The Microsoft vision for Blockchain
- 1. 4 Blockchain at Microsoft Project Bletchley Kristof Rennen Program Manager | Microsoft Azure
- 2. 6
- 5. Regulatory Compliance Microsoft cloud services have the largest compliance portfolio in the industry United States HIPAA / HITECH FedRAMP JAB P-ATO FIPS 140-2 FERPA DISA Level 2 ITAR-readyCJIS21 CFR Part 11 IRS 1075 Section 508 VPAT Industry ISO 27001 PCI DSS Level 1SOC 1 Type 2 SOC 2 Type 2 ISO 27018Cloud Controls Matrix Content Delivery and Security Association Shared Assessments Regional European Union Model Clauses United Kingdom G-Cloud Singapore MTCS Level 3 Australian Signals Directorate Japan Financial Services China Multi Layer Protection Scheme China CCCPPF New Zealand GCIO China GB 18030 EU Safe Harbor ENISA IAF
- 6. DIGITAL TRANSFORMATION Leading edge regulatory compliance capabilities empowering financial services “The cloud is inevitable… But right now the timing isn’t right.” Two years ago… “Tell me how to get there in a safe compliant way…” Today… Over 45 Financial Services Regulators Engaged in Last 12 Months Customers are Moving! 7 of the Top 8 “Too Big to Fail” Insurers 17 of the Top 26 “Too Big to Fail” Banks Are Now Committed to Our Cloud… Online Services (All Customers) Financial Services Amendment (FS Only) Financial Services Compliance Program (FS Only) Regulator Right to Examine Institution is accountable & in control
- 7. 11
- 10. Technical View .
- 11. Technical View .. Traditional System Centralized system with stored ledger Blockchain System Distributed system with distributed ledger
- 12. Characteristics . Cryptographically Authentic Uses tried and true public/ private signature technology. Blockchain applies this technology to create transactions that are impervious to fraud and establishes a shared truth. Shared Blockchain’s value is directly linked to the number of organizations or companies that participate in them. There is huge value for even the fiercest of competitors to participate with each other in these shared database implementations. Distributed There are many replicas of the Blockchain database. In fact, the more replicas there are, the more authentic it becomes. Ledger The database is a read/write-once database so it is an immutable record of every transaction that occurs.
- 13. Characteristics .. Control Access to Data Traceability Data integrity Immutability Real-time Traditional Databases Distributed database Centralized control provides efficiencies but requires trust in a central entity Decentralized control reduces dependency on trusted parties Tracked through rights and permissioned access managed centrally Non-trusted participants can may be allowed to join the blockchain with restricted access to data Complex data dependency and business model makes auditing difficult Easy traceability due to combination of IDs and history of transactions Subjective protocols and techniques to ensure security while providing more control. Manipulation of historical interactions with data is possible and immutability is lost Cryptographically signed history maintains data integrity. Unchangeable transactions on the blockchain make it immutable but gives lesser control Prolonged query times for large databases reduces possibility of real time reporting Shared ledger and sync-ing enhances response time for reports Source: Private blockchains are more than “just” shared databases – a MultiChain blog
- 14. Opportunities Blockchain can bring greater transparency, security, and efficiency in our current business processes eliminating inefficiencies. It can enable new business models based on distributed marketplaces and technology Grow Revenue Reduce Fraud Increase Speed Efficiency Eliminate intermediaries Build New Relationships Enter New Markets Transformation
- 15. Network Types . Public Private Consortium Many, unknown participants Writes by all participants Reads by all participants Consensus by Proof of Work Known participants from one org Write permissions centralized Reads may be public or restricted Multiple algorithms for consensus Known participants from multiple orgs Writes require consensus of n participants Reads may be public or restricted Multiple algorithms for consensus Public blockchain Person a Woodgrove Financial Person B Northwind Traders Bank 6 Bank 1 Consortium 6 Bank A Blockchain Location 1 Location 2 Location 3 Location 4 Department A Department B Consortium Woodgrove Financial Contoso Bank Northwind Traders Bank b Insurance c Investment consortium c
- 16. Network Types .. Public Blockchain ( Permissionless) Private/ Consortium Blockchain ( Permissioned) Access Speed Transaction Security Identity Examples Open Read/Write access to the database Permissioned Read/Write access to selected nodes Slower Faster Proof of work/ Proof of stake Pre- approved participants Anonymous / Pseudonymous Known identities Bitcoin/ Ethereum R3 / Eris Industries / Multichain
- 17. Consensus Algorithms Proof of Work The Proof-of-Work (PoW) method asks users to repeatedly run hashing algorithms or other client puzzles, to validate electronic transactions in exchange for the opportunity of a reward. Proof of Stake In Proof of Stake (PoS) based blockchians the creator of the next block is chosen in a deterministic (pseudo-random) way, and the chance that an account is chosen depends on its wealth (i.e. the stake). Proof of Authority Proof-of-Authority (PoA) uses a hard-configured set of "authorities" - nodes that are explicitly allowed to create new blocks and secure the blockchain. This makes it easier to maintain a private chain and keep the block issuers accountable. Voting “Voter” nodes can vote on which block should eb the canonical head at a particular height. The most recent block with the most votes is considered the canonical head of the chain. A block is only considered valid once a given threshold of votes has been received from valid voters.
