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BlockchainA Platform for the Next Generation Connected World
Markus Hautala
Head of Innovation ProgramTieto, CIO [email protected]
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Contents• What is blockchain?
• Why does blockchain matter?
• How will blockchain speed up digitalization?
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Blockchain technology is gaining huge interest
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Blockchain technology is gaining huge interest
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What is blockchain?
Consensus protocol ensures integrity the distributed ledger
Peer to Peer = No central authorityBlock
Blockchain
Transaction
• Block = all transactions in a certain time period• Blockchain = links all blocks together
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Bitcoin is peer-to-peer payment system that enables users to transact without trusted third partiesHow is a bitcoin transaction executed?
1. Alice sends bitcoins to Bob
A
2. The transaction is configured into a block
B
3. The transaction is broadcast across the entire network which validates it
5. Bob receives bitcoins from Alice
B
4. The block is then added to the bitcoin blockchain which is a public ledger recording the entire immutable transaction history
BB
BB
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Blockchain has potential to radically change the future of transaction based industries
Financial intermediaries (Today)• Requires trusted, centralised
intermediaries• Batch clearing and settlement• Higher fees and costly infrastructure
Clearing house(centralised ledger)
Financial network(distributed ledger)
Blockchain protocol (Emerging)• No intermediaries required• Faster processing and management• Lower fees and reduced infrastructure cost
Adapted from source: Citi research
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Blockchain comes in many flavors
Source: Distributed Ledger Technology: beyond block chain; A report by the UK Government Chief Scientic Adviser
1. How many copies of the ledger?
Traditional database
• Traditional ledger Personal bank accountOne
3. Who maintains the integrity of the ledger
Anyone
2. Who can access these copies?
Many Blockchain
• Private• Permissioned
Bankchain, a clearing and settlement network
Owner group
• Public• Permissionless
Bitcoin, a cryptocurrencyAny user by untrusted
consensus
• Public• Permissioned
Ripple, a global financial transactions system
Trusted ledger owners or actors
by validation
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Blockchain can be viewed as a distributed transaction infrastructure and it is well suited for ecosystem collaboration
Intra-institution space
Scattered infrastructure and product landscape of a single corporation / institution.Blockchain can potentially cut costs as mediation platform, but requires heavy integration of legacy systems.
Inter-institution space
Ecosystem/consortium of actors sharing private blockchain utility platform in regulated environment. Prime examples as inter-bank payments, trading market and securities settlement
End-user space
Open, public distributed ledger making the role of centralized institutions obsolete Not under regulation. Driven by cryptocurrencies.
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In the future blockchain will lead towards decentralized, autonomous organisations
Adapted from source: William Mougayar, 2015
Increasing creation compexity & delivery timeframe
Smart contracts
Computer protocols that facilitate, verify, execute and enforce the terms of a commercial agreement. Betting, Inheritance pay-out, P2P insurance, Performance proofs, Escrow
Smart property
Ownership of property is controlled via the blockchain using contracts (car, home, office)
Payments, Tips, Crowdfunding, MicrofinanceCurrency
Identity, Land and property title, Business ownership, Voting, Data storageOther assets
Decentralised Autonomous
Organisations
Entities that fund and manage resources autonomously
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The blockchain technology will speed up digitalisation
Transaction counterparties trust an autonomous
system instead of trusted 3rd party
Move to digital ownership from physical ownership
Machine controlled autonomous processes will
replace manual processes
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The blockchain technology will provide a platform for next generation connected world
Loosely coupled systems Ecosystem collaboration platforms
Asynchronous and offline processes
Synchronous and real-time processes
Stand-alone blockchains Interconnected blockchains
Local value chains Global value chains
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Technology is only developed when used
There was no rational reason to use them But they were the start of a revolution!
The early automobiles:• They looked like horse carriages• They didn't go faster• They often had breakdowns• They were a good deal noisier• and a man with a red flag had to go in front
