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The Founder’s Handbook | Design your business model
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The Founder’s Handbook | Design your business model
—
opportunities.
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The Founder’s Handbook | Design your business model
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The Founder’s Handbook | Design your business model
—
Let’s examine each.
For solutions where value is mostly derived
from increased membership and participation,
think about what MVP attributes will attract
Investment case early entrants and how they can attract other
participants. You’ll want to decide whether to
You need to determine if the investment it takes
charge a small fee to kick-start the solution and
to create and launch the network will yield the
whether you’ll reimburse the fee to early entrants
return you’re looking for. This exercise is tied
once the network reaches a certain size. In some
to your individual goals, financial assumptions
use cases, founders might create a solution that
and appetite for risk.
significantly increases the overall value of each
transaction. In other cases, a one-time membership
For networks where value is predominantly
fee, annual membership fee or per-transaction
derived by one or a few participants providing
fee might suffice.
a differentiated service, you should think about
whether you and the cofounders can bear all the
When your solution creates value, how will
upfront costs. The founders will recoup upfront
you distribute profits? One option could include
costs through business revenue or from new
distributing profits based on the number of
process efficiencies if the blockchain solution
referrals to the network. For example, if company
is successful. If the upfront cost is too large for
A refers X members, they receive Y% back, which
a single founder, that founder might need to reach
could cover part of company A’s membership fee.
out to close partners, upstream or downstream,
Another option might include reinvesting profits
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The Founder’s Handbook | Design your business model
back into the network. Reinvesting could build Craft the value proposition
further solution capabilities, maintain the solution Crafting the value proposition is a quantitative
or lower the price per transaction. exercise. You must craft one for each type,
or segment, of participants who will contribute
Business model data to the solution. Founders often need to
After you’ve justified the investment for demonstrate the solution’s value to their potential
your organization, you can begin designing partners to entice them to join. Here’s how:
the business model. When you design the
business model, you need to: 1. Calculate how much value the solution
– Create the plan for shared value. costs with the existing process.
– Decide how to return value to
founders and solution members. 2. Calculate how much value you can transfer
– Devise a plan to sustain and maintain back to the participants.
the solution.
3. Identify specific metrics, such as dispute
Founder’s tip → resolution time savings or reduced transaction
Calculate value together early. costs, and attempt to calculate the solution’s
value for each type of participant. You can
Your solution’s stakeholders will become
discover and document the solution’s metrics
—
your initial blockchain network participants,
using a business value assessment.
so get input from them as early as possible.
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The Founder’s Handbook | Design your business model
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The Founder’s Handbook | Design your business model
The solution’s value might also dictate the Finally, remember to consider the new revenue
business model. If the value is relatively fixed opportunities and cost savings possible once
on a per-transaction basis, then you could recoup this level of shared data is available. It’s likely
a portion of the cost. The recouped portion could other parties in adjacent industries will express
go toward network maintenance. If the value interest in the data, which might create additional
is variable instead, then you might apply rules opportunities to monetize the network and the
—
around variable transaction fees to account for data within it.
seasonality or peak usage. Think of a nightclub
that asks for a cover charge at peak hours or
lowers its prices at happy hour to manage
customer volume.
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The Founder’s Handbook | Design your business model
The intersection of local energy providers, Lastly, your network can connect with other
consumers and retailers provides an example. networks to use other solutions and provide
Allowing consumers to pay for products and additional benefits which have yet to be discovered.
services with energy tokens might actually In other words, your network has the potential
drive more local shopping than without tokens. to scale over time. Remember, new technologies
Over time, this behavior might even influence will emerge, and new opportunities will present
additional members and retailers to join. themselves, so you must be ready to reinvent
your offering.
Intangible benefits like these examples might
drive up the network’s overall value proposition,
helping it collect even greater revenues. At the
same time, you might distribute this revenue
to groups outside the direct network as a means
—
to uphold its overall value proposition.
