Demystifying blockchain

2018 © NextGen Knowledge Solutions Private Ltd. 1
Kuwait FinTech 2018
The Palms Beach Hotel, Kuwait – October 24, 2018
- Demystifying Blockchain -
Presented by:
Vinod Kashyap
NextGen Knowledge Solutions Private Ltd.

“We stand on the brink of
of a technological revolution that will
fundamentally alter the way we live,
work and relate to one another. In its
scale, scope and complexity, the
transformation will be unlike anything
humankind has experienced before.”
Klaus Schwab on The Fourth Industrial Revolution
World Economic Forum

Bitcoin: A Peer-to-Peer Electronic Cash System

Without comment….
“There is no reason everyone will have
computer at home.”
Ken Olsen
Founder, DEC
Jim Keyes
CEO, Blockbuster
“Netflix is not even on the radar screen in
terms of competition.”
“Google is not a real company.
It’s a house of cards.”
Steve Ballmer
CEO, Microsoft
Oliver Blume
CEO, Porsche
“An iPhone belongs in your pocket, not on the
road.”
“Bitcoin is not a real thing.
It’s fraud and will blow up.”
Jamie Dimon
CEO, J P Morgan

Gartner Hype Cycle
Source : Gartner
Hype Cycle for Emerging Technologies 2017

Blockchain is the future….

Blockchain is not Bitcoin
o Blockchain doesn’t require crypto-currency.
o The platform can be constructed to handle a varying
set of rules and configurations.
o Related technology such as smart contracts, can
greatly improve process efficiency, transparency,
reliability and reduce risk.
o A crypto-currency is merely one application of crypto-
technology allowing the transfer of value via
transactions recorded on a Blockchain.
o There are many existing crypto-currencies most
notably Bitcoin.
o Specific to crypto-currencies a key-benefit include
preventing double spending.

What is Blockchain ?
A Blockchain is a decentralized ledger of all transactions in the network. Using Blockchain technology, participants in
the network can confirm transactions without the need for a trusted third party intermediary.
Someone in a network requests
a transaction
The transaction is broadcast to other
computers (nodes) in the network
The network nodes validates the
transaction using agreed algorithms
Private Key
Smart contacts
(additional business
logic) could be
applied, if needed.
The transaction is complete The new block is added to the network’s
Blockchain, in a way which is permanent
and unalterable
The verified transaction is combined
with other transactions to create a new
block of data for the ledger

Blockchain Ecosystem
Distributed Ledgers
Every participant in the network has
simultaneous access to a view of the
information.
Cryptography
Integrity and security of the
information on the Blockchain are
ensured with cryptographic
functions.
Consensus
Verification is achieved by
participants confirming changes with
one another, replacing the need for
a third party to authorize
transactions.
Smart Contracts
The ability to run additional business
logic means that agreement on the
expected behavior of financial
instruments can be embedder in the
blockchain.
What does this mean for your organization ?
Near real time data availability and
transparency that can eliminate the
need for reconciliation.
Prevents unwanted intrusion on the
network from non-authenticated
participants.
Facility for peers in the network to
validate, updated information
ensuring validity and integrity of the
data on the chain.
Facilitates the ability to design and
implement shared workflow and
enhance automation.

Blockchains are built on three technologies
Cryptography
Identity
B
B’s Public Key
B’s Private Key
P2P Network
System of Record
#
Hashed
History
12:31
Time
Private
Key
PPublic
Key
Program
(The Blockchain’s Protocol)
Platform
Description

Advantages of Blockchain
Intermediaries of trust required Consensus
Immutable information makes
the blockchain a tool of
disintermediation
Digital foot print generated by
transactions
Only pertinent information is
shared, the rest remains
encrypted and inaccessible
Immutable
TransparentInefficiencies in maintaining the
integrity of data
Mistakes deliberate or
otherwise are easily visible
Threats of information security Information is secured using
cryptography
Hegemonic monopoly over data Data is stored over a
democratized network
Encrypted
Distributed

