Blockchain and distributed ledger technology at Travelport

Transcription

1 Blockchain and distributed ledger technology at Travelport A Travelport white paper Enterprise Architecture April Travelport All rights reserved. Travelport, Apollo, Galileo, Worldspan and the Travelport logo are trademarks of Travelport. All other marks are the property of their respective owners.

2 Contents 01 Background and introduction 02 Blockchain fundamentals 04 Main blockchain actors and participants 05 Blockchains are not platform dependent 06 Not all chains are the same 08 Blockchain suitability for the travel industry 08 Currently blockchain technology is suitable for 08 Currently blockchain is not so good for 10 Travel industry blockchain developments 11 Travelport position and conclusion 12 About Travelport 12 Contact

3 Background and information Blockchain is a framework for a consensus driven, immutable peer-to-peer distributed ledger. A blockchain facilitates secure online transactions. It is a decentralized digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. i Blockchain represents a fundamental move away from owned applications located in a data center or on cloud, to true distributed computing power in the hands of the participants of the network. This is why it is seen as a disruptor technology, it is a new transactional computing model, distributed not centralized, and consensus driven rather than single controlling entity. This white paper clarifies Travelport s position on blockchain and distributed ledger technology and explores the suitability of blockchain and potential uses within the travel industry. 01

4 Blockchain fundamentals Blockchain is a distributed peer-to-peer ledger where each computer (or node) on the network contributes to creating and validating a continually growing chain of transactions. The consistency of the ledger across the network of nodes is ensured through consensus models; when the majority of network nodes have validated the ledger content, it becomes the single source of truth. Each node holds a copy of the ledger, and any node can then represent the true state of the ledger. Centralized Decentralized Distributed Businesses have struggled to embrace blockchain as a computing model because the traditional relationships between supplier and consumers are disrupted. Consumers and suppliers can both be active in the trust model relationship that is created, with both parties trusting each other to manage assets on the blockchain. An asset could be a monetary value, represented by a token or cryptocurrency, it could be a contract that executes when all parties have agreed to it or it could be deeds of ownership that represent a real-world asset passing from one owner to another. The blockchain ledger records the current state of the asset, when the state of that asset changes and the majority of nodes agree on that change of state, then the ledger will reflect the new state of the asset. The trust model is secured by cryptographic algorithms that encrypt all the transactions and link new blocks (groups of transactions) to all the previous transactions, this is the origin of the term blockchain. The trust model is maintained by a reward mechanism that rewards contributors who provide computing resource to calculate and validate the cryptographic values of new blocks of transactions on the chain. Where blockchain has made an impact so far is in the cryptocurrency space, describing digital assets that carry a currency value and can be traded in the same way as real currencies. One of the first public blockchains of this type was Bitcoin, launched in 2009 as a monetary unit not dependent on any sovereign currency or central bank. Bitcoin is created or mined by contributors to the network who provide computing resource. The miners are rewarded with Bitcoins for maintaining the trust and integrity of the network, so that other participants can spend or trade Bitcoin securely and reliably, with the state of ownership recorded on the blockchain ledger. Early on, Bitcoin suffered from a reputational problem, the perception was that it was the currency of choice for criminals. This is not because of any inherent insecurity in the blockchain itself, but more due to the security and the perceived anonymity that Bitcoin offers for those who transact with it. 02

5 Blockchain fundamentals Blockchain has potential far beyond cryptocurrency, however, it can be used to create a trust model built around any recordable asset, transaction or contract. Further implementations of blockchain have introduced smart contracts, these are codified distributed applications (known as Đapps) that execute or change state under certain conditions. This allows the blockchain to be used as an automated state machine, responding to events and changing the state of the assets. The most successful smart contract blockchain so far is Ethereum, launched in 2015 and backed by its own cryptocurrency (Ether). Participants can contribute to these types of blockchain by providing computing resource to mine the next block (known as proof-of-work), or by putting up a stake of cryptocurrency to endorse or guarantee transactions then collecting a transaction fee (known as proof-of-stake). Public blockchains are funded and maintained by cryptocurrencies. These can be traded as a commodity in their own right but also have many other uses. Here are some cryptocurrency symbols and their uses; ETH Ethereum, currently the second most traded currency after Bitcoin. Ethereum allows distributed apps (Đapps) to perform logical operations and computing functions on the blockchain. BAT The basic attention token, used to link digital advertising suppliers with consumers. ARK The all in one blockchain, neutral exchange token for linking chains. PAY TenX is a real-world credit card backed by Visa but using its own cryptocurrency. LTC Litecoin, alternative to Bitcoin higher capacity and lower transaction fees. EOS A more scalable and better performing alternative to Ethereum, to allow larger and more robust computing transactions. XRP Ripple is a cryptocurrency that focuses on low cost international payments. GTO Gitto project, an upcoming initial coin offering in the car rental space offering tokenized rental deals and shared rides. 03

