Distributed Ledger Technology

Distributed Ledger Technology Leveraging Blockchain for ESA's Success Torben David Trainee, DG-SD Supervised by Gianluigi Baldesi ESA HQ, Strategy Department 11/09/2017 ESA UNCLASSIFIED - For Official Use

Why are we talking about this? Blockchain is a threat It could destroy banks It might diminish public administration And it could abolish parliaments ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 2

Why are we talking about this? Blockchain is a threat It could destroy banks Blockchain is an opportunity It creates zero transaction cost payments It might diminish public administration It saves Dubai 25.1 million hours of productivity And it could abolish parliaments And it makes Estonia s data unhackable ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 3

Why are we talking about this? 2000 Global funding 2012-2017 (USD Million) Blockchain is an opportunity It creates zero transaction cost payments 1500 1000 500 0 2012 2013 2014 2015 2016 2017 (YTD) Total Venture Capital invested It saves Dubai 25.1 million hours of productivity And it makes Estonia s data unhackable Source: Coindesk ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 4

What is Blockchain? The blockchain is a digital database that dis-intermediates transactions Through the Openness of the Internet and the Security of Cryptography ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 5

What is Blockchain? The blockchain is a digital database that dis-intermediates transactions All nodes are equal and connected Through the Openness of the Internet and the Security of Cryptography A Distributed Network Source: Paul Baran ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 6

What is Blockchain? The blockchain is a digital database that dis-intermediates transactions All nodes are equal and connected Through the Openness of the Internet and the Security of Cryptography All content on a blockchain is encrypted Original Message Encrypted Message Decrypted Message A Distributed Network Source: Paul Baran Sender encrypts message Recipient decrypts message ESA UNCLASSIFIED - For Official Use with recipient s public key with his own private key Torben David 11/09/2017 Slide 7

What is Blockchain? These components are combined in the Consensus Mechanism A majority of nodes has to validate transactions 1 Bob wants to send a message to Alice 4 The message is sent to Alice, who can decrypt it 2 The encrypted message is broadcast to every node in the network 3 The nodes accept the message as valid ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 8

Defining Blockchain s Value Operational Simplification Resilience Security Auditability Trust ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 9

Defining Blockchain s Value Operational Simplification Bob D. Driving Licence Verifies Resilience Government Bob D. Verifies Security 1234 4567 8910 1112 Credit Card... Bank Auditability Based on: Secure Digital Identity Credentials & Reputation (Goldman Sachs, 2016) Recognised by Trust ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 10

Defining Blockchain s Value A unified database Operational Simplification On a distributed network Resilience Cryptographically protected Security With traceable records Auditability And full personal control Trust ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 11

Current Challenges Source: World Economic Forum Existing frameworks Slow down Blockchain adoption And could prevent it entirely ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 12

Current Challenges Source: World Economic Forum Existing frameworks Slow down Blockchain adoption And could prevent it entirely Hype Inflates expectations Leads to misallocated investment Source: Gartner ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 13

Applications by Industry and Key Purpose Transaction Services Asset Services Identity Services Finance Government Enterprise Financial Markets Grant Allocation Payments Taxation Inter-Divisional Accounting Trade Finance Inter-Agency Data Silos Protection of Critical Data Correspondent Banking Protection of Critical Data Protection of Critical Data Regulatory Compliance Quota Management Regulatory Compliance Digital Rights Management Property Registers Currency Metered Access to Resources Metered Access to Resources Securities Smart Electricity Grids Patent Systems Supply Chain Management Voting Procedures Voting Procedures Voting Procedures Registries and Identity Smart Incorporation Fraud Prevention Internet of Things Internet of Things ESA UNCLASSIFIED - For Official Use Fraud Prevention Torben David 11/09/2017 Fraud Prevention Slide 14

Applications by Industry and Key Purpose Systems that use blockchain for sending, receiving and securing data Transaction Services Asset Services Identity Services Finance Government Enterprise Financial Markets Grant Allocation Payments Taxation Inter-Divisional Accounting Trade Finance Inter-Agency Data Silos Protection of Critical Data Correspondent Banking Protection of Critical Data Protection of Critical Data Regulatory Compliance Quota Management Regulatory Compliance Digital Rights Management Property Registers Currency Metered Access to Resources Metered Access to Resources Securities Smart Electricity Grids Patent Systems Supply Chain Management Voting Procedures Voting Procedures Voting Procedures Registries and Identity Smart Incorporation Fraud Prevention Internet of Things Internet of Things ESA UNCLASSIFIED - For Official Use Fraud Prevention Torben David 11/09/2017 Fraud Prevention Slide 15

