An Introduction to Blockchain Technology

Transcription

1 An Introduction to Blockchain Technology Tanya Knowles - Executive Director, Fractal Solutions, a Division of Strate Strate

2 Disclaimer (!) No one will pay money to get from Berlin to Potsdam by train in one hour when he can ride his horse there in one day for free. (King William I of Prussia, 1864)

3 Strate (Pty) Ltd OPERATING DIVISIONS 3

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5 What is money versus Bitcoin versus Blockchain?

6 Yap Island 1500 years ago

7 Key Attributes of Money Scarcity - This is money's most important attribute. The island of Yap did not have limestone - all stones had to be imported from Palau - so stones were very scarce. Durability - The stones on Yap could last a very long time without being damaged or requiring maintenance. Divisibility - Individual stones were not easy to divide, however large stones could be exchanged for smaller ones. Verifiability - Real stones were easily distinguishable and identifiable against fake ones. Portability - Most smaller stones could be easily transported. Fungibility - On Yap, stones of equal size were equal in value. No one cared which specific stones they had.

8 But how did they keep track of ownership? Option 1: Go to the tribal chief as a central authority (who keeps a central ledger) Option 2: Each islander keeps a mental record reached via consensus (distributed ledger)

9 Challenges with a Central Register Complete trust in a single entity Single point of failure Vulnerable to corruption / can be tampered with Power of a single entity / Monopoly status Vulnerable to cyber attacks Etc Option 2 looks very appealing

10 Bitcoins - Accident or Genius or Experiment??

11 Bitcoin Peer to peer electronic cash system which allows online payments directly from one party to another without the burden of going through a financial institution (independent party)

12 Blockchain/Bitcoin Blockchain underpins Bitcoin - Unregulated, censorship-resistant Shadow currency - First Blockchain application Pioneer of Blockchain Technology But the Blockchain is NOT Bitcoin Digital currencies (fiat currencies) different from cryptocurrency 12

13 What is Blockchain?

14 Technology Trends Transfer of Value / Asset 1970 s Mainframe 1980 s PC 1990 s internet 2000 s social media 2010 s blockchain Transfer of Information 14

15 Some consider Blockchain to be the Missing Piece of the Internet Voice Video The World Wide Web TC/IP and HTTP Blockchain? Source: Credit Suisse Research

16 Don t rely on Government or Regulations to protect your business! 16

17 Areas Ripe For Disruption Complex Industries Broken Trust Redundant Intermediaries Limited Access Collaborative Lab / Rachel Botsman

18 Blockchain Catch Phrases Bitcoin Database Assets Computer network Decentralised Shared Ledger Consensus Peer to peer Public / transparent No central Authority Immutability Provenance 18

19 Blockchain Key Phrases Database Assets Single Shared Ledger (Decentralised) No central authority 19

20 Blockchain Peer to peer transacting Open source technology on the web with no central authority (like the internet) Blocks of data records a batch of transactions Electronically chained together with advanced cryptography to create a permanent and public record of every transaction that cannot be altered Secure, tamper proof and easily accessible Shared record of transactions (ledger) and data distributed over a vast network of users Miners are like librarians cataloguing information Near instantaneous settlement at peer / beneficial ownership level Public versus private blockchains

21 What does a Single (Shared) Distributed Ledger actually mean? (Distributed Ledger Technology DLT) 21

22 Simplification of the current equities process (securities only) 22

23 Equities on a Blockchain Simplified Single ledger Broker CSDP Mary Jane ABC Brokers CSDP No 1 John Smith YXZ Brokers CSDP No 2 Alice Jones MNO Brokers CSDP No 6 Near real time settlement Encrypted data No reconciliations No single point of failure 23

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26 Regulatory, Central Bank and Industry Body Developments A number of International securities regulators have announced that they will be studying blockchain and the impact on securities markets around the world as follows: International Organization of Securities Commissions (IOSCO) Board agreed on 22 February 2016 to intensifying work on technological change with particular relevance for securities regulators, including blockchain European Securities and Markets Authority (ESMA) has issued a blockchain paper requesting market input The International Securities Services Association (ISSA) and a group of CSDs have formed a blockchain working committee respectively Public announcements have been issued by a number of central banks on the topic including the European Central Bank, Federal Reserve Bank, Central Bank of England and the Japanese Central Bank. 26

27 What does this mean and what are the possibilities?

28 Our World Today

29 Our World Today cont Independent parties verifying the transaction Control / keep a record (legal) assets Levy fees for the services They are a single point of failure that could lose those assets / be corrupted

30 Alice s Assets Marriage Art Medical Records Electricity usage Motor vehicle Money / Cash Qualifications Digital Identity Jewelry House Music Shares

31 hn s sets Marriage Art Peer to Medical peer Records Electricity usage Motor vehicle Money Qualifications Digital Identity No legal Jewelry hassles House Liam s Assets Marriage Art Medical Records Electricity usage Motor vehicle Money Qualifications Digital Identity Jewelry House Music Shares Music Shares Sally s Assets Mary s Assets Marriage Art No Intermediaries Medical Records Electricity usage Motor vehicle Money Marriage Art Medical Records Electricity usage Motor vehicle Free / Cheap Money Qualifications Digital Identity Jewelry House Music Shares Alice s Assets Electricity usage The Motor vehicle Ron s Blockchain Qualifications Digital Identity Assets Money Jewelry Qualifications House Digital Identity Music Jane s Jewelry Shares House Assets Jen s Assets Marriage Art Medical Records Electricity usage Motor vehicle Money Qualifications Digital Identity Jewelry House Music Shares Marriage Art Medical Records Electricity usage Motor vehicle Money Qualifications Digital Identity Jewelry House Music Shares Immutable record Marriage Art Medical Records Music Shares Speed Marriage Art Medical Records Electricity usage Motor vehicle Money Qualifications Digital Identity Jewelry House Music Shares Mike s Assets Marriage Art Medical Rec Electricity Motor vehic Money Qualificatio Digital Iden Jewelry House Music Shares

32 Real life examples Alice s Assets Marriage Art Medical Records Electricity usage Motor vehicle Money / Cash Qualifications Digital Identity Jewelry House Music Shares

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34 The Blockchain may never exist No standards / governance structures Technology is in its infancy No laws, regulation, taxes governing the system Dispute resolution Its not free! The computing power / electricity to run the Bitcoin blockchain alone is enough to power half the country of Ireland daily

35 #FOMO US$ 1 billion in 2015??? Up to US$ 10 billion in 2016

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37 Any company not making the investment in adopting this technology will cease to exist, and even adopting it is no guarantee that they'll survive. By Roger Arnold

38 How long before this becomes real?

39 Diamonds on the blockchain Everledger is a permanent ledger for diamond certification & related transaction history Over 1 million diamonds have been issued onto the Everledger blockchain 14 metadata reference points on the diamond Aims to solve a 45 billion loss in insurance fraud

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42 Tanya Knowles Executive Director, Fractal Solutions Strate (Pty) Ltd) Strate