IBM Cloud Côte d'Azur Meetup - Blockchain Business Processes & Rule-based Smart Contracts

1Page© 2018 IBM Corporation© 2018 IBM Corporation
Blockchain Business Processes & Rule-based
Smart Contracts
With IBM Operational Decision Manager
October 2018
Stephane Mery
Distinguished Engineer, IBM ODM Chief Architect

2
It has been estimated that a blockchain “is about 80%
business process change and 20% technology implementation”
Source: Deloitte, Blockchain: Enigma. Paradox. Opportunity, 2016, page 11
Blockchain will foster automation of processes at the edge of the Enterprise.
Connecting your systems and data will be a significant integration challenge.
What will be the impact on your existing processes?
How can you make your systems ready to participate?
Process
Integration

3
Letter of credit process – without Blockchain

4
Letter of credit – with Blockchain
• Distributed, immutable ledger
• Replicated on each participant’s system
• Contract clauses automated by Smart Contracts

5
Participant Process Orchestration - Choregraphy
Participant Shared Process
Private Process Private Process
Participant
Participant
Participant
Participant
Participant
Blockchain
Because business rules and smart contracts that
execute based on one or more conditions can be built
into the platform, blockchain business networks can
evolve to support end-to-end business processes and
a wide range of activities.
IBM Institute for Business Value, Oct 2016

6
Disruption ahead!
• Entire industry business processes will be re-invented, using Blockchain as
medium
• The eco-system will have to adapt its own business processes
• Failure to do so will foster emergence of brand new, “born-in-blockchain” eco-
systems
• Look at industries where eco-system processes are today manual
• Look at industries where “middlemen” are taking the biggest share of the trade

7Page© 2018 IBM Corporation
Blockchain for Business
Append-only
distributed system of
record shared across
business network
Business terms
embedded in
transaction
database
& executed with
transactions
Transactions are
endorsed by
relevant
participants
Ensuring appropriate
visibility; transactions
are secure,
authenticated
& verifiable Privacy
Shared
ledger
Smart
contract
Trust

Smart Contracts
• Verifiable, signed
• Encoded in programming language
• Example:
– Defines contractual conditions under
which a bond transfer occurs
Business rules associated
with the transaction

9
Blockchain Smart Contracts
• Automate transaction processing logic in the Blockchain
• Executed by all nodes
• Consensus needed to validate the side effects
• Limited in Bitcoin
• Turing-complete in other blockchain platforms (Hyperledger, Ethereum…)
• Written in code – Go Lang, Javascript, Solidity…
Term coined by Nick Szabo in 1994: computer protocol to digitally enforce a contract
https://en.wikipedia.org/wiki/Smart_contract
Combined with immutability, the ability to automate transaction
processing is what make Blockchain a disruptive technology

10
Smart Contracts – not smart, nor contracts….
• Smart Contracts are no more than code processing transactions embedded
in the Blockchain platform
• “Smart” is more a marketing twist
• A real legally binding contract is much more than code
• Must be able to deal with ambiguity in court
• Would require end-to-end legally-approved system
• However, still a powerful mechanism to automate the conditions of value
exchange
• Trusted execution environment, actions are tracked, code is transparent
• “The Code is the Law” philosophy – Decentralized Autonomous Organization

11
Smart Contracts are dangerous
• They are manipulating value (crypto-currency or other assets)
• They are code, subject to bugs
• 2016 - $40M stolen due to a Solidity bug in Ethereum
• 2017 - $30M stolen and $150M locked due to
a bug in multi-signature wallet technology
è but… Bitcoin core technology has never been hacked
Technology is in its infancy, need time to mature and be fully secured

12
Ricardian Contracts – half-way between Law and code
• Contract readable by lawyers and machines
• Keeping a text version of the contract,
digitally signed
• Source of Truth in court
• Extract machine-readable conditions
• To automate execution of the contract
• Startup in LegalTech are on it
• Clause.io
• Livecontracts.io

13
Accord Project – standard for legal smart contracts
https://www.accordproject.org/
Nascent standardization initiative to make legal & code closer

