Blockchain IBM Point of View and More Cases Lab

Blockchain 101
Carlos Henrique “Kiko” Duarte

IBM Consultant – LAB Services
IBM
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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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© 2017 IBM Corporation
be reproduced in whole or in part without the prior written permission of IBM. 1
Business networks,
wealth & 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)

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)

So, Blockchain is…
with shared
business
A trusted, processes
distributed
ledger

Problem …
Participant
B’s records
Participant Bank
A’s records records
Insurer Regulator Auditor

records records records
… inefficient, expensive, vulnerable

A shared replicated, permissioned ledger…
Participant
B’s records
Participant Bank
A’s records records
Blockchain
Insurer Regulator Auditor

records records records
… with consensus, provenance, immutability and finality

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

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

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

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

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

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

Contents
is Blockchain?
is it relevant
for our business?
can IBM help

us apply Blockchain?

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

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

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

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

Letter of credit
Republic of A B-land
Sales contract
Example: Company A:
Buyer/
applicant
Company B:
Seller/beneficiary
Letter of credit Buyer applies

for LC
Seller’s bank authenticates
LC and credits Company B
Buyer’s bank issues
Bank A LC and sends to Bank B
seller’s 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

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

End of First Presentation

Contents
is Blockchain?
is it relevant
for our business?
can IBM help

us apply Blockchain?

How IBM can help
Technology
Linux Foundation
Hyperledger Fabric Fabric Composer
Hosting and Support

High Security
IBM Bluemix
Business Network
Making blockchain real

for clients
Garages Engagement

Linux Foundation Hyperledger
– A collaborative effort created to advance cross-industry

blockchain technologies Brian Behlendorf
Executive Director
– Announced December 2015, now over 120 members
Blythe Masters
– Open source, open standards, open governance Board Chair
– One active framework (“Fabric”) and four incubators

Chris Ferris
– IBM is a premier member of Hyperledger TSC Chair
www.hyperledger.org

Hyperledger Project Members
Premier General
Associate
Source: https://www.hyperledger.org/about/members
Updated April 2017

Fabric 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
Fabric 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 part of Linux Foundation Hyperledger
– Try a demo now! - http://fabric-composer.mybluemix.net/

IBM Engagement model overview
Let’s 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

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

IBM & Hyperledger – Referências selecionadas
HSBC, Bank of America, IDA Trade Finance - Letter of Credit

ABN AMRO Financial Restructuring & Recovery
Crédit Mutuel Arkéa Consortium Shared Ledger
Japan Exchange Group (JPX) Post Trade
Mizuho Digital Currency
IBM Global Finance Shadow Chain for Dispute Resolution
Everledger Diamond provenance
Bank of Tokyo – Mitsubishi UFJ Business Partner Contracts
CLS Bilateral netting service
UBS Digital trade finance

Session reference links
• Blockchain: The Simple Guide for Everything you Need to Know – Jacob
William
• The Business Blockchain: Promise, Practice and Application of the Next
Internet Technology – William Mougayar
• Blockchain Revolution – Don Tapscott
• Innovation Edge: Cryptocurrencies – BBVA Innovation Center
• https://console.ng.bluemix.net/catalog/services/blockchain
• http://www.ibm.com/blockchain/
• https://www.hyperledger.org
• https://blockchain.info

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Blockchain 101

Carlos Henrique “Kiko” Duarte

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 0

Two fundamental Intangible assets Cash is also

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 1

– Wealth is generated by the flow of

– Markets are central to this process:

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 2

– Transaction – an asset transfer onto or

– Contract – conditions for transaction to occur

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 3

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 4

Insurer Regulator Auditor

… inefficient, expensive, vulnerable

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 5

Insurer Regulator Auditor

… with consensus, provenance, immutability and finality

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 6

– Blockchain for business differs in key areas:

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 7

Append-only Shared Smart Business terms

Ensuring appropriate Transactions are

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 8

Records all transactions across business network

• Shared between participants

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 9

Business rules implied by the contract … embedded in the Blockchain

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 10

The ledger is shared, but participants require privacy

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 11

The ledger is a trusted source of information

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 12

can IBM help

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 13

Saves Removes Reduces Increases

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 14

What • Competitors/collaborators in a business network need Benefits

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 15

What • Provenance of each component part in complex Benefits

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 16

What • Financial data in a large organization dispersed Benefits

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 17

Letter of credit Buyer applies

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

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 18

Financial Public Sector Retail Insurance Manufacturing

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 19

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 20

can IBM help

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 21

Hosting and Support

Making blockchain real

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 22

– A collaborative effort created to advance cross-industry

– One active framework (“Fabric”) and four incubators

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 23

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 24

Blockchain (Hyperledger Fabric)

– Fully open and part of Linux Foundation Hyperledger

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

© Copyright IBM Corporation 2017. Technical University/Symposia materials may not 25

Let’s Blockchain First

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

Remote Digital Face to face Face to face