Blockchain: Real World Use Cases

Editor's Notes

• #3: So – this time, let’s recap on what Blockchain actually is Look at design patterns Then look at some use cases that Capgemini has been working on Think about the business success factors Sum up and questions
• #4: There has been a startup scramble, possibly a ‘bubble’ of activity. Almost reminiscent of Netscape and the browser wars...1995.. ‘Another class of thing, like the internet ..a new organizing paradigm’ Reinventing the infrastructure for transacting globally, between institutions, in real time. A distributed database you can trust... Chris Skinner’s video interview on Capgemini ‘Agents of Change’ But WHEN will this happen and WHERE are we on the Gartner Hype Cycle? Some people are getting cynical about all the Startup and PoC fever. Bitcoin, Litecoin, Counterparty, Namecoin, Stellar, Ethereum, Ripple, BitShares, Eris, Lisk, Tendermint, Factom, Setl, Evernym, Guardtime KSI (It’s hard to keep up evaluating all these!!) Have seen some quiet successes and some spectacular failures in governance and trust – the DAO But we are seeing... Emerging standards.. Hyperledger / Linux Foundation R3 and Corda Blockstack
• #5: DECENTRALIZED DATABASE Data is stored in more than one place Blockchain-databases vary, but one common trait is that all or part of the database is replicated at each node This gives a resilience which is well suited to applications of critical national importance, such as payment systems and tax records «Data» can be anything In the original implementation (Bitcoin) the data was information about transactions for each Bitcoin It is a database technology, with no special limitations on the data to be stored Each entry is «chained» to the next The name «blockchain» stems from the fact that each record in the database is connected to the next through a mathematical process It is impossible to change a transaction which occurred earlier in the chain without also changing all subsequent transactions PROCESS AUTOMATION Smart contracts are small programs written in the database These can be used to make value transfers upon given conditions being true, but can also perform other tasks For example, an electronic land registry could transfer ownership of a property upon the receipt of payment Automate processes by decomposition into smaller steps If a process can be decomposed into steps, then it can be automated by each step being handled by a smart contract module Processes which end in a payment – such as applications for loans or benefits – are particularly well suited Smart contracts are in the database – not middleware Because they can be written directly in the core system, smart contracts can be more robust and efficient than virtual robots Particularly interesting when core systems are being replaced, but add-on modules can also be create (such as for reporting) CRYPTOGRAPHIC SECURITY Built on public-key infrastructure Each entry in the blockchain is linked to the next through a mathematical process, so that changing a single record also requires a change to all subsequent records This makes the blockchain an immutable record Cryptographic security can be varied according to need Bitcoin uses extremely energy- and time-consuming cryptography because it was intended to be open to all – this is not always necessary Most financial and public sector uses are likely to limit access to known participants, and therefore can rely on faster internal algorithms and trust… theoretically Limit the severity of data breaches A blockchain can be designed to require more than one cryptographic key to read or edit data, to reduce the severity of any data breach This could be important for sensitive health-data, for example VALUE TRANSFER Blockchain was initially used for transferring currency value… Payments in digital currencies – so called cryptocurrencies – were the first use-case, and the one primarily associated with blockchain Other digital values such as shares, bonds or national currencies in digital form can just as easily be transferred … but the record-keeping “ledger” functionality has many other uses Blockchain is useful in any area where an immutable record of the past is required – typically registries of ownership Already blockchain is used for land registration, patent records, refugee identity, and even ownership of diamonds Any digital representation of an asset Anything given a digital “fingerprint” and which is valuable enough to want to track ownership of, can be put on a blockchain «Control» over physical assets still requires a legal tie between owner and asset – such as a deed There are many such platform technologies: Bitcoin, Litecoin, Counterparty, Namecoin, Stellar, Ethereum, Ripple, BitShares, Eris, Lisk, Tendermint, Factom, Setl, Evernym, Guardtime KSI We evaluate these and it’s hard to keep up!! Emerging standards.. Hyperledger / Linux Foundation R3 and Corda Blockstack
• #6: Here’s a famous (but fuzzy) diagram on network design.... From Paul Baran in 1964: Paul Baran http://en.wikipedia.org/wiki/Paul_Baran contrasted centralized systems (such as governments), decentralized ones (such as Twitter+Facebook+Google, etc.) and distributed ones, using this drawing http://www.rand.org/about/history/baran-list.html Centralized, Decentralized and Distributed (I prefer to call the middle one ‘Federated’ – Federated and Distributed and both DE-centralized.)
