Blockchain As An Enabler

CFO Connect Symposium 201615th July 2016

David Lee, Professor of Fintech, SIM University

Vice President, Economic Society of Singapore@DavidKChuenLEE

https://www.linkedin.com/home?trk=nav_responsive_tab_home

Disclosure: An Investor in Blockchain and Scalable Technology

Financial Services and BlockchainTrade FinancingPayroll & InsurancePaymentsBanksBrokerageExchangesInvestmentsMerchantsComplianceTrading PlatformsCapital MarketsMoney Servicesand More

A software platform for fastBlockchain ,and SmartContract prototyping ,andapplication development.Blockchain As A Service

Drove effort to create a new architecture at IBM for connecting devices in Internet of Things (IoT)

Focused on wearable technologies • Apple Watch• Connected medical devices• Application of sensors and

connectivity to industry

Recruited Paul BrodyDeveloped RUBIX

Support from Big 4

Hiring people with expertise in Ripple, Hyperledger and Chain.

Aim to be neutral advisor for clients in implementation, rather than technical specialist

Blockchain Advisory

Commercial Sidechain“Liquid” to facilitate fastand secure transfersbetween exchange orbrokerage accounts

• Integrate multiple blockchains

• Distributed file storage permission

• smart contract capable blockchains

Strategic Partnerships

IBM Watson

• IBM is part of the Linux-based Hyperledger project.

• Offer ‘blockchain as a service’ for developers to use

within the IBM Cloud via a service called Bluemix. Its API

infrastructure allows external data to be plug into the

WATSON.

• Via the Watson platform, IoT information can be enter

into its blockchain suite. Such information can be

harnessed from RFID chips, barcode scans or mobile

devices.

source：http://thenextweb.com/apps/2016/02/16/ibm-has-just-open-sourced-44000-lines-of-blockchain-code-on-github/

• Industrialisation – Manual labour replaced by Machine production• The development of the modern computers and internet is a proven fact.

• Centralization • The essence of cloud computing is to provide a single platform to consolidate the hardware,

and software resources administered by different groups in different regions.

Cloud computing is outdated?

Cloud computing has lowered the cost of operation and improved efficiency。

But, centralisation has its shortcomings too

• Data security.

• Disconnection.

• Data accountability

• Trust mechanism.

source：http://www.wtoutiao.com/p/156D8bB.html “云计算”已成「老炮儿」，将被“区块链”所革命！

Is there an alternative technology?

In October 2015, the 1st Global Blockchain Summit

was held in Shanghai. Geeks, entrepreneurs, academic

experts, investors, corporate executives, and regulatory

policy makers gathered to discuss the business

applications and opportunities of blockchain

technology in Payments, Internet of Things, securities

trading, digital assets management. Over 200 guests

from the financial industry attended the summit.

In September 2016, there will be a 6-day Summit in

Shanghai!

source：http://www.8btc.com/wanxiang-blockchain-labs-20151015

On 20th January 2016, The People’s

Bank of China (PBoC) said that it was

moving towards the launch of its own

cryptocurrency. The bank wants to use

its control over the currency to reduce

money laundering, tax evasion and other

criminal acts. Blockchain will form the

backbone of its eRMB.

source：http://www.wtoutiao.com/p/156D8bB.html “云计算”已成「老炮儿」，将被“区块链”所革命！

A n I n t r o t oB l o c k c h a i n

C e n t a l i s e d P l a t f o r m D e c e n t r a l i s e d

CentralisedPlatform

DistributedDecentralised

Nodes

NodesNodes

Nodes

NodesNodes

(C) DavidKuoChuenLee

Blockchain：First Distributed “Payments” Ledger was from Bitcoin。

Encrypted transaction

Step 1

Block

A block is formed from online transactions.

Step 2

The block is distributed to all the participants

Step 3

Validation is done by cryptography contest or by consensus algos

Step 4

Step 5

The “winning” or “chosen”block is added to a chain of previous blocks - the transactions are recorded and timestamped

Step 6

Transactions completed and confirmed

(approximate 6 blocks to be certain for bitcoin)

Encrypted transaction

Blockchain

Public (ungated) chains

Private (gated) chains

Consortium Chains

Fully Private Chains

E.g.：R3 CEV

E.g.：Bitcoin

Types of BlockchainFeatures of Blockchain

• Distributed/decentralised

• Data are replicated on all the nodes in a distributed P2P network, and each copy of the ledger is identical to others. It can also be decentralised with some lighter nodes not having full data storage with limited connection.