6 Blockchain fundamentals Main blockchain actors and participants Chain creator The role here is to set the standards and create some seed assets based around a real-world business problem. Once the chain is running this role disappears. In a private chain, however, the creator may also be the owner and controller of permissions on the chain. The creator may run an ICO (initial coin offering) that is the funding mechanism for public chains setting the value of the cryptocurrency that becomes the tradable entity or a project built on a public chain that deliver services to customers. Miner or Validator Verify transactions and group them into blocks. Provide the computing power, known as proof-of-work, or another economically meaningful stake such as a cryptocurrency (proof-of-stake) to determine and validate the next block in the chain. Exchange Create transactions on the behalf of consumers and exchange one cryptocurrency or ICO token for another or convert cryptocurrency or ICO tokens to/from fiat currency. Exchanges run a full-node (copy of the ledger) to verify the assets held by consumers and trade them. Exchanges may change the state of assets then allow miners to validate the assets. More compute intensive than most consumers but less than mining. Large growth in exchange vendors as it can be a profitable business model, example vendors: Cardpool, Coinbase, CurrencyFair, Kantox, Kraken, OKCoin, Points, Poloniex and ShapeShift. Consumers Owners of the asset/value/data recorded in the distributed ledger. The strength of the cryptography and rules for consensus across the network will greatly influence the cost of mining and the security and reliability of the blockchain. Public chains rely on an incentive mechanism for mining or validating a new block, either a flat fee cryptocurrency reward and/or a transaction related fee. 04

7 Blockchain fundamentals Blockchains are not platform dependent Blockchains are not dependent on any specific technology or platform standard, because they are distributed they must be able to run on any hardware and any operating system. The standards that have emerged so far are around the cryptography that is used to secure the chain and open token standards for the major public chains such as Ethereum and Bitcoin. Standards allow easier exchange of value across different chains. However, true interoperability does not yet exist between different blockchains. Each chain uses a variation of common programming languages and many have defined their own scripting language for transactions. For example Ethereum s scripting language is called Solidity and is based around the ECMAScript specification that was originally proposed to standardize the Java Script language. The technology behind blockchain, a deeper view Blockchain works by securing data with a cryptographic hash, a security algorithm that generates a long apparently random number from the source data. The hash value of the content and the header data from many transactions is used to create a block of transactions. The new block is then hashed again using the hash of the previous block in the chain and a random number called the nonce. The result of this double hashing means that the hash value of the new block is dependent upon the hash value of all the previous blocks in the chain. In cryptography terms, the structure created by a blockchain is known as a Merkle Tree. Hash 0 Hash (Hash 0 + hash 1) Hash 0 Hash (Hash hash 0 1) Hash 0 Hash (Hash hash 1 1) Hash 0 Hash (L1) Hash 0 1 Hash (L2) Hash 0 2 Hash (L3) Hash 0 3 Hash (L4) Data Blocks L1 L2 L3 L4 In proof-of-work blockchains, the network sets a target maximum value for the block hash to validate new transaction, this is known as the difficulty. Miners or validators of new blocks use dedicated computer hardware to try trillions of hashes per second attempting to reach the target difficulty value by changing the nonce. If the target value is achieved a new block is validated and added to the chain. The amount of effort required to reach the target difficulty value and validate the block means it is extremely difficult and compute intensive to tamper with transactions and change previous blocks, and still achieve a hash value that meets the target. Hence this guarantees the blockchain s security and makes previous transactions immutable. 05

8 Blockchain fundamentals Not all chains are the same At their heart, all blockchains are distributed ledger technologies (DLT). Governance models define the rules by which the assets managed in the ledger are created and how the ledger is maintained. The use of blockchain implies that the ledger is authoritative, however the governance rules built into the blockchain can define how disputes are resolved and corrections made. Three broad categories of governance model exist public, permissioned or private. In a public (permissionless) blockchain anyone can contribute to be a user or maintainer. Permissioned blockchains have defined membership rules and processes for blockchain maintainers. If users can freely join the blockchain and submit transactions, then we talk about a public permissioned blockchain. A private blockchain, another form of permissioned blockchain, is run and used by one organization or a private business network and membership rules and processes are in place for both maintainers and users. iii Public chains like Bitcoin and Ethereum invest heavily in creating robust and secure consensus processes for creating blocks and adding them to the chain in chronological order. Public chains attribute cryptocurrency value to the participants in the chain who supply the computing power to maintain a truly distributed network. The difficulty of the chain is high, and the amount of computing resource required to add a new block (the proof-of-work ) is expensive. There are other public chains such as Bitshares, Etheremint, Verse One, Sovrin which use proof-of-stake algorithms. In private chains the network is defined and limited to the participants and the trust model needs to be pre-established between the participants rather than being formed in an open environment where the participants do not generally know each other. A private blockchain implies all the rules for asset creation and ledger maintenance are created and managed by a single or group of organizations, they are often referred to as distributed ledger technology (DLT) rather than true blockchain. However, in most cases they are learning tools because within an organization, there are more efficient technologies for maintaining a distributed ledger than a blockchain. 06

