A Technology Revolution

Transcription

1 Blockchain and Cryptocurrency 101: A Beginner s Guide You ve heard all the buzz and hype, but you re still not sure what s the big deal Presented by: Grant E. Buerstetta Michelle A. Gitlitz Keith B. Letourneau Kate B. Belmont A Technology Revolution Technological shift that will change how the world does business Business today: Business with blockchain: 63

2 Cambridge Study Sep Organizations / 57 Public Sector Institutions Blockchain s promise Facilitate asset transfers without need for trusted central authority or intermediaries Reduce fraud ($4.0 trillion in 2016) Streamline business processes across multiple entities Increase record transparency and ease of audits Distributed Ledger Technology ( DLT ) landscape fluid, highly fragmented, contested, complex Hurdles to implementation Regulatory uncertainties and legal risks not yet fully recognized Interoperability with existing systems still in its infancy Scalability, privacy and confidentiality 63% of central banks developing blockchain proofs of concept 15% of OPSIs plan to deploy DLT-based applications this year; 23% within next two years 64 What Does A Blockchain Looks Like? Blockchain is a form of Distributed Ledger Technology Blockchain is not Bitcoin It is a shared list of transactions Every new transaction creates a time-stamped block. Each block is linked to the previous block creating a chain of transactions. The ledger is updated on a network of computers that are connected to the blockchain through the Internet. 65

3 Is A Blockchain Secure? Uses encryption technology known as cryptography Public and private keys 66 Public and Private Blockchains Public Permission-less where anyone can read the distributed ledger, send transactions to and watch them being included in the ledger (if valid), and participate in the consensus process. Private Each member of the network has access rights so that confidential information is shared on a need-toknow basis. 67

4 Benefits of Blockchain Speed Security Transparency Permanence 68 Use Cases: Supply-Chain Management Present Day: Point-to-Point Numerous stages and geographic locations Use of intermediaries to consummate transactions, convey information Raises transaction costs with intermediate mark-ups and fees Difficult to trace events and incidents, e.g., counterfeiting, forced labor, damaged goods Pricing Factoring Blockchain: Shared, synchronized information available to all network participants Supply chain status readily available Records transaction details that cannot be altered without consent of all parties Capable of tracing products to origin and raw materials used (eg., tuna tracked from hook to fork using sensors) 69

5 Use Cases: Supply-Chain Management Blockchain Challenges in the Supply Chain Immature technology Tech talent is scarce Need to scale up by creating networks of users Standards yet to be created, though various consortiums are at work Long-term - Private versus public blockchain networks Competition/innovation versus security/privacy 70 Use Cases: Maritime Transportation Of Goods Tracking containers and goods Maersk/IBM developed blockchain application to track shipping containers digitizing the supply chain process from start to finish. 90% of world s goods are carried by ocean carriers Program intended to encompass shippers, freight forwarders, carriers, ports and customs authorities Designed to reduce paper trial, reduce cost and complexity of trading, create transparency, reduce fraud and errors, reduce time in transit, improve inventory management, reduce the cost of goods, enhance global trade from both emerging markets and developed countries In 2014, Maersk found that a simple shipment of refrigerated containers from East Africa to Europe can involve nearly 30 people and organization and more than 200 different interactions and communications among them Costs associated with trade documentation are estimated to account for 1/5th of actual transportation costs Hyundai Merchant Marine shipment of goods from South Korea to China employed paperless processes shipment booking, cargo delivery. 71

6 Use Cases: Smart Contracts 72 Use Cases: Smart contracts Enforceability Electronic Signatures in Global and National Commerce Act ( ESIGN ) State laws modeled on the Uniform Electronic Transaction Act ( UETA ) provide sufficient legal foundation for blockchain-based smart contracts to be enforced under current law. The cryptographic key with which blockchain-based smart contracts are signed and acknowledged falls squarely within the language and intent of ESIGN and UETA as an electronic signature. Progressive jurisdictions: Arizona Nevada Vermont Delaware 73

7 Additional Use Cases Blockchain is poised to impact every industry imaginable Banking/Financial Services/Securities- trade, letters of credit, ICOs Real estate- title insurance and property records Education- issuance of diplomas Energy trading- BP, Shell, Staoil, Koch Supply & Trading, Mercuria, ABN Amro, ING and Society Generale Marine Insurance- XL Catlin, Ernst & Young & Guardtime Healthcare/biotech- medical records, clinical trials, prescription supply chain management 74 Regulatory Issues Securities and commodities regulation Financial surveillance and anti-moneylaundering Privacy and identity 75

8 What Is Cybersecurity? Cybersecurity is information security Information technology Operational technology Security of data Protecting information and operations / theft and manipulation of information, attacks on computer systems Examples: WannaCry (UK Health System), Petya/NotPetya (Maersk, Merck, DLA Piper), Deloitte, Equifax, SWIFT System, Bitcoin 76 Be Cyber-Aware! You Are At Risk! There are only two types of companies: 1. Those who have been breached 2. Those who have, but don t know it 77

9 How Secure Is Blockchain? The great savior? The great challenge? The great hype? Hot topic worldwide: major focus for academics and industry Tremendous gap between theory and practice Must be very careful how/when/where/why we use it With great power comes great responsibility 78 Blockchain: Things To Consider CHALLENGES AND VULNERABILITIES: 1. Everything that touches the internet is vulnerable (blockchain is no exception) 2. Blockchain can be hacked/compromised blockchain is only as good as the code upon which it is written people created blockchain, people can break blockchain blockchain is only as secure as those parties within the network key management is a major issue human factor greatest risk to cybersecurity 79

10 Blockchain: Things To Consider 3. Privacy 4. Trust but verify do most transactions need to bypass trusted third parties? 5. No central authority is that a good thing? if there is a breach, who is liable? just because it is decentralized does not mean it is more or less secure 6. Quantum attacks 7. Why is it a hot topic? not a mature, fully understood area big disconnect/gap between theory and practice 80 Blockchain: Future Considerations ENVIRONMENTAL IMPACT: One Bitcoin transaction now uses as much energy as the average American house in a week. There are currently 300,000 transactions per day. Blockchain is inefficient tech by design Is blockchain sustainable? 81