Blockchain Potential Applications & Disruption
E-Commerce
Global Payments
Remittance
P2P Lending
Micro Finance
Health Care
Title Records
Ownership
Voting
Intellectual Property
Digital Rights
Wagers
Escrow
Equity
Private Market
Debt
Crowd Funding
Derivatives
Blockchain is radically changing the future
of transaction based industry

Border Control
Essentia has designed
a border control
system that would
use blockchain to
store passenger data
in Netherlands.
Blockchain Real World Use Cases
Identification
Voter Registration
is being facilitated by
a Blockchain project in
Switzerland
spearheaded by
Uport.
Mobile Payments
The Blockchain Ledger
that Ripple uses has
been latched onto by a
group of Japanese
banks, who will be using
it for quick mobile
payments.
Insurance
A smart contract based
Blockchain is being
used by Insurer
American International
Group Inc as a means of
saving costs and
increasing
transparency.
Endangered
Species
Protection
The protection of
endangered species is
being facilitated via a
Blockchain project that
records the activities of
these rare animals.
Carbon Offsets
IBM is using the
Hyperledger Fabric
Blockchain in China to
monitor carbon offsets
trading.
Enterprise
Ethereum’s
Blockchain can be
accessed as a cloud
based service
courtesy of
Microsoft Azure.
Government
Essentia is developing an e-
Government pilot with the
Finland’s Central Union of
Agriculture Producers and
Forest owners that will
enable urban and rural
citizens to access public
records.

Supply Chains
IBM & Walmart have
partnered in China to
create Blockchain
project that will
monitor food safety.
Blockchain Real World Use Cases Cont.…
Shipping
Shipping is a natural
fit for Blockchain and
Maersk Line has been
trailing a Blockchain
based project within
the maritime
industry.
Energy
Essentia is developing
a test project that will
help energy suppliers
track energy distribution
of their resources in real
time, while maintaining
data confidentiality.
Computation
Digital Currency Group
are helping Amazon
Web Service examine
ways in which
distributed ledgers
technology can help
improve database
security.
Healthcare
A number of
healthcare systems
that store data on the
Blockchain have been
pioneered including
Medrec.
Real Estate
Blockchain is now
being used to
complete real estate
deals, the first of which
was constructed in
Kiev by Propy.
Land Registry
Land registry titles
are now being stored
on the Blockchain in
Georgia in a project
developed by
National Agency of
Public Registry
Advertising
New York Interactive
Advertising Exchange
has been
experimenting with
Blockchain as a mean
of providing as a Ad
market place for
publishers.

Journalism
Decentralized,
journalism as enabled by
Blockchain technology
has potential to prevent
censorship and increase
transparency as CIVIL
has shown.
Food
Food importation is
another industry where
Blockchain is providing
it’s worth, with Louis
Dreyfus Co. trialling a
soyabean importation
using this technology.
.
Fine Art
By storing Certificate
of authenticity on the
Blockchain it’s possible
to dramatically reduce
art forgeries as one
Blockchain project.
Tourism
In a bid to boost as
tourism economy,
Hawaii is examining
ways in which
Blockchain based
cryptocurrencies can
be adopted throughout
the US States.
Waste
Management
Waltonchain is using
RFID technology to
store waste
management data on
the Blockchain in
China.
Diamonds
De’ Beers group is
using Blockchain to
track the importation
of sale of diamonds.
National Security
For the past two years,
the US Department of
Homeland Security has
been using Blockchain
to record safely store
data captured from its
security cameras.
Taxation
In China, a Tax based
initiative is using
Blockchain to store tax
records and electronic
invoices led by
Miaocal Networks.

Energy
Chile’s National Energy
Commission has started
using Blockchain
technology as a way of
certifying data
pertaining to the
country’s energy usage.
Railways
Russian rail operator
Novotrans is storing
inventory data on a
Blockchain pertaining
to repairing requests
and rolling stocks.
Enterprise
Google is building it’s own
blockchain which will be
integrated into its cloud-based
services enabling businesses to
store data on it and to request
their own version white label
developed by Alphabet Inc.
Music
Arbit is a Blockchain
based project led by
former Guns n Roses,
drummer Matt Sorum,
seeking a fairer way to
reward musicians for
their creative efforts.

