1. Blockchain is for Real Nin Lei Distinguished Engineer
CTO, Big Data and Analytics, IBM Systems
October 20, 2016
Thanks, pleasure etc.
There is much hype around Blockchain.
Most of this relates to the use of Blockchain to underpin the Bitcoin crypto currency.
Whilst IBM are not interested in Crypto currency, we are very interested in exploring the broader business application of Blockchain technology. This is a transformational opportunity for many of our clients
This touches most all industries – we are making Blockchain REAL for business.

2. Blockchain is an (1) electronic, (2) distributed, (3) replicated, (4) decentralized Ledger
What?
Ledger is THE system of record for a business
records asset transfer between participants.
Business will have multiple ledgers for multiple business networks in which they participate…hence may be “peers” in multiple blockchains…..
The “Block” is an executed & verified
transaction
The “Chain” is the Ledger
(book of record for all transactions)
Ledgers are not new – they have been used for double entry book keeping since the 13th Century
Commercial usage of the term is for the "principal book of account" in a business house.
THE system of record for recording asset transfer in and out of a business.

3. Inefficient, expensive, vulnerable
What?
Problem Statement: Difficult to monitor asset ownership and transfers in a trusted business network
Party A’s records
Bank records
Party C’s records
Party B’s records
Auditor records
Inefficient, expensive, vulnerable
This is the “BEFORE” picture representing the “status quo” for business networks.
Each participant keeps their own ledger(s) which are updated to represent business transactions as they occur.
This is EXPENSIVE due to duplication of effort and intermediaries adding margin for services.
It is clearly INEFFICIENT, as the business conditions – the contract – is duplicated by every network participant
It is also VULNERABLE because if a central system(e.g. Bank) is compromised due to an incidents this affects the whole business network. Incidents can include fraud, cyber attack or a simple mistake.

4. Remember—Blockchain is Decentralized…
What?
e.g. Bitcoin
..for business
Ty – Get graphics approval

5. Summary: Basic concepts related to Blockchain
What?
Ledger
Business Networks
Assets
Business Networks connect
Participants who are customers, suppliers, banks, partners
Cross geography & regulatory boundary
Wealth is generated by the flow of goods & services across business network
Markets are central to this process
Public: fruit market, car auction or
Private: supply chain financing, bonds
An asset is anything that is capable of being owned or controlled to produce value  
Two fundamental types of asset
Tangible, e.g. a house
Intangible e.g. a mortgage 
Intangible assets subdivide
Financial, e.g. bond
Intellectual e.g. patents
Digital e.g. music
Cash is also an asset
Has property of anonymity
Ledger: THE system of record for a business
Business will have multiple ledgers for multiple business networks in which they participate
Transaction: an asset transfer onto and off of the ledger
John gives a car to Anthony (simple)
Contract: conditions for transaction to occur
If Anthony pays John money, then car passes from John to Anthony (simple)
If car won't start, funds do not pass to John (as decided by third party arbitrator) (more complex)
Business never operates in isolation. They are participants in a business network.
Business Networks will connect customers, suppliers, banks and regulators and will cross geographical boundaries.
WEALTH is generated as goods and services move across this network; this flow is referred to as a MARKET.
Growth of wealth can be constrained if the network is heavily silo’d or inefficient.
Ownership of assets pass across the network in return for payments, and governed by contracts.
ASSETS can be tangible and intangible, We are most comfortable with tangible (Cars, Houses),
INTANGIBLE assets – financial instruments most obvious, but don’t forget about intellectual assets like patents and growing digital assets (music, games, video, art).
Ledgers are not new – they have been used for double entry book keeping since the 13th Century
Commercial usage of the term is for the "principal book of account" in a business house.
THE system of record for recording asset transfer in and out of a business.

6. Smart Contract Business rules that form the transaction
What?
Business rules that form the transaction
Encoded in programming language
Verifiable, signed & encrypted
Guaranteed future execution
Example:
Defines contractual conditions under which corporate Bond transfer occurs

7. Consensus … the process by which transaction are verified
What?
… the process by which transaction are verified
When participants are anonymous
Commitment is expensive
bitcoin cryptographic mining provides verification for anonymous participants but at significant compute cost (proof of work)
When participants are known & trusted
Commitment possible at low cost
Multiple alternatives
proof of stake where fraudulent transactions cost validators (e.g. transaction bond)
multi-signature (e.g. 3 out of 5 participants agree)
PBFT (cross checked secure message exchange)
Industrial Blockchain needs “pluggable” consensus
CRYPTOGRAPHIC consensus needed to support participant anonymity – this is NO TRUST system
This is expensive, giving a COST to anonymity.
When there is TRUST in a business network this become less, in the limit superfluous
So as TRUST increases then cost of consensus decreases or in the limit can be eliminated
Once participants identity