9 Blockchain fundamentals Not all chains are the same A permissioned blockchain is a semi-public chain where a group, such as the primary stakeholders of a specific industry, decides on the standards and governance. Only those within the group are allowed to maintain the ledger and depending on the business model, create assets. Access to the ledger may or may not be granted to others outside of the group. The primary technical advantage of a permissioned blockchain is the ability to use significantly less expensive and/or compute-intensive processes for maintenance of the chain. However, forgoing economic security guarantees through an incentive model, and inheriting the nothing-at-stake problem makes the ledger less secure. The decision whether to rely on economic security guarantees or not depends on the value-at-risk that is being put on the chain and requires a careful evaluation of speed vs. security. Therefore, private and permissioned blockchain owners must consciously decide how secure, decentralized and immutable their chain will be. They decide whether and under what circumstances to reverse a verified transaction, particularly if that transaction can be shown to be fraudulent. Balancing characteristics of blockchain. Determining the type of governance applied to blockchain helps to determine its characteristics. How each creator implements the ledger will change the balance of the ledger s fundamental characteristics. Anonymity ranging from pseudo-anonymous to permissioned access to full identity. Immutability how easy or difficult it is to make changes to the ledger. Efficiency the cost of maintaining the ledger in terms of computing power. Transparency what and how much transaction detail will be exposed. Cryptographically secure the strength of the cryptographic keys used to encrypt transactions. Economically secure the balance of value-at-risk vs economic incentives (rewards/punishments). Decentralized what restrictions are placed on who and how many can contribute to and maintain the ledger. Data integrity the ability to track attestations to the validity of a transaction. Each implementation of blockchain or distributed ledger defines governance and security models that place a different level of importance on these characteristics. For example, the public Bitcoin blockchain prioritizes pseudo-anonymity, immutability, and transparency over efficiency. 07

10 Blockchain suitability for the travel industry There are many potential applications for Blockchain in the travel industry from the guarantee and distribution of inventory, to payments, traveler identity to ticketing. Each application requires investment and collaboration across partner organizations for it to be successful. Blockchain is still an emerging technology and the standards and variations of blockchain and DLT are still being formed. Travelport believes that the current maturity of blockchain technology is only suitable for certain applications. Currently blockchain technology is suitable for: Distributed ledger business processes with lots of parties that need to keep records or track assets. Transactions between partners that don t know or trust each other. Assets that are easily described digitally (such as a currency) or contracts that can be executed by a logical flow. Providing a trust model with: Transparency Immutability Cryptographic security Data integrity Decentralized processing Currently blockchain technology is not so good for: A distributed database deployed in one organization (single organization private permissioned chain). The only benefit to using blockchain in this scenario is learning. Fast, high volume transactions Bitcoin is handling transactions per second. The Travelport transaction rate exceeds that of both Bitcoin and Ethereum together. Real time transactions block checking and validation takes time, as there needs to be consensus across the network. This can be anything from a couple of seconds and up to 10 minutes. Low value transactions mining (block creation) is expensive in terms of computing power, and risky as every transaction is not guaranteed to succeed. 08

11 Blockchain suitability for the travel industry Travelport has been exploring potential use cases for blockchain and distributed ledger technology. These use cases cover a number of different aspects of the travel process from holding inventory or guaranteeing a reservation to making payments. An assessment of each use case suitability has been made based on the current available blockchain capabilities and technology. It is likely that as blockchain applications and distributed ledger computing techniques develop, there will be more use cases that it can be considered for: Use case Whole trip, travel reservations Traveler identity Payments for travel transactions Suitability for blockchain or distributed ledger and limitations Currently not suitable for public blockchains, scalability and speed of transaction verification are limiting factors. Suitable for blockchain or distributed ledger, needs robust access control mechanism and security model. Suitable for blockchain, requires financial partners and requires currency stability. Loyalty federation Guarantee of bookings and payments Ticketing Possibly suitable for blockchain, requires collaboration of travel suppliers and agreement on exchange mechanism. Validating a booking on distributed ledger, suitable for blockchain as it does not involve keeping the whole reservation on the ledger. Similar to above but risks transposing legacy process to distributed ledger technology. B2B settlement Suitable for distributed ledger in a closed business network. Shopping and inventory Travel exchange Inventory control possible with distributed ledger but probably only within a limited access group or closed network due to performance and scalability. Travel token or currency exchange capability, working across supplier s ledgers. Will probably be a necessity to support some of the other models. 09