• Consensus mechanism

• All users in the network can come to a pre-determined programmable agreement on the method of validation and can be by consensus.

• Irreversibility and crypto security

• One would need to command at least 51% of the computing power (or nodes or stake) to take control of the bitcoin blockchain. (or others).

• Openness

• The platform and data can be open and transparent to those who participate.

• Anonymity

• Individual parties can be anonymous. Security keys (public and private key pairs) are required to gain access to transaction output.

• Multiplatform

• Every blockchain node has the same calculation and data structure.

source：http://www.8btc.com/what-is-blockchain; http:// community.qingcloud.com; https://blog.ethereum.org

There will be other permutations and combinations. Data in Public Chain can be encrypted or transparent.

Features of Blockchain•Distributed/decentralised

• Data are replicated on all the nodes in a distributed P2P network, and each copy of the ledger is identical to others. It can also be decentralised with some lighter nodes not having full data storage with limited connection.

•Consensus mechanism• All users in the network can come to a pre-determined

programmable agreement on the method of validation and can be by consensus.

• Irreversibility and crypto security• One would need to command at least 51% of the computing

power (or nodes or stake) to take control of the bitcoin blockchain. (or others).

Features of Blockchain

•Openness• The platform and data can be open and transparent to those who

participate.

•Anonymity• Individual parties can be anonymous. Security keys (public and

private key pairs) are required to gain access to transaction output.

•Multiplatform• Every blockchain node has the same calculation and data structure.

Telecommunications Voting Healthcare Nortarization Banking

Equity brokerage &Exchanges

Insurance Web DomainInternet of

Things

……

Moreare

coming

Stock/Securities Exchange

1 Bitshares system 2 Blockchain Equity Exchange System.

• Real-time exchange; total transparency• All corporates can self -issue their securities.• Open source system，enable tens of thousand of

transactions per second.

• Use mainly for the transactions of privatecompanies shares.

• Overstock and project Link by NASDAQ are developing this system.

Advanced Financial exchange and settlement system

B a n k i n g

• E.g. Cash transfer• Present：You＝>bank＝>friend• Future：You＝>friend

• BIS research report：The development of block chain technology will change how central banks operate.

Benefits of block chain that banks can leverage on

• Security: irreversible, immutable, traceable

• Ease of governance : Utilises name base block chain, every node will be identified, e.g. alliances, issuers, general users

• Low operating cost : Reduce the cost of transactions

• Shortened the settlement time of financial transactions: UBS white paper: business process time can be reduced to 15 seconds.

• Santander bank: using blockchain technology will help the banking sector to reduce expenses by USD20 million.

• Lower counter party riskssource：http://www.businessinsider.sg/11-banks-in-r3-consortium-use-blockchain-technology-to-trade-2016-1/?r=UK&IR=T

Banking R3

Blockchain applications for banking：From vision to realisation

•R3 (R3CEV LLC) leads a consortium of 40+ financial companies in research and development of blockchain usage in the financial system.

•11 banks conducted trials on transactions through distributed ledger using Ethereum and Microsoft Azure.

I n s u r a n c e

Traditional coverage system

Decentralised coverage system

• All data are recorded into the

blockchain.

• Any user can start and end their

insurance coverage anytime.

• No need for insurance funding pool.

Mode of insurance coverage

• Irreversible, immutable and

impartial: ensure self authenticationand fairness.

• The decentralised system removesthe need for middleman, which

ensures high utilization of the fund.

Advantages

Communication

Design flow of traditional communication devices：All nodes will connect through the shortest or the most efficient route.

Bitmessage as a central link for message delivery ：• Message is sent to users of the network,

and users can only access using theirprivate key.

• Avoid being tracked• Ensures data security and data transfer

security

GetGems a decentralised hub：• communication function is

similar to that of Bitmessage• Equip with Bitwallet • Transact and earn

cryptocurrency“gems”.• Users can click on

advertisements for monetary rewards.

Bitmessage

V o t i n g

source： https://followmyvote.com/

Open source

ConvenientLow cost

Secure

AGM will be transformed!

