Blockchain & beleggingen NBA Amsterdam, 28 mei 2018
Introductie Dennis de Vries Joined in 2015 as senior manager Audit serving financial institutions Appointed lead KPMG Digital Ledger Services Netherlands in 2016 Member of KPMG DLS Global Steering Committee 14 years internal audit 5 years business management First ever ING Bank blockchain reseacher for Executive Board in 2014 25 years of bicycling around the world 50+ trips to over 35 countries 2
Agenda 01 02 Wat is blockchain? Blockchain & beleggingen 03 Blockchain & auditing 2018 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG Document Classification: KPMG Confidential International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third 2018 KPMG Advisory N.V., registered with the trade register in the Netherlands under number parties, nor 33263682, does KPMG is International a member have firm any such of the authority KPMG to obligate network bind of independent any member firm. member All rights reserved. firms affiliated with KPMG International Cooperative 3 3
01 Wat is blockchain?
Defining Blockchain projects CRYPTOGRAPHY PEER TO PEER NETWORK CONSENSUS MECHANISM OPEN SOURCE CODE DECENTRALIZED LEDGER Private & Public Keys Hash Algorithms Merkle Tree Decentralized & distributed network architecture No central governing body Nodes linked over the Internet Nodes collaborate to validate information Use various types of consensus models Initial Bitcoin Blockchain uses Proof of Work Source code open to review by anybody Catalyst for wave of innovation Many different implementations today Public record of all transactions Every stakeholder has the same ledger Avoids cheating and automatically reconciles all data Value transfer via the internet without a trusted third party..validated by nodes within a network based on open source protocol completely transparently 5
Domestic payment flow Client Client Facing layer Product System Transaction Processing Clearing Transaction Processing Product System Client Facing layer Merchant 6
Process flow cryptocurrency Client Client Facing layer Mining Client Facing layer Merchant 7
Bitcoin blockchain the good news Distributed All network participants have a full copy of the ledger for full transparency Programmable A blockchain is programmable ( Smart Contracts ) Anonymous The identity of participants is (supposed to be) either pseudonymous or anonymous Secure All records are individually encrypted BLOCKCHAIN Time-stamped Transaction timestamp is recorded in a block Immutable Any validated records are irreversible and cannot be changed Unanimous All network participants agree to the validity of each of the records 8
Bitcoin blockchain the bad news Performance Bitcoin Blockchain is not able to support non-btc industry use-case throughput or latency requirements Technology Innovation Proof of Work consensus many not survive innovations in technology (e.g. Quantum) Privacy The identity of BTC Blockchain participants can be, and has been, reverse engineered Real Costs for Use Minting new currency as Proof of Work mining rewards disguises true costs of using BTC Blockchain. Costs are hidden, not removed, and every party has to come to an end one day. BLOCKCHAIN Legacy Debt & Compliance A huge amount has been invested in current systems and no regulator will sanction BTC Blockchain for industry usecases Security Although the basic BTC Blockchain protocol has proven very secure, private key management in wallets and exchanges has led to problems (Mt. Gox, Bitfinex) Governance The Bitcoin community cannot even decide how to best resolve the problems on this slide 9
The complexity of the current blockchain ecosystem The following illustration demonstrate participants involved in the market space. Other partnerships Hyperledger R3CEV Chinaledger Nimbrix DPactum Industry consortiums Document Digitization Trade Finance OTC Derivatives Corporate Actions Syndicated Loans Record Keeping Applications and use-cases Cross-border Payments Digital Identities/KYC Smart Contracts Asset Tokenization Fixed Income trading Clearing and Trade Settlement Consensus mechanisms Leader based Proprietary distributed ledger consensus Federated consensus Node-tonode (N2N) Proof of work Proof of stake Delegated Proof of stake Round Robin PBFT and derivatives Swirlds hashgraph Private/proprietary Private Consortium Open-source Open DigitalAsset Tendermint CASPER Corda (R3 CEV) Multichain Ethereum Stellar PBFT Platform Technologies/ providers NASDAQ (Linq) Chain SETL Intel (Sawtooth) Ripple BlockEx Symbiont DPactum Hyperledger Bitcoin Coinprism Consensys Symbiont Paxos Bitcoin Infrastructure technologies/ providers Public/private cloud AWS, Azure, In-house systems/data centers Nimbrix etc. Non-DLT/Traditional Infrastructure IBM Bluemix MS Azure DLT-specific Infrastructure Amazon Web Services ETH BAAS Successful market examples, tests and implementations ILLUSTRATIVE 10
Blockchain is an inspiration to rethink our world Basic questions raised by emergence of blockchain technology Why do organisations have so many replicated functions within their value chain? Why are organisations competing on IT infrastructure? Can we digitize assets and identities across value chains? Can we create programmable money and program compliance into this money? Can trust be organised at transaction level rather via a trusted third party? Can we automate accounting through smart contracts and triple entry accounting? 11
02 Blockchain & beleggingen
Inspirational blockchain use cases The essence of blockchain is making identities, assets and relating properties truly digital across the value chain. When this is realized reconciliations between different databases are no longer needed and the concept of automating processes and products through smart contracts becomes a possibility. Below a list of some inspirational blockchain use cases Identities Assets Currency Applications 13
Overstock 14
NASDAQ / Australian Stock Exchange 15
Know Your Customer 16
FundsDLT delivers operational efficiency, digital distribution, process optimization FundsDLT uses distributed ledger technology and smart contracts to dramatically improve processing of the shared issuer register 17 www.fundsdlt.net
03 Impact van blockchain op auditing
Impact of blockchain on accounting / auditing From Double entry bookkeeping Centralised organisations with central databases Manual transaction entry Sample testing Individual departments recording goods, debtors, creditors, bank accounts Audit trail to be documented by auditee Physical assets Once a quarter / year reporting Financial audit with IT component To Triple entry bookkeeping Value chain IT with shared ledgers Cryptographically secured transactions Entire population testing Smart contracts managing flow of goods and money Immutable audit trail outside organisation Tokenised assets Continuous reporting possible IT audit with financial audit component 19
Dank u wel Dennis de Vries Lead KPMG Digital Ledger Services Netherlands devries.dennis@kpmg.nl 06 43 817 117 dennisdevries22