8. Privacy Ledger is shared, but participants require privacy
What?
Ledger is shared, but participants require privacy
Participants need:
Transactions to be private
Identity not linked to a transaction
Transactions need to be authenticated
Cryptography central to these processes
Not every member of business network can see all of the Blockchain
Cryptography controls who can see what
Implies user registration process to build trust network and access permission via certification management

9. Blockchain is NOT Not for all . . .
Why?
Blockchain is NOT
Suited to high performance (millisecond) transactions
For just one participant (no business network)
A database replacement
A messaging solution
A transaction processing replacement
Suited for low value, high volume transactions
Qualifying Questions:
Blockchain is not rights for all classes of business problem
This simple “indicators” chart helps us choose the right set of business problems 9

10. Blockchain is for Friction…
Why?
Blockchain is for Friction…
Lots of manual processes
Room for dispute & debate about what “is” “is” (the truth)
Toll collectors/middlemen adding little value
…which leads to risk
…delays
…toll collectors adding risk in the process and adding cost
Qualifying Questions:
We all want to know when does it make sense to use blockchain for a business problem or for creating a solution. If you answered YES for 10 or more of these questions, then your solution can benefit from Blockchain! Q1
Are there well defined transactions that cross multiple organizations? Q2
Are there multiple partners or parties who have some stake in the transactions? Q3
Do you trust your partners? Q4
Do these transactions have state changes during their life time? Q5
Do these transactions contribute to either revenue generation or cost recovery? Q6
Are there disputes with regard to these transactions? Q7
Are there consistency requirements with these transactions? Q8
Is there a need for agreement or consensus on the consistency of these transactions? Q9
Are these transactions and their states stored in multiple different databases? 
Q10
Can more than one party create and change states of these transactions?
Q11
Do you expect some ordering among different transactions?
Q12
Does every one in the network have to see the same ordering of transactions?
Q13
Do you need to be able to access these transactions anytime you want?
Q14
Do multiple parties have a need to update transactions or change states of transactions simultaneuously?
Q15
Do you need to persist the history of the transactions, including the history of the states of the transactions?
Q16
Do you need to ensure that no one should be able to tamper with the persisted transactions?
Q17
Do different stakeholders need different types of access for different parts of transactions?
Q18
Do you need to encrypt transactions while in motion and in storage?
Q19
Do you need to identify all parties who touch or participate the transaction ? 
Q20
Do you have business rules that define consistency of transactions?

11. Blockchain Benefits Saves Removes Reduces
Why?
Saves
Removes
Reduces
Time
Cost
Risk
Transaction time from days to near instantaneous
Overheads and cost intermediaries
Tampering, fraud & cyber crime
Other benefits include :
Improve discoverability
When everyone on an exchange can view the same ledger, it is easy to broadcast an intention (or offer) by appending it. For example, in a trading network, all asks and bids would be visible to every network participant.
Automate trusted processes
Unlike a centralized system where only the network operator can create a generalized solution that fits every user’s needs, Blockchain networks allow each participant to create customized solutions using their own proprietary business logic while running on the same common ledger.
Ensure trusted record-keeping
By design, no one party can modify, delete, or even append any record to the ledger without the consensus from others on the network, making the system useful for ensuring the immutability of contracts and other legal documents.

12. Immutability Use Case – Financial Ledger
Why?
What?
Financial data in a large organization dispersed throughout many divisions and geographies
Audit and Compliance needs indelible record of all key transactions over reporting period
How?
Blockchain collects transaction records from diverse set of financial systems
Append-only and tamperproof qualities create high confidence financial audit trail
Privacy features to ensure authorized user access
Benefits
Lowers cost of audit and regulatory compliance
Provides “seek and find” access to auditors and regulators
Changes nature of compliance from passive to active % {} @ # $ € 27
+/- ! …
Use Case

13. Finality Use Case – Letter of Credit
Why?
Demo:
What?
Bank handling letters of credit (LOC) wants to offer them to a wider range of clients including startups
Currently constrained by costs & the time to execute
How?
Blockchain provides common ledger for letters of credit
Allows all counter-parties to have the same validated record of transaction and fulfillment
Benefits
Increase speed of execution (less than 1 day)
Vastly reduced cost
Reduced risk, e.g. currency fluctuations
Value added services; e.g. incremental payment
Use Case

14. Use Case – Open, Trusted Supply Chain
Why?
What?
Consumers demanding transparency on where and how their products are made.
EU requires more information about corporate supply chains, with penalties for non-compliance.
How?
Blockchain enable safe digital transfer of property across the end to end supply chain. 
Benefits
verifiable, preventing any party from altering
efficiencies through greater transparency
consumers can make informed purchases
governments get reliable information
Use Case