• #7: Let’s try to UN-fuzz that a little: Look at the right hand side of this diagram from a network design – connectivity - perspective: it’s the internet! Hooray let’s do it! It just works. No one owns it. Everyone can use it. Anyone can improve it. (thanks to the BBC ‘IT Crowd’ for the image)
• #8: But looking at it from at it from a software perspective: Oh dear. It gets a lot harder to do as you go distributed: Ease of development : centralized are quick to set up (e.g. Use a ready-made framework) Federated and Distributed, you have to first work out some tough protocols - how to ‘trade’ the common resources and ‘communicate’ in a different way.... A very high-stakes Service Oriented Architecture Maintenance : Centralized systems are easier to maintain as there is only one big thing to fix (and that also makes it a single point of failure). Federated have more... but finite. Distributed systems are very hard – eg deploying fixes. That’s partly why the WWW is dominated by centralised websites and providers like google, facebook, amazon, ebay, twitter rather than the distributed model of peer to peer information sharing that Tim Berners-Lee perhaps anticipated. Of course all these guys, especially Google, use distributed architecture themselves – think of the parallel processing and big data - MapReduce and Hadoop. (centrally orchestrated, but with distributed nodes. A hybrid) SO why do it at all?
• #9: SO why do it at all? Fault Tolerance / Stability  / security: assassinate the leader = chaos. Kill the leader of a federated system and you will spawn similar, but now un-coordinated centralised systems. A single failure in a distributed system... Isolated problem (Unless it’s a ‘systemic’ flaw) Scalability : Centralized =Low, Distributed =Infinite....IN THEORY But the tech is still immature: Bitcoin blockchain (with proof of work) can do only 10TPS! (the blocksize and blocktime constrain it) - by contrast Mastercard operates centrally, at tens of thousands of TPS. Cloud technology helps those centralised logical application design scale massively on physical infrastructure that is massively distributed – or ‘serverless’ (But blockchains can also deploy in cloud and are optimised to go much faster, and bring blockchain-like characteristics to centralized db’s like Oracle ..’blockchain as a service’ is now being offered by IBM and Microsoft) https://guardtime.com/blog/guardtime-announces-ksi-blockchain-integration-for-oracle-11g-12c Innovation/Diversity : Centralized = low; Federated/Distributed systems = high (once the basic infrastructure is in place) Blockchain is a distributed ledger technology for VALUE EXCHANGE Now Look at it again from an economic / social / political / biological perspective: Who’s in charge? Who is our sovereign? A ‘strong leader’ / dictator model you can think of those for yourselves. I’m not going to invite a Cyber Attack. A concentration of power, and strong barriers to entry for any other potential central node; a Centrally Planned economic model. There are trade offs between the sovereignty of the individual and the state or community... There is collective trust needed in all these models.. A central website like google, facebook, amazon, ebay, twitter ... have all my data. And some take a ‘commission’ on all my trades with the other nodes in the network. OK... They federate (link to each other) and compete for all my data, and I might trust some more than others, and have some choices about how far I extend trust. Internet tech... Stacks of content and fancy rendering.... but Txions... We have only recently got to microservices and rest And even then that’s pretty centralized... Data and code. Facebook. Google. Cloud has virtualised and shared it... But it’s still logically centralized. Very little is truly distributed.. Except the people and things / Assets that the objects represent. To transact, people have always needed a ledger, and trust...
• #10: A market place where people (or things) transact value Crowded landscape of participants.. of different types... buyers, suppliers, regulators It doesn’t work that well today: maybe it’s clumsy, there’s no trust or transparency or It won’t scale up, or has a scary single point of failure Everyone could probably agree on some rules of fair play There’s benefit from near-instant exchange value and information in one go, and If we could automate all the checking and registering... speed it up, reduce risk and working capital If we could keep the government / regulator as we went along, not in clumsy audits ...so that all involved can serve their customers well ,and profitably. What do we learn from that for Blockchain Use Cases? Where you have a simple idea, you need to grow fast, your users trust you and scale isn’t a worry, go centralized. Don’t bother with blockchain. Where you are serving a market of individual contributors who don’t trust central authorities, then think distributed, but perhaps start centralized. Where you are aiming for massive scale – for example in financial markets or public sector – and you can take your time to design now for distributed, it’s good to experiment while you wait for the technology to mature.