Internet of Things (IoT)

Today supply chain: buyers, sellers andtheir banks are link with one another

Tomorrow’s supply chain:maintains the same direct connections,plus complete trustable visibility intothe flow of goods and the flow oftransactions.

• IBM and Samsung Electronics jointly developed the Autonomous Decentralized Peer-to-Peer Telemetry (ADEPT)

• ADEPT has several capabilities that are fundamental to building a decentralized (Internet of Things) IoT

• ADEPT operates on three open source protocols: Telehash for messaging, BitTorrent for file sharing and Ethereum, a blockchain protocol for autonomous device coordination functions.

• Once a product is assembled, the manufacturer will register on the production system blockchain. When a consumer purchases the product, he or she can register the product on the manufacturer regional blockchain for authentication purpose.

Notarization

Blockai aims to develop

a new tool that enables

artist to prove and

states their copyright

to their artworks.

Uproov utilises the

blockchain for time

stamp ability.

Stampery wishes to use

blockchain to replace

notarisers, and to

provide authentication

for legality of sensitive

information.

Chronicled utilizes

blockchain technology

to authenticate

collectibles sports shoes.

Irreversibility and incorruptibility allow Blockchain to be widely utilised for notarization purposes

source：http://www.8btc.com/blockchain-item?tagname=%E5%85%AC%E8%AF%81%E9%98%B2%E4%BC%AA

Bitproof has setup a one stop

service to notarise education

certificates.

BitSE develops Vechain the

first blockchain-based anti-

counterfeiting technology.

Factom utilizes blockchain to help

businesses and government to

simplify records management,

record business processes, and

address security as well as

compliance issues.

source：http://www.8btc.com/blockchain-item?tagname=%E5%85%AC%E8%AF%81%E9%98%B2%E4%BC%AA

Notarization

Irreversibility and incorruptibility allow Blockchain to be widely utilised for notarization purposes

M e d i c a l H e a l t h c a re

A collaboration between Estonia government and guardtime

Healthbank：utilises blockchaintechnology to manage and share personal medical data with medical professionals.

Applications：Population Health, medical records, patient data

Strengths：• Increase the transparency of healthcare services• Protect patient privacy (Insurance , credit providers, and patients can utilised

the blockchain solutions to manage claims and payments.)• Major data leak e.g. Anthem – 80 million patients and employees records ;

UCLA Health 4.5million patient records.• Increase the efficiency of bills payments process.

（ V i s a / D o c u S i g n )

The project is in the proof-of-concept stage. It brings DocuSign’s Digital Transaction Management (DTM) platform and eSignature solution together with Visa’s secure payment technology (via Bitcoin blockchain).

Alipay will have similar project.

Users, through their Cars, will be able to pay for toll fees, buy pizza ,or subscribe for satellite broadcast programs.

Consumers can hop into a car in a showroom, configure the lease, insurance and other expenses such as parking and tolls, notarise it, pay via Visa, and drive off.。

source：https://www.docusign.com/blog/the-future-of-car-leasing-is-as-easy-as-click-sign-drive/

Contract:Utilise Docusign to verify lease and insurance.

Report:Check driving records

In car payment:Use Visa card

Service:Connections through Apps.

source：http://www.wanbizu.com/fazhan/201512015809.html；http://www.wanbizu.com/news/201602186602.html；http://www.wanbizu.com/news/201602186602.html

Government Administration

Ukraine will be the first to employ blockchain technology in its government administration system..

Bitnation is collaboratingwith Estonia to utiliseblockchain toadminister governmentaffairs…………

A new political party in Australia is advocating for the use blockchain as the mechanism for voting.

小蚁AntShares 布比区块链

Many more projects are in the pipeline

China has more than 50% bitcoin mining power, the largest mining farm, fastest machines and its exchanges account for more than 50% of bitcoin trades.

source：https://www.bitmaintech.com/product.htm

AntMiner S7 with 4.73th/sLess energy, more efficient

AntRouter is a wireless networking device containing a

bitcoin mining chip

WanXiang Blockchain Labs is a frontier research lab focusing on blockchaintechnology. The lab will gather experts in this field to work on technologicaldevelopment, business applications, industrial strategy and other aspects.The lab will also guide entrepreneurs, and provide reference for the developmentof the industry and policy making.Its overall aim is to benefit the society and economy with blockchain technology.

