BUSINESS DISRUPTION WITH BLOCKCHAIN. September 15th, 2017

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Crystal Sharp
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1 BUSINESS DISRUPTION WITH BLOCKCHAIN September 15th, 2017

2 Agenda 1. My own experience 2. Will Blockchain change the world? 3. Why explotion still missing 4. Two Constrains 5. Is the gigantic wave arriving sooner than expected? 6. Final Remarks

3 My Unicredit Experience Started in May 2015 with decision of experimenting on Ripple. Pilot of cross-currency payments in production (fully integrated with legacy systems) with real money (with RBC) based on Ripple technology. (September 2016) POC on Supply Chain Finance with Skuchain and with R3 Forex trades confirmation matching directly in the blockchain network removing the need for SWIFT & paper confirmations for internal trades. Internal pilot running R3: active participation in their Labs and different projects; i.e. Project Argent, eloc and Digital Trade, Moore, Vega Stingray, Trade finance KBC: consortium of European Banks Discussion with MAS for projects in APAC Pilots/Evaluation with different platforms: i.e Ripple, Corda, Skuchain, Ethereum, Hyperledger, ecc.

Everis Blockchian Offering Solution FABRIC Everis implements the Ripple Solution to enable banks to conduct realtime and bilateral settlement of funds.

4 Everis Blockchian Offering Solution FABRIC Everis implements the Ripple Solution to enable banks to conduct realtime and bilateral settlement of funds. With Ripple banks can access the Ripple Consensus Ledger, a blockchain that functions as a global cross-currency RTGS system and liquidity marketplace. Ripple s technology is the most advanced settlement system in the industry. The Interledger Protocol (ILP) is the open Internet standard for connecting ledgers. It is a neutral and open protocol stack for bridging banks, blockchains, digital wallets and other types of ledgers. Everis, Ripple and NTT DATA are collaboratively working on the Java implementation of the Interledger Protocol. Corda and Hyperledger Fabric have been engineered to enable shared and authoritative systems of record for financial agreements. They are the most advanced platforms for recording, storing and maintaining financial industry level smart contracts to represent and reconcile financial contracts between parties. everis aims to become the best Corda and Hyperledger Fabric System Integrator for banks.

5 2. WILL BLOCKCHAIN CHANGE THE WORLD? 1988 forecasting 2018 Nov It will change our life more than Internet

6 Blockchain Is Not Only Cryptocurrency FROM BLOCKCHAIN REVOLUTION by DON TAPSCOTT He (Satoshi Nakamot) solved all the problems. Whoever he is should get the Nobel Prize-he s a genius. This is the thing! This is the distributed trust network that the Internet always needed and never had Marc Andreessen (co-creator of Netscape) Ensure the integrity of the data without going through a trusted third party. It will allow us to re-posses our own data. Distributed trust will profoundly affect people in all walks of life It is also a platform for everyone to know what is true at least with regard to structured recorded information To The Economist blockchain technology is the great chain of being sure about things It solves security (not only for the encryption algorithm) as well as privacy issues. There are no more intermediaries It changes how to prove my ownership it will disrupt also the new disruptive model

7 3. WHY EXPLOTION IS STILL MISSING? SO MANY DISCUSSIONS, USE CASES, PILOTS, POCS, A LOT OF INTEREST, HUNDREDS OF ANNOUNCEMENTS, BUT WHY THERE WAS NOT A REAL EXPLOSION YET?

8 Gartner Hype Cycle

9 THE TRUTH ABOUT BLOCKCHAIN (*) A foundational, not a disruptive technology (*) The impact will be enourmous Blockchain will create a foundational for our economic and social system Process of adoption will be gradual and steady, not sudden It will require more time than initially expected Internet took 30 years to have real disruptive business models. Today, half of the companies with higher value have Internet driven platform-based business models Physical scale and unique IP no longer confer unbeatable advantages: economic leaders are enterprises that act as keystones proactevely organising, influencing and coordinating widespread networs of community users and organizations (*) The truth about Blockchain article on Harvard Business Review, Jan-Feb 2017

10 Gartner Too From a digital currency to a platform for digital transformation Blockchain technologies offer a radical departure from the current transaction and recordkeeping mechanisms and can serve as a foundation of disruptive digital businesses, for both established enterprises and startups. Blockchain technology has operated outside traditional legal, accounting and institutional governance frameworks, threatening long-standing working practices.

11 Gartner Too BUT Many blockchain technology and foundational concepts are immature, poorly understood and unproven in mission-critical, scaled business operations. Many blockchain technologies are not fully developed, are untested, and will require early adopters to accept significantly increased levels of operational risk over the next five to seven years. The vendor ecosystem is neither cohesive, nor fully formed Regardless of vendor claims, Gartner anticipates that, through 2018, 85% of projects with "blockchain" in their titles will deliver business value without actually using a blockchain No enterprise has yet been able to take a POC to scale. This is partly a technology issue, but inhibitors also include multiple business challenges (including legal, risk, accounting, culture and strategy).