- 18. 24
- 19. Evolution . Smart Contracts are unable to access external data or events based on time or market conditions. Calling code or data outside of a Smart Contract or blockchain breaks the general trust barrier and authenticity of transactions. Cryptlets will allow the blockchain to access external data securely, while maintaining the integrity of the blockchain.
- 20. 27
- 21. Topology
- 22. Digests
- 24. Mining
- 27. 35
- 28. Challenges Co-operation & Establishing Standards • In order to gain widespread adoption, standards need to be agreed between participants that create a common set of protocols for individual firms to adopt. This is challenging given the number of participants that need to come to agreement • For some markets “Critical mass” will be achieved by a smaller group that will then work together and create de-facto standards Regulatory Framework • Regulators will focus on how blockchain achieves outcomes that align with regulatory concerns (e.g. AML/KYC, Resilience, Recovery and Resolution) • Specific local regulations such as specific Asian data Secrecy requirements will need to be met • Negative connotations associated with bitcoin impact on regulator’s perceptions Scalability & Resilience • Bitcoin’s transaction capacity (~3 transactions per second) precludes mainstream capital markets adoption • Regulators concerns around operational resilience will need to be satisfied Legal Framework • To trade significant values of assets firms need to ensure that they can perfect legal title to the underlying asset recorded by the tokenised asset in the distributed ledger • An identified challenges is achieving a uniform legal framework across a distributed set of peer parties with no centralised authority Settling value in “real money” • Any mainstream application will need settlement certainty in real money • Tokenized solutions pose an added layer of settlement and counterparty risk that will not be acceptable Legal and regulatory, rather than technology are primary barriers for blockchain adoption
- 29. Adoption
- 30. 38
- 31. Use Cases . Blockchain has the potential to disrupt multiple industries Retail & Manufacturing Financial Healthcare Government
- 32. Internet of Things Freight Transportation • Moving freight is a complex process involving different parties with different priorities • An IoT-enabled blockchain can store the temperatures, position, arrival times and status of shipping containers as they move through the system • Indelible blockchain transactions ensure that all parties can trust the data and take action to move the product quickly and efficiently Components tracking & compliance • The ability to track the components that go into an aircraft, automobile, or other vehicle is critical both for safety and regulatory compliance • IoT data stored in shared blockchain ledgers enables all parties to see component provenance throughout the vehicle’s life • Sharing this information with regulatory agencies, shippers, manufacturers and so on is secure, easy, and cost-effective Log operational maintenance data • IoT devices track the state of safety of critical machines and their maintenance in your organization • From aircraft engines to elevators blockchain provides for a tamper- free ledger of operational data and the resulting maintenance • Third-party repair partners can monitor the blockchain for preventive maintenance and record their work back on the blockchain • Operational records can also be shared with government entities to verify compliance Smart Vending Machines, Package Drones, Machinery Maintenance • Vending machines could automatically pre-order and pay for the delivery of more soft drinks before they run dry • Factory machine could monitor their own componentry and initiate and pay for required maintenance and parts automatically. • Package delivery drones could not only verify a recipient’s address but also collect payment once that verification has been received