14
Challenges with Smart Contracts
• Sometimes Law and regulations are ambiguous… on purpose
• Smart Contracts can have bugs
• Smart Contracts define business logic in technical code
• Who decide when and how the contract need to be amended?
• How Smart Contract can use knowledge from the real world?
• Oracles

15
How Decision Management can be an answer?
• Decision Management is a discipline to involve Business people in the
implementation of the business logic in IT systems
• Decisions are extracted from applications and encoded as readable
Business Rules
• Can evolve at the pace of the business
• Governance and life-cycle management involve both Business & IT
• Business Agility, transparency, auditability, governance are the key benefits
• Smart Contracts are typical examples of code that represent business logic
https://en.wikipedia.org/wiki/Decision_management

Blockchain = Process + Decisions
Eco-system processes automated with Smart Contracts
Rule-based Smart Contracts
Encoding agreement as business rules

Decision Management and Blockchain
• Implement real contracts if Blockchain is used a platform to trade value
• Contracts have clauses that are business conditions
Smart Contract is the Blockchain mechanism to automate transaction processing logic.
• On the market for more than 15 years
• Used by ~1,000 Customers Worldwide for critical business operations – Finance, Insurance, Retail, Supply Chain,
Transportation…
• Provides Enterprise-class capabilities to author, execute and manage decision logic
IBM Operational Decision Manager (ODM) is the market-leading Business Rules
Management System

Smart Contracts – Challenges and Opportunities
Code in Smart Contract is often Business Logic
• Implementing the clauses of contract & agreement between transacting parties
• Making transactions compliant to the regulation
• Code is essentially “business rules” encoded in Go, Java or JavaScript.
• -- quickly becomes complex to implement and manage without a rule engine
• è need to be more accessible to Business Stakeholders, a high-level business-friendly language would be better
Business Logic might change frequently
• Need proper governance around change
• è need extensive tooling to govern Smart Contracts life-cycle
Semantic of the Smart Contract should be well defined
• Expressivity should be limited to early detect inconsistencies, ambiguities and contradictions
• We should be able to verify, test and simulate Smart Contracts
• è A Rule Engine provides a safer environment, trading expressivity for safety

Smart Contracts – Use Cases
Digital Rights dispatch to Artists
- Current solutions spoil artists
- Intermediaries capture a lot of the value
- Smart Contracts to store artist rights
encoded as rules
- Smart Contract to encode payment split
depending on when/where a song is
broadcast, for instance
- …

Smart Contracts – Use Cases
Parametric Insurance
- Insurance contract fully automated using
Smart Contracts
- Policy conditions defined as Business Rules
Insurance Contract
define a location and
the weather conditions
triggering payout
Weather events published as
transactions in Blockchain
Automatic payout as weather
conditions meet contract clauses

Introducing IBM Operational Decision Manager

Introducing IBM ODM
Business Rules
ApplicationApplication
Decision logic
§ Natural language rules can be easily read
§ Externalized rules are easy to change
§ Centralized rules enable reuse and consistency
§ Rules written in software code cannot be read by
business people
§ Hard coded rules are difficult to change
§ Rules intertwined within applications cannot be reused by
other systems
Without Decision Management With Decision Management

Key Capabilities

Author – Decision Service
Author Business Analysts prepare the Decision Service
structure and define contract in Rule Designer
Rules are organized in reusable and composable
Rule Projects
The Business Decision is exposed
as a Decision Service

Author – Business Vocabulary
Author Business Analysts can represent complex Business
Data Model that Developers can integrate with Enterprise Data
Business Object Model Business Vocabulary
Loan
§ amount
§ loanScore
§ riskScore
§ approve(message)
§ reject(message)
the loan
§ the amount of <the loan>
§ the score of <the loan>
§ the risk associated to of <the loan>
§ accept <the loan> with …
§ reject <the loan> with …
Data Model
Rule Language
X
S
D
J
A
V
A

Author – Business Rules
Author Business Users can express and orchestrate complex
Business Logic