Applications by Industry and Key Purpose Systems that add digital and real assets to blockchains for ownership records, trade, legal enforcement Transaction Services Asset Services Identity Services Finance Government Enterprise Financial Markets Grant Allocation Payments Taxation Inter-Divisional Accounting Trade Finance Inter-Agency Data Silos Protection of Critical Data Correspondent Banking Protection of Critical Data Protection of Critical Data Regulatory Compliance Quota Management Regulatory Compliance Digital Rights Management Property Registers Currency Metered Access to Resources Metered Access to Resources Securities Smart Electricity Grids Patent Systems Supply Chain Management Voting Procedures Voting Procedures Voting Procedures Registries and Identity Smart Incorporation Fraud Prevention Internet of Things Internet of Things ESA UNCLASSIFIED - For Official Use Fraud Prevention Torben David 11/09/2017 Fraud Prevention Slide 16

Applications by Industry and Key Purpose Systems that tie real-world identity to blockchains for legal enforcement and universal digital identity Transaction Services Asset Services Identity Services Finance Government Enterprise Financial Markets Payments Trade Finance Correspondent Banking Protection of Critical Data Regulatory Compliance Currency Securities Voting Procedures Fraud Prevention Grant Allocation ESA UNCLASSIFIED - For Official Use Fraud Prevention Torben David 11/09/2017 Fraud Prevention Slide 17 Taxation Inter-Agency Data Silos Protection of Critical Data Quota Management Property Registers Metered Access to Resources Patent Systems Voting Procedures Registries and Identity Internet of Things Inter-Divisional Accounting Protection of Critical Data Regulatory Compliance Digital Rights Management Metered Access to Resources Smart Electricity Grids Supply Chain Management Voting Procedures Smart Incorporation Internet of Things

Applying Blockchain at ESA Procurement Added Value Faster and more accurate payments A strong audit trail Real-time access and updates Challenge Supplier Blockchain governs ESA and supplier agree on automated Smart Contract Required implementation by all parties Potential Impact A Replacement of ESA or tool a for subcontractors T&C Signatures Payment Changes of Terms ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 18

Applying Blockchain at ESA Information & Documentation Management Added Value Individualised data access management Traceable changes to and retrieval of data Seamless updates to access rights Stored, secured and backed up on Add: New Contract on Part X for Project Y ESA Blockchain Recognised by Procurement Verifies Bob D. ESA Administrator - Procurement - Read & Write All Contracts Challenge Integration with legacy systems View: Personal File & Contract Recognised by HR - HR - Read 1 File Bob D. Potential Impact From total control to improved data validity Recognised by Strategy - Strategy - No Access ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 19 Access Denied...

Applying Blockchain at ESA Voting Added Value Immutable votes Immediate vote processing Flexible application Challenge Double-edged sword of direct democracy Potential Impact Source: Nikolas Roby Tool for engagement or political roadblock? Blockchain Tokens are distributed to participants and then spent on the vote ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 20

Conclusion Blockchain: A technological Work In Progress With great potential worth analysing in detail Procurement Faster payments A strong audit trail Required implementation Voting Immutable votes Immediate processing Direct democracy Information Management Individual data management Traceable data Problem of legacy systems ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 21

Appendix ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 22

Additional Definitions Definition: A blockchain is a public, immutable, distributed ledger Public Immutable Distributed Ledger Accessible to everyone Records cannot be changed Everyone holds a ledger copy List of transactions/database ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 23

Cryptography - Hashing The purpose of the Agency shall be to provide for and to promote, for exclusively peaceful purposes, cooperation among European States in space research and technology and their space applications, with a view to their being used for scientific purposes and for operational space applications systems 4ef03725c65b20524593dcd3a92d ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 24

Cryptography - Hashing The purpose of the Agency shall be to provide for and to promote, for exclusively peaceful purposes, cooperation among European States in space research and technology and their space applications, with a view to their being used for scientific purposes and for operational space applications systems The purpose of the Agency shall be to provide for and to promote, for exclusively peaceful purposes, cooperation among European States in space, research and technology and their space applications, with a view to their being used for scientific purposes and for operational space applications systems 4ef03725c65b20524593dcd3a92d 6aaf7e87ceb377248446f53bdcfd8 ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 25

Cryptography - Hashing The purpose of the Agency shall be to provide for and to promote, for exclusively peaceful purposes, cooperation among European States in space research and technology and their space applications, with a view to their being used for scientific purposes and for operational space applications systems The purpose of the Agency shall be to provide for and to promote, for exclusively peaceful purposes, cooperation among European States in space, research and technology and their space applications, with a view to their being used for scientific purposes and for operational space applications systems 4ef03725c65b20524593dcd3a92d 6aaf7e87ceb377248446f53bdcfd8 ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 26

Cryptography - Hashing Every block has its own unique hash - A block s hash is calculated using its predecessor ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 27

Smart Contracts A small computer program on the blockchain - Just a Notary Service? ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 28

Technical Challenges Security No software is bulletproof, hacks will happen Garbage Data Old and faulty data is on the blockchain forever Necessity Is a blockchain-based solution really necessary? ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 29

Source: McKinsey Consulting ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 30

ESA UNCLASSIFIED - For Official Use Torben David 11/09/2017 Slide 31