- 33. Supply Chain PRODUCER Food Processor Milk producer supplies Milk to Food Processing Company SMART CONTRACT IoT Enabled The package has to be maintained at : Temperature < 10º C Humidity < 65% The terms of shipping are registered using a smart contract on the Blockchain Origin 8ºC 60% Warehouse Carrier 2 Store CARRIER 1 Warehouse CARRIER 2 Retail Store 9ºC 64% 9ºC 64% 11ºC 66% At various points in the journey, the IoT device from the package sends the Temperature & Humidity data which are recorded on the blockchain SMART CONTRACT UPDATED 11ºC 66% The conditions of the contract have been violated. Carrier 2 is liable for penalty as the temperature of the package when it reached the retail store was above the prescribed limit The Food product is sealed in an IoT enabled package for shipping SHARED LEDGER
- 34. Scenarios Asset Titles Diamonds Designer brands Car leasing & sales Home Mortgages & payments Land title ownership Digital asset records Government Voting Vehicle registration WIC, Vet, SS, benefits, distribution Licensing & identification Copyrights Identity Personal Objects Families of objects Digital assets Multifactor Auth Refugee tracking Education & badging Purchase & review tracking Employer & Employee reviews Media Digital rights mgmt. Game monetization Art authentication Purchase & usage monitoring Ticket purchases Fan tracking Ad click fraud reduction Resell of authentic assets Real time auction & ad placements Computer Science Micritization of work (pay for algorithms, tweets, ad clicks, etc.) Expanse of marketplace Disbursement of work Direct to developer payments API platform plays Notarization & certification P2P storage & compute sharing DNS Medical Records sharing Prescription sharing Compliance Personalized medicine DNA sequencing IoT Device to Device payments Device directories Operations (e.g. water flow) Grid monitoring Smart home & office management Cross-company maintenance markets Payments Micropayments (apps, 402) B2B international remittance Tax filing & collection Rethinking wallets & banks Consumer Digital rewards Uber, AirBNB, Apple Pay P2P selling, craigslist Cross company, brand, loyalty tracking Supply Chain Dynamic ag commodities pricing Real time auction for supply delivery Pharmaceutical tracking & purity Agricultural food authentication Shipping & logistics management Financial Trading Deal origination POs for new securities Equities Fixed income Derivatives trading Total Return Swaps (TRS) 2nd generation derivatives The race to a zero middle office Collateral management Settlements Payments Transferring of value Know your client (KYC) Anti money laundering Client and product reference data. Crowd Funding Peer-to-peer lending Compliance reporting Trade reporting & risk visualizations Betting & prediction markets Insurance Claim filings MBS/Property payments Claims processing & admin Fraud prediction Telematics & ratings
- 35. 43
- 37. 47
- 38. Our Vision
- 39. An Open Cloud HyperScale EnterpriseGrade Hybrid We’ve delivered an open, broad, and flexible cloud acrossthe stack AzureBaaS Applications Management Clients Web App Gallery Dozens of .NET & PHP CMS and Web apps Infrastructure Databases App Frameworks SQL Server +Hundreds of community supported images on VM Depot
- 40. Tenets of our BaaS Strategy FAIL FAST & CHEAP MIX & MATCH CREATE & INNOVATE SHARE SOLUTIONS PROVISION
- 43. High Level .
- 45. Architecture
- 46. Marketplace A bank, defines a certified Commercial Loan SmartContract and places it in the Marketplace, charging $10 per use Company A wants to raise funds to kick off a new campaign and needs a loan to do so, they create an instance of the SmartContract filling in the details and putting it on the ledger, the Bank gets $10 Blockchain ledger Investors see the Commercial Loan SmartContract and agree to its terms and signs the SmartContract putting it in force and action
- 47. Middleware .