Govern

Automate

Rule-based Smart Contracts with IBM ODM

ODM for Smart Contracts – Public Assets
• ODM for Blockchain Smart Contracts: http://ibm.biz/odm-blockchain
Article:
Code Sample:
• ODM for Blockchain Smart Contracts: https://github.com/ODMDev/sample-blockchain-vehicle-lifecycle
Based on:
Hyperledger Fabric 1.1
Hyperledger Composer 0.19+

Smart Contracts leveraging IBM Operational Decision Manager
è Externalizing Smart Contract business logic in ODM
- Business decisions involved in Smart Contracts are delegated to the ODM rule engine
- eXecution Object Model generated from HyperLedger Composer Data Model
- Business stakeholders are maintaining the logic in ODM tools, like Decision Center
è Integrating ODM Rule Execution Server with Hyperledger Fabric
- Deploying Rule Execution Server in Blockchain peer nodes
- Calling Decision Services REST API from Hyperledger Composer Smart Contracts
- Deploying Ruleset through Blockchain transactions

Smart Contracts – Running ODM rules in-chain
- ODM rule engine part of the
Blockchain Peer Nodes
validating transactions
- Deployed as a Docker
image
- Transaction processing logic expressed
as Business Rules with ODM
- Ruleset stored in the Blockchain and
deployed through a Blockchain
transaction
- Out-process REST call from Composer
Transaction Processor
Leveraging ODM Business-friendly tooling to author, test, simulate and govern Smart Contract rules

• Decision Services are implemented in ODM
- eXecution Object Model and BOM are generated from HyperLedger Composer domain model
- Business Vocabulary created in ODM
- Decisions are implemented as Business Rules & Decision Tables using ODM tooling
• Decision Services exposed as REST/JSON API
- Signature based on the BOM
- Called from the Smart Contract
Invoking Decision Services

Invoking Decision Services
• HyperLedger Composer Transaction Processors calling-out to Decision Service REST API
- Transaction data and assets are serialized in JSON and passed to the POST API
- Decision result data come back as JSON object, used in the Java Script Transaction Processor code
HyperLedger Composer Transaction Processor
Using Composer ‘post’ API passing the transaction
and related assets referenced by the transaction
Transaction Processor code decodes the decision
service response and takes the appropriate action

Business Rules life-cycle
• New version of the Ruleset are submitted to the Blockchain as Transactions
- Specific RuleAppUpdated Transaction type specified in Composer
- Specific Transaction Processor in Composer to handle the transaction and deploy the ruleset
- Ruleset deployed to the RES associated to the peer through a facade to the RES exposed as a REST API
• Most current Ruleset version is stored in the Blockchain
- Ruleset are stored in the Blockchain for reference
- The most current version number is written in an asset and used when calling out Decision Services
- If deployment transaction fails, transaction is rolled-back and most current version is unchanged
• XOM changes are deployed the same way
- All logic execution support secured by the Blockchain

Smart Contracts – Business Rules Lifecycle Management
1 Business Users update rules in
Decision Center following proper
Governance workflow
2
When Business Rules are agreed and
properly validated, they are pushed to
the Ledger as a Transaction and
dispatched to all Nodes
Composer
Chaincode
Specific Transaction Processor
ODM Rule Execution Server
RES Deploy REST API
Blockchain World State
& Ledger
Ruleset Deployment Tx
3
Ruleset is stored in
the Ledger as well
as the current
version
4 Ruleset is deployed to the RES
5
When Deployment
Tx will be validated
on all nodes, the
new version of the
rules is available
Ruleset
Blockchain Peer Node
Blockchain
BusinessNetworkParticipants

Smart Contracts – Leveraging IBM Operational Decision Manager
Author
Empower Business Stakeholders to author business-friendly Smart Contracts, validate and simulate them.
Run
Execute in a Rule Engine in HyperLedger Fabric, via HyperLedger Composer. Capture traces and metrics for
auditing, reporting and analytics purpose
Govern
Allow Business Partners to collaborate, deploy and govern their Smart Contracts. (negociation, change
management process, auditing, reporting…)
IBM Operational Decision Manager: https://www.ibm.com/cloud-computing/products/business-process-management/business-rules/

Wrap-up
• Smart Contract is a key concept in Blockchain. The logic applied to transactions is likely to be
Business-related.
• IBM ODM, as the Market-leading Decision Management platform, provides Enterprise-class
capabilities to define and manage Business-logic and make it accessible to the Business.
• The combination of Blockchain/Smart Contract and ODM is a way to go beyond technology and
include Business stakeholders in the value chain.

