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Inte
rnal
BlockchainA Platform for the Next Generation Connected WorldMarkus Hautala
Head of Accelerator ProgramTechnology Services and [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?
Distributed peer-to-peer network ensures the data integrity
Peer to Peer = No central authorityBlock
Blockchain
Transaction
• Block = all transactions within a certain time period• Blockchain = links all blocks together
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Bitcoin popularized the blockchain technology• Bitcoin was proposed in 2008 in a
whitepaper by Satoshi Nakamoto (pseudonym)
• Transaction parties can directly transfer a digital currency (bitcoins) without trusted third parties (i.e. payment service providers)
• Network of untrusted peers (nodes) ensures (consensus protocol) the validity and immutability of all transactions
• Nodes are rewarded by a lottery-based system
• All transactions are publicly verifiable through a public ledger (the Bitcoin blockchain)
Market cap 2nd Oct, 2016
$9.7 Bn
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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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Cryptocurrency is just one of the applications for blockchain
Smart contractsSmart contractsAccount balances
Alice: 30 EurBob: 100 EurCarol: 150 Eur
Users
Money
Blockchaine.g. Bitcoin, Dash, Monero
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Cryptocurrency is just one of the applications for blockchain
Smart contractsSmart contractsSmart contracts
StorageCode
Blockchaine.g. Ethereum, Synereo, LiskUsers
Money
Data
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What are smart contracts?
Coding Distribution Execution• Pre-written logic (computer code) • Stored and replicated on a
distributed storage platform (eg a blockchain)
• Executed/run by a network of computers (usually the same ones running the blockchain)
• and can result in ledger updates (cryptocurrency payments, etc)
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Essential functions of a trusted third party can be automated with the Blockchain
Buyer
Business process
Business records
Seller
Business process
Business records
Middleman facilitated transactionsBuyer
Business process
Value adding service
provider
Value added
services
Seller
Business process
Shared business process(Smart contracts)
Shared business records stored on shared blockchain
Shar
ed p
latfo
rm
Blockchain facilitated transactionsTrusted 3rd
party
Shared business process
Shared business records
Shared platform
Messaging & management of discrepancies and duplicates
Modified from The Corda non-technical whitepaper, R3
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Dumb networks fuel innovation
Telephone network Internet of information
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Blockchain will fuel financial innovation on the edge of the network
Financial network
$
€¥
Internet of value
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As a platform for digital services blockchain can serve various use cases beyond currency
Source: Citi research
Use Case / Application
Record
BLOCKCHAINPlatform
CRO
SS-B
ORD
ER P
AYM
ENTS
ESCR
OW
& C
USTO
DY S
ERVI
CES
SUPP
LY C
HAIN
& T
RADE
FIN
ANCE
CUST
OM
ER A
CQUI
SITI
ON
& LO
YALT
Y
CURRENCY
FINA
NCIA
L SE
CURI
TIES
& T
RADI
NG
LOG
ISTI
CS &
ASS
ET T
RACK
ING
INTE
LLEC
TUAL
PRO
PERT
Y RI
GHT
S
ASSETSRE
AL E
STAT
E &
PRO
PERT
Y
SUPP
LY C
HAIN
MAN
AGEM
ENT
DIG
ITAL
RIG
HTS
MAN
AGEM
ENT
INSU
RANC
E
LEG
AL
CONTRACTS
IDEN
TITY
MAN
AGEM
ENT
FILE
STO
RAG
E &
SHAR
ING
ELEC
TRO
NIC
MED
ICAL
REC
ORD
S
AUDI
TING
AND
CO
MPL
IANC
E
DATA
INTE
NET
OF
THIN
GS
VOTI
NG A
ND G
OVE
RNAN
CE S
YSTE
MS
COLL
ABO
RATI
VE E
CONO
MY
OTH
ERS
TO B
E DE
TERM
INED
P2P
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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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Different flavors for different use cases
Intra-company space
• Private• Permissioned
• Scattered application landscape of a single corporation / institution.
Inter-company space
• Public / private• Permissioned
• Ecosystem/consortium of actors sharing blockchain utility platform.
End-user space
• Public• Permissionless
• Renders the role of trusted 3rd parties obsolete.
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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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Future predictions
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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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Blockchain is still in its infancy
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...but the choice to adopt the technology has already been made
•15% of global banks to roll out commercial blockchain products by 2017•Financial and technology firms are investing over $1 Bn to bring blockchain technology to capital markets in 2016
Financial service providers are adopting the technology dramatically faster than initially expected
•+$1.4 Bn venture capital invested in blockchain startups since 2012 ($300M in H1 2016)•Wanxiang’s $30 Bn Smart Cities initiative will be driven by blockchain
Investments are rapidly growing
•Market cap has exceeded $12 Bn (+70% in 2016)•The relative share of Bitcoin continues to decrease (over 90% -> below 80% in 2016)
Cryptocurrency and cryptoasset market surges and diversifies
•Technology platform vendors: Microsoft (Azure), IBM (Bluemix)•Service integrators: Accenture, Deloitte, Tata, Cognizant, Infosys, CGI, Atos …
Major technology vendors and service integrators have entered the market
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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