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The Founder’s Handbook | Design your business model
“We’re using blockchain True Tickets use case Estimates range that 50 to 100 million dollars’
to make ticketing smarter, worth of tickets sold are counterfeit. When a
A big issue for ticket buyers who attend concerts
and it all goes back to the customer buys a counterfeit ticket and presents
and sporting events is counterfeiting. A buyer
fact that everything that it at an event, scanners will detect that the ticket
might buy a ticket in the marketplace that won’t
goes into the blockchain is fraudulent. Naturally, the venue will deny the
get them into their desired event. “Roughly 400
is permanent.” customer access. Besides creating a disappointing
million tickets are sold in the primary market
customer experience and artists losing out on
—S
teven Dobesh every year,” says Steven Dobesh, co-founder and
revenue, not much else can be done with the
Co-founder and President, president of True Tickets. “Another 200 million
True Tickets current system.
are sold in the secondary market—that we know
of. Other tickets are being sold ‘under the table,’
Blockchain technology provides an ideal tool for
[through] Craigslist [and] other mechanisms.”
adding the end-to-end transparency and security
With the current system, there’s no way to keep
lacking in the ticketing business. That’s why
track of it all.
True Tickets is working with Chateaux Software
Development Inc., an IBM Blockchain Business
It starts with the buying frenzy of scalpers.
Partner, to build a ticketing system on the IBM
“Within seconds of an event going on sale,
Blockchain Platform. The True Tickets app
the tickets are harvested in the thousands by
verifies the identities of all buyers and sellers,
a small but ruthlessly efficient army of [scalpers],
ensuring that both the tickets and the people
many using multiple credit cards to bypass the
buying them are authentic. “It’s all about making
limit on the number of tickets that one person
sure that ticket is valid and it’s getting into the
can purchase,” wrote Rob Davies and Rupert
hands of the right person,” says Matt Zarracina,
Jones in The Guardian. But, according to Dobesh,
co-founder and CEO of True Tickets. The app acts
the counterfeiting threat primarily exists in
as an immutable ledger, allowing artists, venues,
the secondary market when tickets are resold.
promoters and fans to track a ticket through each
lifecycle stage, from creation to its use at an event.
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The Founder’s Handbook | Design your business model
One key function that benefits both buyers “Our goal is to connect artists and true fans,
and artists is the ability to establish rules and we think we can do that by enabling them
around a ticket’s resale. Establishing ticket to buy tickets through blockchain technology,”
A challenge in creating the resale rules helps artists benefit from the Dobesh says. “With blockchain technology,
True Tickets blockchain solution secondary market and ensures prices are tickets bought in the primary market are secured
was making sure to maintain controlled. For example, the solution can [and] traceable throughout the entire ecosystem.
privacy for buyers and sellers.
True Tickets had to be aware of establish a ceiling, so a 20-dollar ticket won’t Once you put tickets on the blockchain, you make
how it was putting personally be sold for more than 100 dollars. Once the them counterfeit proof.”
identifiable information on the ticket price goes above 20 dollars, the solution’s
blockchain and adhere to
jurisdictional laws. tracking capability helps ensure that artists still Learn more about the True Tickets solution here:
get a cut. “How blockchain technology is helping bands
and their fans.”
36
D Choose your governance model
37
D Choose your governance model
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The Founder’s Handbook | Choose your governance model
Six key solution governance Let’s consider two governance areas when building Data refers to data ownership and data security.
considerations
a blockchain network: solution governance and The network should provide clearly defined
blockchain governance. Solution governance ownership and security strategies before inviting
Data Marketplace refers to the set of rules that determine how participants to join. Some initial questions you
different organizations interact with each other. should address when considering the governance
Blockchain governance refers to the structure model include:
Participation and process determining how the distributed – Who owns the data submitted to the network?
ledger framework itself is maintained and evolves – Who owns the insights made from that data?
over time. – What kind of data security and data privacy
Technology does the network need?
Founder’s tip → – If members leave the network, can they take
Consider these six keys for solution governance. their data with them?
Transactions As you consider the type of governance model
you want for your network and the path to achieve Marketplace refers to the rules around bringing
it, we’ve identified six solution governance areas the solution to market. Much of the marketplace
Smart to focus on: data, marketplace, participation, factor hinges on the future state of the network,
contracts
technology, transactions and smart contracts. so developing a decision-making process is better
than defining specific rules from the outset. Here
are some questions to ask if you build a revenue-
generating solution:
– What’s the model and how will revenue
be shared?
– Will you incentivize participants to bring
others into the network?
– Are participants allowed to build revenue-
generating applications on top of the solution?
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The Founder’s Handbook | Choose your governance model
Participation refers to topics around network – Will the technology stack require
access and onboarding. Ask yourself: a blockchain-as-a-service platform?