Backup

http://ibm.biz/odm-blockchain
https://github.com/ODMDev/sample-blockchain-vehicle-lifecycle
Article
Sample
References

Vehicle Lifecycle Blockchain Application
• Developed with Hyperledger Composer and run on Hyperledger Fabric
• Manage the overall lifecycle of a Vehicle from Order to Recycling through registration and
various ownership transfer
• Detect suspicious ownership transfer using Business Rules externalized in ODM
https://www.youtube.com/watch?v=IgNfoQQ5Reg

Vehicle Lifecycle Data Model

Vehicle Lifecycle Data Model in Composer
Participants, Assets and Transactions are defined in HyperLedger Composer

Vehicle Lifecycle Data Model in ODM
• The same model is designed in ODM as a Java Execution Model (XOM) and a Business Object Model (BOM).
• Could be generated from Composer
• A Business Vocabulary is created in ODM using the business terminology

Vehicle Lifecycle Data Model in ODM
Based on the Decision Service signature, ODM generates a REST API

Decision: is this transaction suspicious?
Is the ownership transfer of this Vehicle from this Seller to this Buyer suspicious?

Demo – 11 Steps Demo

• HyperLedger Fabric and Composer deployed as a set of Docker Containers
Step1 – Start Hyperledger Fabric and Composer
Please refer to https://hyperledger.github.io/composer/installing/development-tools.html to install and run
HyperLedger Fabric and Composer.

• Start the ODM Rule Execution Server Docker Container
Step 2 – Start ODM RES Docker Container
In odm-runtime directory , invoke docker-compose up command

• Start the Deployment Service facade
Step 3 – Start ODM Deployment Service
In odm-deployer directory , invoke docker-compose up command

• Use Rule Designer to build the XOM and the Ruleapp
it packages the XOM jar and the Ruleapp in the ‘output’ directory
Step 4 – Build the XOM and the RuleApp
Launch IBM ODM Rule Designer on a workspace and import projects from vehicle-lifecycle-xom
and vehicle-lifecycle-decision-service

• Using Composer API to build and deploy vehicle-lifecycle@1.0.0.bna
Step 5 – Deploy the Vehicle Lifecycle Business Network to Blockchain
Go to vehicle-lifecycle directory , invoke npm run deploy command

• XOM is built from Rule Designer and deployed to the RES through a Blockchain
transaction
Step 6 – Deploy the XOM to the RES
In vehicle-lifecycle-cli directory, invoke npm run deployXom command (*)
(*) the first time you have to invoke npm install to
initialize the command line

Step 7 – Deploy the RuleApp to the RES
• The Ruleapp is built from Rule Designer and deployed to the RES through a Blockchain
transaction
In vehicle-lifecycle-cli directory, invoke npm run deployRuleapp command

• Send specific PrivateVehicleTransfer transactions that are detected as suspicious by
ODM. The decision service returns the suspicion message related to the vehicle
Step 8 – Submit suspicious transactions
In vehicle-lifecycle-cli directory, invoke npm run demo command

• Use ODM Tooling to change the Business Rules. Increment the version number of the
Ruleset and generate the new Ruleapp archive
Step 9 – Updating the business logic

• Submit a RuleUpdated transaction with the new ruleapp
Npm run list (in vehicle-lifecycle directory) >
Step 10 – Deploy the new version of the RuleApp
In vehicle-lifecycle-cli directory, invoke the following node command

• Submit a suspicious transfer again
Step 11 – See impact of business logic change

IBM Cloud Côte d'Azur Meetup - Blockchain Business Processes & Rule-based Smart Contracts

More Related Content

What's hot (20)

Similar to IBM Cloud Côte d'Azur Meetup - Blockchain Business Processes & Rule-based Smart Contracts (20)

More from IBM France Lab (20)

Recently uploaded (20)

IBM Cloud Côte d'Azur Meetup - Blockchain Business Processes & Rule-based Smart Contracts