12 Travel industry blockchain developments Blockchain is still a cool new technology looking for potential uses and Gartner have placed it at the very top of their hype cycle for 2017/18. Many travel industry participants are taking an interest and are evaluating blockchain and DLT, there a number of different use cases that have been considered. Several larger participants in the travel industry have released white papers on blockchain, however there have been very few proofs of concept or live implementations of travel related blockchains released so far. One notable exception is TUI who have deployed a private blockchain to manage hotel inventory. This allows the hotel suppliers to put inventory onto the blockchain and for TUI to consume inventory and pay them accordingly. Start-up companies are targeting the travel space for blockchain development. Winding Tree is the most prominent of these, Winding Tree is launching its own cryptocurrency (Lif) for travel and is aiming to change the travel distribution model. Several other start-ups are claiming the travel space and we are likely to see a number of cryptocurrency and token releases based around travel asset management. The barriers to entry for travel start-ups are high, however, and we expect that there will be many failures. iv Loyyal is a San Francisco based startup that is aiming to unify the loyalty points market by providing a platform that can exchange loyalty points and unify reward mechanisms. A couple of startups are looking at traveler identity as a potential blockchain use case area. These include vchain, which IAG has invested in, Civic which has a relationship with Amadeus and ShoCard, backed by IATA. IATA announced IATA Coin in mid-2016 but there has been little active development around this concept. IATA Coin is seen predominately as a way of easing payments between travel suppliers and consumers without paying for each intermediary. IATA One Order has the potential to unify air order management and create an order sharing model across the industry that could use blockchain. Based on the current developments in the travel market around blockchain, Travelport predicts that in the short term most developments will happen in closed supplier groups on private and permissioned chains within the travel industry. In the mid to long term we may see payments, inventory and order management disrupted by blockchain or distributed ledger technologies. Whole trip management on blockchain, air settlement and combining of air supplier journeys we see as a longer-term proposal. Short term 1 2 years Mid-term 2 5 years Long term 5 years + Private permissioned DLT for supplier inventory Limited B2B payments Travel cryptocurrency/token offerings Basic traveler identity Travel cryptocurrency exchanges Reservations on distributed private ledger Cryptocurrency payments for travel Early IATA Coin adoption Traveler identity shared across suppliers IATA coin for air settlement Whole trip on blockchain Interlining across blockchains Global traveler identity 10

13 Travelport position and conclusion Travelport is working closely with trusted technology partners on potential use cases for blockchain. Initial investigations and developments have been around: 1. On-boarding and managing low value travel content for secure distribution and selling. 2. Developing and running a travel cryptocurrency wallet and asset exchange. 3. Determining how we can secure, anonymize and manage traveler identities across the travel eco-system. Travelport is actively seeking other travel industry partners who are interested in exploiting blockchain and DLT. We believe that many of the initial implementations in the travel industry will be based on private permissioned DLT chains. This helps to build learning and assess technology suitability, caution needs to be applied in releasing travel products and process onto public or permission less blockchains. Travelport believes that blockchain and DLT is still an immature technology, but has potential to change the travel market in the medium to long term. There are financial and reputational risks to investing in blockchain too early, or in use cases that do not suit the technology. There is also a risk in doing nothing, as the travel market could be disrupted by other blockchain innovations. This is why Travelport is actively investing in distributed ledger proof of concept projects with our technology partners. Travelport believes, that it can position itself as an enabler between blockchain eco-systems used by travel providers. Travelport is positioned to manage travel assets on and off chain, providing wallet and exchange capabilities to suppliers and consumers. This capability could be coupled with our own distributed ledger for managing low value or long tail content outside of our normal distribution model. Written by Andy Bell and Dave Hollander i ii iii iv 11

14 About Travelport Travelport (NYSE: TVPT) is the technology company that makes the experience of buying and managing travel continually better. We operate a travel commerce platform providing distribution, technology, payment and other solutions for the global travel and tourism industry. We facilitate travel commerce by connecting the world s leading travel providers with online and offline travel buyers in a proprietary business-to-business (B2B) travel platform. Travelport has a leadership position in airline merchandising, hotel content and distribution, car rental, mobile commerce and B2B payment solutions. Travelport also provides critical IT services to airlines, such as shopping, ticketing, departure control and other solutions. With net revenue of over $2.4 billion in 2017, Travelport is headquartered in Langley, U.K., has over 4,000 employees and is represented in approximately 180 countries and territories. Contact info@travelport.com travelport.com 12