– Are participants entitled to the solution’s
– Is manual or digital onboarding appropriate
source code ownership?
for your network?
– How is the cost of technology shared?
– What’s the actual process?
– What types of roles will participants play?
Transactions refers to the exchange of value
– What’s the process of revocation if a
on the blockchain network. These questions are
participant wants to leave the network?
typically answered with MVE participants as they
– When the participant leaves the network,
evaluate solutions to be run on the network:
how will you treat the participant’s data?
– What types of assets can be transacted?
Technology refers to the technology stack – What types of participants can submit
used, Intellectual Property (IP) ownership and a transaction and which participants
infrastructure costs. Many of these discussions can validate them?
will be resolved early on, but you should have – How many participants are required
a strategy for evolving the solution as it grows, to validate transactions?
as well as the underlying technology. Consider – Do different types of transactions
the following: have different requirements?
– What privacy level will the blockchain
require—user, administrator and data?
– Will the network contribute advancements
to the underlying open-source distributed
ledger technology (DLT) framework?
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The Founder’s Handbook | Choose your governance model
Smart contracts encode the business logic Address governance with blockchain technology
on the network, dictating the conditions under The governance considerations previously
which transactions are approved, coded and outlined all deal with your solution’s business
maintained. They help establish trust and
The blockchain technology you model, so ensure your governance model
choose for your business case can efficiency as an inherent part of the network’s
affect your governance model.
appeals to new organizations looking to join
functioning and, therefore, you should seek
Check out this helpful resource to the network. Design them in a flexible way so
to include your MVE in these conversations.
get an inside look on how to build, governance can evolve over time as the network
operate and govern your network Additionally, during the process of writing smart
with the IBM Blockchain Platform.
grows and matures.
contracts you’ll need to work closely with your
engineering team to ensure they accurately Consider your blockchain technology carefully
capture the business logic as agreed upon because your choice of technology will affect
and intended by the ecosystem members. the governance model. For example, some DLT
Key questions to consider include: frameworks are more open than others. Look
– Which parties are responsible for reviewing for a framework that’s openly governed by a
and approving the smart contracts? third-party organization that has a track record
– What verification measures are needed of successfully managing open-source projects
to assure the validity of data shared like The Linux Foundation. Beware, some
among participants? DLTs attempt to create the appearance of
– How can ecosystem members verify being open by creating their own open-source
that the code accurately represents agreed- community, which is often just a veneer of
upon conditions? openness. Ideally, your DLT framework should
– What’s the approval process for implementing include contributors from a diverse distributed
—
changes and new smart contracts? community of developers.
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The Founder’s Handbook | Choose your governance model
—
to address unexpected issues when they arise.
As an example, Hyperledger Fabric provides an
open governance framework, backed by The Linux
Foundation’s 20-year track record of managing
open-source projects. An executive committee Next steps
and a technical steering committee govern the
After reviewing the key concerns and drivers
project. This open-source, collaborative software
for your governance model, you might benefit
development approach ensures transparency,
from seeking legal advice; legal considerations
longevity, interoperability and support.
can significantly impact your business decisions.
You should also seek frequent input on governance
from your network participants. They’ll likely
have different regulatory requirements depending
on their industries, geographies and roles. Lastly,
remember that best blockchain governance
practices will continue to evolve, so applying
the latest practices will be an ongoing effort.
42
The Founder’s Handbook | Choose your governance model
“With this infrastructure- The Thailand Blockchain Community KBank’s enterprise LG solution is completely
sharing, banks do not need Initiative use case paperless. The goal is to improve the customer
to invest on their own.” experience, strengthen security and reduce
Every year in Thailand, banks issue more
costs for clients and the banks. The transparency
—V
eerathai Santiprabhob than 500,000 letters of guarantee (LGs) worth
provided by blockchain can help eliminate forgery
Governor of the Bank of Thailand more than THB 1.3 trillion (USD 43.2 billion).
(TokenPost, May 2019) and provide efficient service delivery. The current
As with many manual processes, banks want
network also has the ability to scale up as the
to accelerate transactions and minimize risk
volume of LGs increase. Also, by offering a single,
of fraud while reducing overall costs when it
shared data structure, the blockchain solution
comes to issuing LGs.
lays the foundation for new business models
to be created by the banks in the region.
