MCCRC 4TH ANNUAL SYMPOSIUM A BRIEF HISTORY OF BLOCKCHAIN JOHN PALFREYMAN V3, 12 Sep 17 PALFREYMAN VENTURES
CONTENTS 1. BLOCKCHAIN EXPLAINED 2. FOUR AGES OF BLOCKCHAIN 3.PROJECT PITFALLS (& HOW TO AVOID THEM) 2
BLOCKCHAIN EXPLAINED
BUSINESS NETWORKS.... WEALTH & MARKETS Business Networks need connectivity Between customers, suppliers, banks, partners Operate cross geography & regulatory boundaries Wealth generated by flow of goods & services in transactions, according to contacts Markets are core to process Public (fruit market, car auction Private (supply chain, bonds)
ASSETS TRANSFERRED ACROSS NET WORK TO BUILD VALUE Two types: Tangible, e.g. a house Intangible, e.g. a mortgage Intangible assets subdivide: Financial, e.g. a bond Intellectual, e.g. a patent Digital, e.g. video Cash is also an asset property of anonymity
LEDGER BUSINESS BOOK OF RECORD Ledger Updated on asset transfer in or out of business Multiple Ledgers Transaction - asset transfer between ledgers e.g. John gives Matt a car (simple) Contract - condition for asset transfer If Matt pays John money, then car passes from John to Matt (simple) If car won't start (as decided by third party arbitrator) funds do not pass to John (more complex)
MEET BLOCKCHAIN Trusted, distributed ledger Shared business process
PROBLEM - DIGITISATION OF AGE OLD PROCESS Participant B s records Participant A s records Bank records Insurer records Auditor records Regulator records.. INEFFICIENT, EXPENSIVE, VULNERABLE
SHARED REPLICATED PERMISSIONS LEDGER Participant B s records Participant A s records Bank records Blockchain Insurer records Auditor records Regulator records CONSENSUS, PROVENANCE, IMMUTABILITY, FINALITY
BLOCKCHAIN FOR BUSINESS Append-only distributed system of record, shared Shared ledger Smart contract Business terms embedded in transaction database across the business & executed with network transactions Appropriate visibility; Transactions are transactions are endorsed by relevant secure, authenticated & Privacy Trust participants verifiable Differs from bitcoin in key areas: Identity over anonymity Selective endorsement over proof of work Assets over cryptocurrency
BENEFITS Saves TIME Near instantaneous transactions Removes COST In overheads & intermediaries Reduces RISK Tampering, fraud, cyber crime Increases TRUST Shared processes & records
SELECTED USE CASES Shared Reference Data Collaborators share critical information Tamper proof record of changes, control over who updates Supply Chain Complete history of who s owned what, and when Held in tamper proof records, control over who can change Audit & Compliance Efficient way to inspect dispersed, trusted transactions Auditor is part of blockchain network with access to all Letter of Credit Efficient way to implement supply chain financing Blockchain allows counterparts to validate transaction
FOUR AGES OF BLOCKCHAIN
HYPE CYCLE FOR EMERGING TECHNOLOGIES (C) GARTNER, INC http://www.gartner.com/technology/research/methodologies/hype-cycle.jsp
NICHE
AGE 1 - NICHE 2009 (OR EARLIER) - 2014 Cryptography in hieroglyphs, 1900 BC 19th Century - becomes scientific - cryptanalysis WW II - mechanical cypher machines Early 2000 - encryption through public key algorithms Bitcoin born in 2009, Wikileaks accepted in 2011.. A Brief History of Cryptography". Cypher Research Laboratories. 24 January 2006. Retrieved 18 September 2013. https://en.wikipedia.org/wiki/history_of_bitcoin
an innovative payment network and a new kind of money OR... An unregulated shadow-currency The first blockchain application Resource intensive (for anonymity) https://bitcoin.org/ https://www.imf.org/external/pubs/ft/sdn/2016/sdn1603.pdf
IBM INCUBATES...... IN RESEARCH DIVISION 12 labs on 6 continents, 3,000 researchers Primary research & transition to mainstream Typical Projects Quantum computing Artificial Intelligence Neuromorphic computing Cryptography http://research.ibm.com
TALK
AGE 2 - TALK 2015 Gradual realisation that blockchain IS NOT bitcoin Broader industry applicability - blockchain for business Banks view as both threat & opportunity Part of FINTECH movement Technical discussions (lashings of gobbledygook) Hype around blockchain starts as potential clarifies
IBM.. TO EMERGING BUSINESS Evaluate potential - initially in Finance Industry Investigate fabric (aka plumbing) alternatives Explaining blockchain in business terms Business demonstrations - what can blockchain do? Start customer discussions, offering hands on REF
EXPERIMENT
AGE 3 - EXPERIMENT 2016 (- AND CONTINUES) Banks & financial institutions start to experiment Other industries see potential & follow Cross industry consortia arise, disrupt Crazy use cases blockchain s the answer, what s the question Hype hits fever pitch - customer confusion on business value
IBM SUPPORT EXPERIMENTS... AND PREPARE FOR MAINSTREAM Key contributor to Linux Foundation project Engagement approach - making blockchain real Hyperledger Fabric code for customer use Customer projects (80 in year) and references Other industries embrace, find core use cases
USE
AGE 4 - USE 2017 (- AND WILL CONTINUE) Banks & financial institutions move to production Other industries experimenting, planning to use Value for business accepted, understanding lags Need for basic awareness continues Still crazy use cases... Hype fever pitch continues - maturity & applicability Ten things blockchain is not: http://bit.ly/blockchainnot
IBM - SCALE & GROW Contribution to Linux Foundation project continues Grow project capability - in delivery cells Usage in all industries, some more mature than others Continue with customer project & references Business network enablement (hard!) Digital education, certification - multiple channels REF
THOUGHTS..... & BACK TO HYPE CYCLE Gartner, hype cycle & blockchain [report, late 2016] Close to peak of inflated expectations, 5-10 years from plateaux Trough of Disillusionment Actions for success? (vendor, customer) Plateau of Productivity What will it look like? (vendor, customer)
PROJECT PITFALLS AND HOW TO AVOID THEM
KNOW YOUR BLOCKCHAIN FROM YOUR BITCOIN? RISK Familiarity with bitcoin & non-permissioned ledger Not fully understanding permissioned blockchain for business MITIGATION Educate Don t jump over awareness steps
BLOCKCHAIN VALUE OR RELIGION? RISK Hype confuses: blockchain is solution to all problems Project gets off to wrong start, then hard to correct MITIGATION Test fit: Network Consensus Immutability Provenance Finality Test early, continue through project
SHARED CLARITY OF PURPOSE? RISK Not all network members have same goals in mind Value for all members not clear or accepted MITIGATION Joint workshop - use case - debate value until clear Business network members agree governance approach REFS
DISCUSS COOPERATION, OR MAKE TRANSFORMATION? RISK Easy for network members to discuss how they work together.... at expense of focusing on transformational opportunity MITIGATION Don t rush - allow time for discussion - careful facilitation Design Thinking: persona analysis, current methods, improvement opportunities
CONCLUSIONS Blockchain: trusted distributed ledger with shared business process Just entered USE phase - production Learn lessons from projects to improve
THANKS JPALFREYMAN@ME.COM @JOHNP261 Thanks to IBM for the inspiration and for use of graphics elements in this presentation PALFREYMAN VENTURES