Auditing Blockchain Transactions
“The Blockchain concept will change the entire audit process.
Third party verification will not be required when the data is
converted to blockchain. In such a situation, certification will
not be required from the auditor.”
“As long as judgement, and manual decision making and entry
are part of the processes leading to business reports, auditing
will be necessary. Blockchain can improve the reliability of
audit trails and reconciliation; but that’s just the starting point
for audit, not the end point.”
Views Expressed on Audit of Blockchain Transactions
Our Views on Audit of Blockchain Transactions
17383817
17

Enterprise Need and Challenges
Increase in transaction volume and rapidly evolving complex technologies are creating a critical need for business,
technologies and compliance functions to be prepared, adaptive and agile to emerging challenges.
Transaction Volume
Due to increase in transaction volume
current audit methodologies that are
manual, sample-based and point-in-
time don’t provide the desired level of
confidence.
Traditional Audit Approach
Methodologies will have to shift from a
manual to an automated and continuous
approach to address a significant
increase in transactions and a new
emerging complex technologies.
Technological Challenges
Current methodologies can not
provide the necessary assurance in
areas when Blockchain is used.
• Point in time
• Forensic
• Sample based
• Speculative
• Subjective
population results
Source : PWC

› On demand reporting
› Continuous Auditing
› Blockchain Ecosystems Audit
➢ Blockchain Eco-system audit aligns with the technology
stack. Executed periodically on a rotational basis.
➢ Software based continuous audit translates audit tests
into programmable logic which is executed against
every set of transactions. Benefits includes:
End-to-End Auditing Approach
• Improve risk coverage
• Improve testing efficiency
• Repeatable process
• Near real time results
Source : PWC

Blockchain Audit Approach
1
2
3
4
5
6
Blockchain
Risk
Framework
• Program Management
• Operational and Capital
Expenditure Oversight
• Project Management
Governance and Oversight
• Business Objectives
• Program Sponsorship
• Leadership Commitment
• Network Security
• Patch and Vulnerability
• Threat Detection
• Threat Response
Overlay Network Layer
• Cloud Security
• Data Security
• Data Privacy
• Penetration Testing
• Signature Management
• Cryptography
• Scalability
• Availability
Blockchain Layer
• Blockchain Platform and
Protocol confirmation
• Hardware Security
Modules
• Clearing and Settlement
• Business Use Case
• Transactions
Decentralized Protocol Layer
• Smart Contracts
• Digital Assets
• Digital Currency
• Program Management
• Integration with off
Blockchain Systems and
processes
Blockchain Ecosystem
• Business Objectives
• Program Sponsorship
• Leadership Commitment
• Business Continuity &
Disaster Recovery
• IT Assets Management
Application Layer
• Servers and Databases
Configuration
• ITGCs
Source : PWC

Blockchain Continuous Auditing Risk Framework – Governance and Compliance
Scope
o Blockchain strategy and program
o Program sponsorship and leadership
o Economic model, OPEX and CAPEX commitment
o KPIs Metrics and reporting
o Blockchain use case projects
o Project Management
Risk Subject Categories Objectives
o Blockchain Program Management
o Blockchain use case business objectives and sponsorship
o Blockchain use case leadership commitment
o Blockchain use case project management
o Blockchain use case operational and capital
expenditure oversight
o Blockchain Program Management
o Blockchain use case business objectives and sponsorship
o Blockchain use case leadership commitment
o Blockchain use case project management
o Blockchain use case operational and capital
expenditure oversight
Governance is the combination of processes and structure implemented by the board to inform, direct, manage and monitor the
activities of the organization towards the achievement of its objectives. Governance consists of the leadership, organizational
structures, capital and operational expenditures, and processes that ensures the success of Blockchain program, strategy and
objectives, and project management.
Source : PWC

2018 © NextGen Knowledge Solutions Private Ltd.
“No matter how complex things are,
basically everything is simple.”
Questions

Vinod Kashyap
Email: vinod.Kashyap@nextgenknowledge.com
Tel # +91-96544-55392

Demystifying blockchain

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