Products

WanXiang Blockchain Labs

source：http://www.blockchainlabs.org/

Bitcoin blockchain based development

platform

Ethereum blockchain based development

platform

Bitshares blockchain based development

platform

factom blockchain based development

platform

AntShares utilises blockchain technology to digitise physical real world assets and ownership rights. Through the node to node connection in the network, Antshares decentralises financial service processes, such as registrations, security issuances, assets transfers, and settlements administrations.

Areas for applications

Equity Crowdfunding

P2P Online lending

Employee Shares Issuance

Authorisation of e-contract

A n t S h a r e s

source：https://www.antshares.com

Jingtum BeiJing and HNA collaborate through blockchain

1 Corporate Wallet

Procurement detailscash

transfersettlement

• Utilise blockchain todevelop a low costsettlement system.

• Increase efficiency ofinformationdissemination

2 Supply chain financing

• HNA award employees with productdiscounts, rewards, and bonusesthrough the blockchain applicationdeveloped by Jingtum.

• Ensures confidential information ofemployees are secured, and allowsemployee to enjoy more discountsrewards.

3 Awarding of Welfare bonuses

• Utilise the encryptiontechnology that is based onJingtum block chain.

• Aims to solve thedifficulties in cashflow andfinancing ,and in high loaninterest faced by suppliers.

source：http://www.8btc.com/jingtong-hna

“One Belt, One Road”Blockchain Applications

As the countries along the One belt ,One Road project transact using USD, the China government wishes to utilise blockchain technology to develop a cryptocurrency system. Through the Asia Financial Cooperation Association ( to be established), members can work and decide on the rules, and protocols to ensure the security and the legality of the cryptocurrency system.

Improve financial cooperation, and communication

Help China corporatesto internationalise

Aid China corporates to minimise foreign investment pitfalls Digitise investment/trade information of the investments in countries along the “One Belt,One Road” project. Blockchain-• will ensure data security ,

transparency, and allow co-verification, and authorisation of information。

• Protect intellectual property rights。

Through the digitisation of production capacity ,and blockchain network, China corporates can• Attract investors in countries along

the “One Belt,One Road” project• Carry out crowdfunding in these

countries or internationally.• Or even conduct IPO on the

blockchain network.

Solve China’s problemof production over capacity

source：http://www.ftchinese.com/story/001065381?full=y

Blockchain 2.0：Ethereum

Ethereum is a decentralized platform that runs smart contracts:

applications that run exactly as programmed without any possibility of

downtime, censorship, fraud or third party interference.。

• Objective：Develop apps which run on a custom built blockchain that

enable shared global infrastructure and that represent the ownership of

property。

• Value proposition：enables developers to create markets, store

registries of debts or promises, move funds in accordance with

instructions or a futures contract, and many other potential

developments, all without a middle man or counterparty risk。

Microsoft, R3, Samsung ,Deloitte、RWE ,and IBM.

What problem does Ethereum wish to solve ?

Utilise smart contract to mitigate counter party risk

and issues

Blockchain 2.0 Core

- Smart contract, Smart Asset

- Rootstock a smart-contract peer-to-peer platform,

is rising fast to challenge Ethereum in Smart asset

developments.

Ethereum supporter？

Blockchain 2.0：Ethereum

ZCASH

• ZCASH PAYMENTS: is a decentralized and open-source cryptocurrency that offers privacy and selective transparency of transactions using advanced cryptography. Zcash payments are published on a public blockchain, but the sender, recipient, and amount of a transaction remain private.

• TRANSACTION METADATA: Bitcoin transactions work using triple-entry accounting: transactions combine the "outputs" of previous transactions and split into new outputs of arbitrary value. The spend-authority of the "inputs" of a transaction, as well as the balance of the transaction, are checked manually by all nodes. This means that all unspent outputs must be kept by all fully verifying nodes, but also, that all nodes are aware of all values and parties involved in transactions.

• ZERO-KNOWLEDGE PROOFS: Our zero-knowledge proving scheme makes it possible to hide values and other identifying information from the public. Using advanced cryptographic techniques, users simply prove that the values balance and that they are authorized to spend such value. (And that they have not spent it before.)