IBM and Kasikornbank Public Company Limited
(KBank), one of Thailand’s largest banks, launched
an enterprise letter of guarantee network based
on the IBM Blockchain Platform, which became
the Thailand Blockchain Community Initiative
(BCI). The new solution is designed to help
simplify and expedite the LG process for KBank
and other banks in the ecosystem. Plus, it was
built with the ability to scale up and meet an
expected increase in digital LG issuance.
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The Founder’s Handbook | Choose your governance model
44
E Consider legal matters
45
E Consider legal matters
While the material in this section is intended Data protection and privacy
to provide readers with issues for consideration, Data on a blockchain benefits from several unique
it isn’t meant to replace the assistance of a characteristics of the technology compared to
qualified lawyer. As soon as you and other founders data stored on a traditional database. For example,
begin working on a blockchain application, the use of cryptography to secure records and
it’s imperative to seek proper legal counsel private keys to function as digital signatures
to address these and any other issues specific provide added security around the transactions.
to your use case.
46
The Founder’s Handbook | Consider legal matters
Additionally, the decentralized nature of – Is there a need for consensus and endorsement
blockchain technology makes it more difficult of the data?
for bad actors to access and alter data, which – Can I store a hash of larger data on chain while
is distributed across a peer-to-peer network. storing the actual data off chain?
As an added precaution, however, you should
manage encryption key generation by limiting the Antitrust law
number of entities that can generate encryption Antitrust law, also known as competition law,
keys and limiting access to those keys. Here are is another legal consideration that may impact
examples of what you would manage: your network’s blockchain solution. Antitrust
– Ability to generate encryption keys law seeks to promote competition and protect
– Frequency of encryption key replacement consumers from anticompetitive business
– Encryption key access practices, such as price-fixing. Generally speaking,
– Encryption key shut off when an employee any action that potentially limits competition can
leaves a company be considered a violation. Anytime two or more
entities in the same industry begin sharing
From a legal perspective, consider the node information, a variety of competition laws can
locations and the type of data stored on the be triggered, depending on the jurisdiction.
blockchain. These factors can trigger additional Take special care to establish measures and avoid
laws and regulations that must be followed, creating the potential for a violation. In some
including HIPAA, FERPA and GDPR. From both situations, even something as simple as preventing
a compliance and performance perspective, network access to certain entities can violate
you should seek to understand what data is antitrust laws.
necessary to store on chain and what data can
be stored off chain. Questions you should ask
yourself when making this decision include:
– Is the data necessary for the use case?
– Do network participants require access
to the data?
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The Founder’s Handbook | Consider legal matters
48
The Founder’s Handbook | Consider legal matters
49
The Founder’s Handbook | Consider legal matters
we.trade use case and with trust. Also, the fact that the contracts
are written into the platform’s code removes
Banks have traditionally facilitated international
the need for any underpinning legal system
trade deals; they have served as intermediaries
or enforcement mechanism.
and provided financing for transactions while
mitigating risk. However, banks haven’t digitally
DLT makes it possible for documentation to
transformed trade finance in decades, and trade
flow transparently yet securely among banks,
finance is either not scalable for banks, or too
logistics companies and freight companies based
complicated and costly for the majority of
on permissions. Bank customers can easily create
companies. As a result, almost 70% of companies
trade orders online and manage the entire trade
haven’t had access to trade finance services.
process from order to payment. And the we.trade
platform enables businesses to create smart
The many legal, financial and cultural risks
contracts on the blockchain to dictate the
associated with trading with foreign partners
commercial and shipping conditions of agreements
might have also discouraged companies from
between trading parties. This system helps
trading internationally. Often, companies lack
businesses scale by triggering automatic
guarantees that a contract will be enforced.
payments based on events.
Any delay to a payment or a delivery due to
a lack of enforcement can hurt a company’s
“You can imagine that each country [that joins
cash flow, further risking the timely fulfillment
the blockchain solution] brings its own level of
of other trade contracts.
expertise, brings its own people, its own policies,
its own requirements,” explains Roberto Mancone,
we.trade worked with IBM to develop a trading
co-founder of we.trade Innovation DAC. “At one
platform built on the IBM Blockchain Platform
point you have to establish rules. We have to act
on the IBM Cloud. The solution provides two
as if we’re one company. We’re sharing the blame,
main features that help empower enterprises
sharing the resources and sharing the risk.”