- 48. Cryptlets . Securely Bridge off- to on-chain Cryptlet to Chain binding Key management integration Routing and reliable delivery Written in tech of your choice Code attestation travels with transaction Agnostic to blockchain below Hosted in any cloud, on prem or internet Smart contracts enforce data validity – hoist rich business logic to cryptlets
- 49. Cryptlets .. Limitation Example No notion of real world time Do something @ specific Time i.e. 4:00 PM EST Do this every 5 minutes Can’t react to real world events directly Do this when oil hits $40 a barrel Code execution scaling is not straight forward I need this to run FAST Hard to implement libraries, versioning is DLL Hell How do I get code reuse? I need to version a referenced SmartContract Code in the clear in all cases My algorithm is company IP Trusting and using external code or data is dangerous How can I trust this data hasn't been tampered with? Is this code running in isolation?
- 50. Cryptlets ... Blockchain ledger A bank, hedge fund and insurance company enter into a SmartContract Everyday at 4 PM EST it needs a calculated rate like: (LIBOR * .04%) + Diff(Gold)
- 51. Cryptlets …. Cryptlets oracles (+)Trust with Verification – trust hoster (HTTPS), trust Cryptlet key & trust enclave signature (-)Requires trust but no formal verification (+)Standard Infrastructure - Hardware based isolation and attestation via enclaves available Globally in Azure (-)Custom – write & host separately and establishing trust difficult (+)Integrated developer use with Aspects and tooling (-)Custom – write your own (+)Marketplace for publishing and discovery (-)No common marketplace, no publishing or discover tools (+)Bletchley Cryptlet SDK frameworks to get started quickly creating and consuming Cryptlets (Utility, Contract) (-)Platform specific, documentation sparse (+)Multiple language options as well as blockchain agnostic (-)Custom
- 52. Deployment .
- 53. Deployment ..
- 54. Deployment … Simple N-Node deployment ▪ 1 to 5 transaction nodes ▪ 1 to 20 mining nodes ▪ 2 subnets ▪ 2 storage accounts Mock Consortium Network ▪ 1 to 5 transaction nodes ▪ 1 to 100 mining nodes ▪ 2 to 6 subnets ▪ 2 to 6 storage accounts ARM Template
- 55. Strategy POCs HealthcareRetail & CPG GovernmentDiscrete Manufacturing Banking, Capital Markets Distributed Ledger Stacks Azure Horizontal SaaS & Adapters 3rd Part y 3rd Party 3rd Party DL stack A 1st Party DL Stack 1st Party 3rd Party Blockchain Virtual Machine Adapters Smart Contract-based UTXO + others MiddlewareBasePlatform 3rd Party DL stack B… 3rd Party DL stack C… ….. IndustrySolutions Blockchain Resource Provider CryptoDelegate & Cryptlet architecture (secure containers, attestation, etc.) Professional Services & Support Identity & Key Services Crypto Services ML & BI Services Distributed Ledger Gateway Services Blockchain Tools ISVs & Customers Blockchain Marketplace
- 56. Roadmap 73 ▪ http://azure.com/blockchain ▪ https://azure.microsoft.com/en-us/documentation/templates/ ▪ Dev/Test BaaS Labs: https://github.com/marleyg/MSFTLabs/tree/master/DevTestBaaS ▪ 43 different partners available today Try Today ▪ https://azure.microsoft.com/en-us/blog/author/marleyg/ For Updates Blockchain Dev Test Labs Bletchley v1 Azure Blockchain Services Bletchley SDKKinakuta Summer 2016 Fall 2016 Future
- 58. SIGN UP FOR AN AZURE ACCOUNT https://azure.microsoft.com/en-us/solutions/blockchain/ PLAY AROUND WITH VARIOUS TEMPLATES https://azure.microsoft.com/en-us/documentation/templates/ SETUP BLOCKCHAIN ON AZURE https://github.com/Azure/azure-blockchain-projects/tree/master/baas- artifacts Getting Started ONCE YOU FEEL CONFIDENT, ESTABLISH A LAB Create your own DevTest Blockchain Lab • Contact us with any questions BaaS@Microsoft.com • Keep up-to-date https://azure.com/blockchain