NETKI

• NAME SYSTEM: Like the Domain Name System, which provides the standard and infrastructure for the Internet to map easy to remember domain names like google.com to a numeric IP address, WNS is designed to allow service providers, using any blockchain, to replace the cumbersome public addresses provided to users (example: 1CpLXM15vjULK3ZPGUTDMUcGATGR9xGitv) with easy to remember, domain-style wallet names.

• IDENTIFICATION: The BIP 0070 payment protocol is another useful (yet underutilized) extension, which allows a sender to ensure that he is actually paying the correct/desired recipient, before he permanently signs away his funds.

MORE ON NETKI

• VERIFICATION: In addition to a green lock or check that appears next to a correctly inputted recipient, BIP 0070 can be used to provide transacting parties with a more detailed recordsurrounding the specific aspects of a particular transfer (e.g: what was purchased, the reason for the transfer, etc.) before the sender ‘presses send’ (initiating an irreversible transaction). These details can be recorded in the ‘memo field’ of a payment request, which are transmitted directly between the sender and receiver, without having to permanently record them on the Blockchain.

• TIMESTAMPING: These payment requests, when combined with transaction details timestamped on the Blockchain, provide companies and individuals with a more complete, digital “paper trail”, which can be used as an effective substitute for traditional receipts, while never inputting sensitive information onto the Blockchain, or exposing any of the extended transaction details to anyone not a party to the transaction. Moreover, the utilization of these payment requests can help companies/services remain compliant with existing AML / KYC / CTF regulations, which generally require financial institutions and DNFBP (Designated Non-Financial Businesses and Professionals) to maintain more detailed records of transaction.

Travel Rule Compliance Solution

• Validated digital identity certificates

• Work across private and public blockchains

• Aid companies with US Travel Rule [31 CFR 103.33(g)], Department of Treasury compliance for Money Service Business (MSB)

• Contain validated identity information

• Work in conjunction with blockchain Payment Protocol (BIP70/75)

• Can be used for non-repudiation

LIBRA As An Interface

LibraTax:

Harnessing DataAnd Drawing Data From Different SourcesFor Tax Reporting.

China will have GlobalTaxation from next year.

Digital Asset (video, audio, picture, bitcoin, DAC, DAH etc) is the nextasset class and you needto monitor, manage, custodise and monetise.

Enabler of Self Organised SocietyEnabler for Machine AuditEnabler for Machine Internal ControlEnabler for Machine Tax AdvisoryEnable for Credit RatingEnabler for Data HarnessingEnabler for Smart Data AnalyticEnabler for SecuritisationEnabler for Asset TransferEnabler for Value TransferEnabler for Service SharingEnabler for Asset SharingEnabler for Verification Enabler for RegistrationEnabler for IdentificationEnabler for Collaboration

NOW

Future Challenges:1. Block Size(Soln: Lightning, Micropayments)2. Storage(Soln: Partitioning, Shredding) 3. Transactions per sec(Soln: No Clever Solutions yet, Partitioning)4. Privacy(Soln: Zero Knowledge, Encryption)5. Legality and Oracle(Soln: Self Learning AI Smart Contract, Oracle Blockchain for Fulfillment of Pre-conditions)

What are slowing the exponential adoption?

All About Computing Power!

From Dark Net to Saviour?

• Is Blockchain a collaboration enabler?• A basis upon which people/entities can easily collaborate with distant

strangers/entities

• Is Blockchain an asset sharing enabler?

• Will Blockchain lead to a self governing IoT society based on voluntary institutions via voting?

• Will Blockchain lead to a large scale de-centralized collaboration?

• Will Blockchain be able to run a mutual insurance pool?

• Will Blockchain be able to establish a mutual credit system?

Source: UN Report

Noah's Ark

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Blockchain Research Group

W u Yu T i n g Z a n g M e n g Yu Sun Ming

Chen WanFeng Huang YiYa Lee YinHao

myzang.2015@maf.smu.edu.sg

huangyiya07@126.com

yuting.wu.2015@maf.smu.edu.sg

wfchen.2015@maf.smu.edu.sg Leeyinhao83@gmail.com

ming.sun.2015@maf.smu.edu.sg

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Acknowledgements• Chainb.com• 8btc forum

• Mentioned companies• Authors of cited websites

For sharing knowledge and information of Blockchain!