15. An explosion of potential use cases…
Why?
Public Records
Real estate records
Vehicle registrations
Business license and ownership records
Broad Industry Applicability!!!
Open & Trusted Supply Chain
B2B Contracts
On-Line Gaming
Internet of Things
Smart appliances
As much as you can imagine…
Aircraft Maintenance Tracking
Anything to do with Provenance
Manufacturing
Financial Services
Securities
Post-trade settlement
Derivative contracts
Securities issuance
Collateral management
Trade Finance
Bill of Lading
Cross-currency payment
Syndicated Loans
Intra-bank settlement
Retail Banking
Cross border remittances
Mortgage verification
Mortgage contracts (smart contract)
Use Case 15

16. Hyperledger Project Successful Launch
How?
30 members
14 Additions since
>$6m funding
2,300 membership requests
5x more requests than next largest in LF history
Linux Foundation - announced 17th December 2015
Wired - "Tech and Banking Giants Ditch Bitcoin for Their Own Blockchain"
Fortune - "IBM, J.P. Morgan, and Others Build a New Blockchain for Business"
Financial News - “Another day, another blockchain consortium update – this time from the Hyperledger Project”
International Business Times -- “Linux Foundation's Hyperledger Project trumpets code contributions from across 30 founder members”
* Initial code contributors: (4) (IBM, DAH, Blockstream, Ripple
* 11 Premium members paying ~$250k/each

17. How?
Founding members now 30 as of Feb 9: ABN AMRO, Accenture, ANZ Bank, Blockchain, BNY Mellon, Calastone, Cisco, CLS, CME Group, ConsenSys, Credits, The Depository Trust & Clearing Corporation (DTCC), Deutsche Börse Group, Digital Asset Holdings, Fujitsu Limited, Guardtime, Hitachi, IBM, Intel, IntellectEU, J.P. Morgan, NEC, NTT DATA, R3, Red Hat, State Street, SWIFT, Symbiont, VMware and Wells Fargo.

18. Blockchain for Business – IBM Strategy
How?
Community + Code
Cloud
Clients
Linux
Hyperledger Project
Blockchain Solutions
Blockchain Garage
IBM Blockchain
Open Source Code: Blockchain built from the ground up for business;
Permission | Privacy
Confidential | Auditable
Open Governance – 40 + member board.
Blockchain value-added manged service on SoftLayer and System Z:
Identity | Consensus | Audit | System Integration | Hardware-assist for Performance & Security.
Blockchain Solutions for Financial Services; Trade Finance | Capital Markets
Blockchain Garage
NY | London | Singapore | Japan
Blockchain GBS Practice
Buisiness Development- Partners 18

19. Get Started…Engagement Model overview
How?
Let’s Talk!
Technology
Hands-on
First Project
Scale
Discuss Blockchain technology
Explore customer business model
Show Blockchain Application demo
Understand Blockchain concepts & elements
Hands on with Blockchain technology
Standard demo customization
Design Thinking workshop to define business challenge
Agile iterations incrementally build project functionality
Enterprise integration
Scale up pilot or Scale out to new projects
Business Process Re-engineering
Systems Integration
Remote or face to face
Face to face
Free of charge
For fee

20. Secure Service Container
High Security Business Network
Secure Service Container ensures…
No system admin access, ever
Once the appliance image is built, OS access (ssh) is not possible
Only Remote APIs available
Memory access disabled
Encrypted disk
Debug data (dumps) encrypted
High Security Business Network
How the Secure Service Container boot sequence works…
Boot sequence
Firmware bootloader is loaded in memory
Firmware loads the software bootloader from disk
Check integrity of software bootloader
Decrypt software bootloader
Software bootloader activate encrypted disks
Key stored in software bootloader (encrypted)
Encryption/decryption done on the flight when accessing appliance code and data
The Blockchain secure services container ( appliance instance )is configured to our high security settings to keep others from tampering with the appliance settings. It's basically like the DataPower box. If I open that physical box, it's ruined. If someone tries to mess with things they're going to need keys to be able to decrypt the software. Whereas docker….. 20

21. Summary Blockchain is a shared, replicated ledger technology
IBM supports an open standards, open source, open governance Blockchain
Blockchain can open up business networks by taking out cost, improving efficiencies and increase accessibility
Blockchain addresses an exciting and topical set of business challenges, which cross every industry
Linux Foundation Open Ledger project developing open source, open standards shared ledger technology
IBM has an easy to access, proven and incremental engagement model giving customers the confidence to get started NOW

22. For More Information please contact…
                      Len Santalucia, CTO & Business Development Manager
Vicom Infinity, Inc.
                                                                One Penn Plaza – Suite 2010
                                                                New York, NY 10119
                                                                mobile
                                                               
About Vicom Infinity
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23. Thank You!