of all sizes to take part in international trade:
DLT and smart contracts. DLT and smart contracts
enable companies to trade seamlessly, simply
50
The Founder’s Handbook | Consider legal matters
A company looking to participate in trade can “We have made significant achievements
be brought onto the we.trade platform by their with we.trade, but this is only the beginning,”
bank, which eliminates potential concerns about Mancone continues. “We are confident that,
the ability to trust counterparties. All relevant working with IBM, we will be able to expand
parties can access the same secured and shared our offering and simplify trade not only in
blockchain information regarding trade deals Europe but in the entire world.”
at the same time, and no single party controls
this data. For example, if company A changes Learn more about we.trade here:
the terms of its trading agreement with company ibm.com/case-studies/wetrade-blockchain-
B, then it will alter the cryptographic hash in fintech-trade-finance
the blockchain. The platform will alert all other
parties, including company B, banks and any
other intermediaries, to the change immediately.
Users also go through international know your
customer (KYC) processes to ensure they
comply with applicable anti-money laundering
(AML) regulations, which mitigate these risks
considerably. All these measures significantly
reduce counterparty risk and make trade finance
services safer and more accessible to small
and medium companies.
51
F Start building your blockchain solution
52
F Start building your blockchain solution
53
The Founder’s Handbook | Start building your blockchain solution
At IBM, we believe passionately in the What will we solve together? Let’s find out.
Start transformative potential of blockchain, and
building Start building your own solution:
we want to broaden your understanding of cloud.ibm.com/catalog/services/blockchain
how to get started in building a blockchain
solution. But this step is only the beginning. Join the IBM Blockchain ecosystem:
Like any good innovation, this edition is only ibm.com/blockchain/ecosystem
the third release of The Founder’s Handbook.
Founders are still figuring out answers to more Provide feedback on The Founder’s Handbook:
big questions, so we invite you to join future ibm.biz/FoundersHandbook_Survey
iterations. Share your stories and the lessons
you’ve learned as you become a blockchain
solution founder and an author of the next
great chapter in business innovation.
54
Acknowledgements
IBM would like to acknowledge the following Carolyn Rogers, Offering Manager,
contributors, listed in alphabetical order by IBM Blockchain
last name. Don Thibeau, Former Offering Manager,
IBM Blockchain
Authors:
Antonio Banda, Content Writer, IBM Marketing Editors:
Services Center Peggy Benson, Senior Editor, IBM Marketing
Matthew Hamilton, Former Offering Manager, Services Center
IBM Blockchain Phaedra Boinodiris, Blockchain, Former Senior
Eileen Lowry, Former Global Program Director, Cognitive Design Lead and Developer Advocate,
IBM Blockchain Garage IBM Industry Platform
John Widdifield, Former Offering Manager, Adrienne Valencia Garcia, Senior Lead Counsel,
IBM Blockchain IBM Blockchain Solutions
Peter Reith, Program Director, Blockchain
Reviewers: Technologies
Andy Carelli, Offering Management Director, Hal Williams, Former Creative Content Director,
IBM Blockchain Platform IBM Blockchain
Jerry Cuomo, Vice President, IBM Blockchain
Technology Design:
Kalie Dove-Maguire, MD, DocChain LLC Jose Fernandez, Former Creative Content
Elaine Lai, Offering Manager, IBM Blockchain Director, IBM Blockchain
Brigid McDermott, Former Vice President, Chris Robison, Art Director, MSC Content Design
IBM Food Trust
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The Founder’s Handbook | Acknowledgements
56
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completely effective in preventing improper use or access. IBM
IBM Corporation systems, products and services are designed to be part of a lawful,
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1 “Veridium to Use IBM Blockchain Technology to Create Social and
The client examples cited are presented for illustrative purposes Environmental Impact Tokens.” IBM News Room, May 15, 2018.
only. Actual performance results may vary depending on specific https://newsroom.ibm.com/2018-05-15-Veridium-to-Use-IBM-
configurations and operating conditions. THE INFORMATION IN Blockchain-Technology-to-Create-Social-and-Environmental-
THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, Impact-Tokens-1
EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE 2 Fred Ehrsam. “Blockchain Governance: Programming Our Future”
AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. Medium, November 27, 2017. https://medium.com/@FEhrsam/
IBM products are warranted according to the terms and conditions blockchain-governance-programming-our-future-c3bfe30f2d74
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