• #11: From Value Pipes to ecosystem marketplaces... Value Exchange Platforms.... Like Uber, Alibaba, Airbnb, ebay. https://youtu.be/4Sijo5w9EZA Platform strategy is determined by three factors: Connection: how easily others can plug into the platform to share and transact - toolbox Gravity: how well the platform attracts participants, both producers and consumers – ‘magnet’ Flow: how well the platform fosters the exchange and co-creation of value – ‘matchmaker’ - deal brokering
• #12: Private Securities Blockchain solution enables Capital Markets firms to create Digital Assets for Private Securities and automates the Master Order Book, Corporate Action and Exchange of Digital Securities, with direct access and oversight for State Regulatory Bodies Syndicated Loans A de-centralized solution that brings a common digital platform to a small group of stakeholders (Lead Bank, Participating Bank and Borrower) to increase efficiency in arranging loans (conversion from paper to digital) Ripple Integration Based on our partnership with Temenos (core banking) and Bluzelle (Ripple Gateway) this allows for Financial Institution to connect their Core Banking application directly to the Ripple Network Blockchain solution for Payment Service Directory 2 (PSD2) targets to create a common framework and standard for Third Parties and Financial Institutions to authorize transactions between 2 parties. (Ethereum) Business Identity Small businesses can control their own strong and verified ‘self-sovereign’ business identity and authorisations and grant secure access to relevant information Fiat-Relay is an open source initiative by Capgemini and a partner bank to connect Smart Contracts to Traditional Payment Services Digital Loyalty Tokens Platform that enables multi-tenant, cross-platform collaboration and a de-centralized exchange for easy and quick conversion of Loyalty tokens Social Loyalty Charitable / welfare donation and non-cash value earning and redemption for the financially excluded to improve social welfare
• #13: Overview Smaller businesses can find it difficult to prove their identity and reputation to tax authorities, lenders, insurers and other financial institutions, their trading counter parties and to their customers. They submit the same documents, proofs and references many times and need to maintain those details with multiple parties. They have directors, employees or agents that they trust and authorise to act on behalf of their company, but need to create (or revoke) those authorisations with many separate institutions. The Blockchain allows for ‘self-sovereign’ business identity information, notarised by proving authorities, together with access and authorisation rights in a distributed database BC Benefit The solution leverages Blockchain technology to build and share identity and authorisation records, under ‘self sovereign’ business control Secure, immutable records with trusted governance Distributed, self-service solution that increases resilience and availability and reduces the cost of data protection for relying parties like tax authorities Target Clients Tax authorities relying on and maintaining centralised business identity and agent access data FI’s and Credit Reference Agencies providing value-added services to the small business sector Banks or other providers offering a simplified business loan service
• #19: Reduce Friction:  Make sure we know the current frictions - inefficiencies, delays, handoffs - and how we will tackle them to make a material difference for all of the key participants. Critical mass:  How do we get to the point where there are enough participants on the platform for it to be mutually valuable enough for them to stay after they have joined?  Some will join only out of initial curiosity - how will we keep them? Pricing:  How to have a measurable, worthwhile financial /non-financial benefit?  Will some key third party partcipants need to be subsidised to join?  Just at the start?  Or forever, in transaction fees, maybe? Ecosystem:  Membership.  Who gets in at the beginning?  Who is kept out? How? How will the excluded behave?  What will the 'network effects' be? Who could be the 'bad actors'?  How will it grow / scale affordably? Meeting Place: The apps... Make sure that the user experience for all the participants is great: make them want to come back. Engage with third party software providers via secure API’s Governance:  Ensure a clear, open  and trusted governance capability - with policy, process, people/organisation, information and technology is in place to keep the platform secure stable and in line with regulations and operating principles. Summary: You should be focusing on your most important business problems, not the technology... but Prepare to open up your legacy monoliths – find business services of ‘market’ value in an ecosystem (before someone else does) – design a platform capable of distribution Don’t use a blockchain right now if there’s a better way of solving the problem with conventional technology... Does it really need to be distributed?
• #20: We work as a virtual community, a distributed network (of course) - led by Bart Cant We published a White Paper in Nov 2015 explaining our Framework for Evaluating Blockchain Technology – can tell you more about that if you come and find me afterwards... we offer our services on G-Cloud 9 focused on public sector We can go into a little more detail on the technology, and also.... give you more details of the other use cases you see in this presentation and show some of it in action (I hope!) Infographic : https://www.capgemini.com/resources/infographic-the-disruption-of-blockchain-on-the-financial-services-industry Point of View: https://www.capgemini.com/resources/blockchain-a-fundamental-shift-for-financial-services-institutions Blogs: https://www.linkedin.com/pulse/distributed-business-thinking-needed-technology-nick-meyne