12 4. TWO CONSTRAINS WHICH ARE THE OBSTACLES THAT ARE SLOWING DOWN THE ADOPTION AND POSTPONING THE EXPLOTION?

13 Platform Issue Who Will Win Among Competing Platforms? Someone say: The one not yet in the market Of the approximately 75 blockchain platform providers, not all will survive. The vast majority are startups Gartner predicts that, by 2025, five blockchain/distributed ledger platforms will be "mainstream commerce platform enablers. Look at Internet history: Internet search engines in 1995: Altavista, Lycos, Terra, Excite, Yahoo, Magellan were well-estabilished players Google came later and won Social Networks in 2003: Friendster, Bebo, High5, Orket, MySpace Facebook came later and won Mobile OS in 2007: Blackberry, Nokia, Win Mobile, ecc. IIOS and Android came later and won

14 Cultural / Strategic Approach Much of the discussion about blockchain focuses on the technology itself, and diverts attention away from the radical societal and business shifts it could enable The ability of blockchain to provide information transparency and immutability, the potential for smart contracts, and the opportunity to create new business models should force CIOs and business leaders to review the fundamental aspects of their value chains, and urgently conduct scenario planning and/or implication theory analysis.

15 5. IS THE GIGANTIC WAS ARRIVING SOONER THAN EXPECTED? BLOCKCHAIN DISRUPTION POTENTIAL IS MORE THAN WHAT IMMEDIATELY WE PERCEIVE IT IS TRUE IF WE THINK NOT ONLY TO FINANCIAL TRANSACTIONS Blockchain has the potential to become the system of records for all the transactions HBR

16 Is The Gigantic Wave Arriving Soon? GARTNER Predicts By 2022, at least one innovative business built on blockchain technology will be worth $10billion. By 2030, 30% of the global customer base will be made up of things, and those things will use blockchain as a foundational technology with which to conduct commercial activity. By 2025, the business value added by blockchain will grow to slightly over $176 billion, then surge to exceed $3.1 trillion by Having a grasp on the economic potential for blockchain is essential to better analyze investment spend and prioritization, by industry and geography. As with many prior emerging technology enabled changes, the "s curve" of growth is quite pronounced

17 Is The Gigantic Wave Arriving Soon? These opportunities paint a landscape of future economic development and potential growth BUT, FOR THE MOMENT: Most of the projects are replacing existing supply chain components There is not yet the transformational disruptive vision to remove centralist supply chain intermediaries. It needs also: Continuous regulatory rethink (already evident) Additional technology upgrades: (it needs time) To unlock the control over infrastructure by powerful centralist in favor of transaction flows among financial institution themselves: the centralists need a push by those in whose name they serve (mainly the largest 100 FI)

18 Something Is Really Changing Recent survey: 1520 execs from 578 Financial Services firms (*) 80% private blockchain will gain greater prominence over the next 5 years 86% public blockchain will gain greate prominence over the next 5 years Concerns: 69% Privacy and scalability Significant cultural shift Major part of them still in POC stage (*) Reported by American Bank

19 Agenda 1. My own experience 2. Will Blockchain change the world? 3. Why explotion still missing 4. Two Constrains 5. Is the gigantic wave arriving sooner than expected? 6. Final Remarks

20 Closing Remarks IS THE FINAL WAVE ARRIVING IN THE NEAR FUTURE (NEXT 2-4 YEARS) OR IT WILL TAKE 20 YEARS? I DON T KNOW. WILL IT ARRIVE? I AM SURE OF IT. PROBABLY FASTER THAN EXPECTED. IT WILL CHANGE COMPLETELY THE FINANCIAL SERVICES WORLD

21 Closing Remarks Soon or later there will be a disruption in the financial services Banks will have to reinvent themselves Will current account, payments, deposits be supplied and managed by banks in the future? Banks has to design and transform their business value, that means their role and services Distributed ledger technology can liberate many financial services from the confines of old institutions, fostering competition and innovation (*) Similarly incumbent institution can transform themselves around blockchain technology, if they can find the leadership to do it. (*) MORE IMPORTANT They have to think and to design. how to be the one that disrupt its own business (*) Blockchain Revolution by Don Tapscott

22 Closing Remarks Be part of the experimentation Assume whatever blockchain technology you choose will be obsolete in 18 to 24 months. Nevertheless is important to understand the technology and opportunities that technology is opening Undertake proofs-of-concept to learn about the major platforms Select limited narrow-scope use case for real deployment on a chosen platform. Prepare to migrate off that platform in 24 monts Involve all the roles (business, technology, security, compliance, legal, risk, ect.) in a proactive and positive way: you need new attitudes more than new competencies

23 Closing Remarks Much more important Think how Blockchain can improve your business Use learnings to reimagine business processes, business models, markets, products Think which value you can bring in the new world age Think how your business can be distrupt in this new age and. be the one that disrupt your business

Riding the Blockchain Wave for High Tech

Riding the Blockchain Wave for High Tech Abstract Given the disruptive power of blockchain, a growing number of high tech companies are deploying proofs of concept across different enterprise scenarios.