© 2017 IBM Corporation

Blockchain explained

June 28, 2018

Louis de BruinBlockchain Leader Europe

Louis_de_Bruin@nl.ibm.com

+31 653 319 130

IBM’s Blockchain view• Blockchain for Business• Hyperledger Project• Hyperledger Fabric

Blockchain in real life• Supply chain• Finance• Food Trust

Challenges starting a blockchain journey• Use case definition• Eco-system• Consortium

Agenda

33

© 2017 IBM Corporation

Introducing Blockchain ...

4© 2017 IBM Corporation

Blockchain

A trusted,

distributed

ledger

with shared

business

processes

5

Problem - asset ownership & transfer in business networks

Inefficient, expensive, vulnerable

6

Solution - a replicated, shared ledger for business networks

Consensus, provenance, immutability, finality. permissioned

7

Key Concepts of Blockchain

A business network

Smart contracts

Consensus

Privacy and confidentialityShared ledger

© 2017 IBM Corporation

Requirements of blockchain for business

8

Append-only

distributed system of

record shared across

business network

Business terms

embedded in

transaction

database

& executed with

transactions

Transactions are

endorsed by

relevant

participants

Ensuring appropriate

visibility; transactions

are secure,

authenticated

& verifiable Privacy

Shared

ledgerSmart

contract

Trust

© 2017 IBM Corporation

Shared ledger database

Streamlined settlement,

improved liquidity,

increased transparency

and new products/markets

Finance

Transparency &

traceability of produce and

ingredients across the

food chain. Reduce and

prevent food related health

scares.

Food Safety

Track parts and service

provenance, ensure

authenticity of goods,

block counterfeits, reduce

conflicts

Supply Chain

Blockchain allows multiple different parties to securely

interact with the same universal source of truth

© 2017 IBM Corporation

Blockchain underpins Bitcoin

• An unregulated shadow-currency

• The first blockchain application

• Resource intensive

Blockchain for business differs in key areas:

• Identity over anonymity

• Selective endorsement over proof of work

• Assets over cryptocurrency

is:

10

© 2017 IBM Corporation

The Technology driving permissioned Blockchains: Introducing the Hyperledger Project

Open source

collaborative effort to

advance cross-industry

blockchain

technologies

Hosted by

The Linux Foundation,

fastest-growing project in

LF history

Global collaboration

spanning finance,

banking, IoT, supply

chains, healthcare,

manufacturing,

technology and more.

12

Together with the global technology community, The Linux Foundation® is solving the world’s

hardest problems through open source and creating the largest shared technology

investment in history.

With 16 years experience providing governance structure, IT infrastructure and ecosystem

development, The Linux Foundation is the umbrella organization for more than 60 open

source projects accelerating open technology development and commercial adoption.

Some of the game-changing initiatives hosted by The Linux Foundation include:

13

Hyperledger Momentum

190+Members

(30+ in China)

9Hyperledger

projects

1 Production

release

Hyperledger Fabric v1.0

3.6M+Lines of Code

43K+Enrolled in 1st

Edx course

Hosted the most popular webinar in

history of The

Linux Foundation

on Hyperledger

Fabric v1.0

80Meetups

Worldwide

21K+Meetup

Participants

30K+Twitter

Followers

1.5K+Avg. monthly

press mentions

in 2017

14

Premier Members

Hyperledger Premier Members Serving on the Governing Board. Complete list of members.

© 2017 IBM Corporation

Hyperledger Fabric – Blockchain for Business

Open Governance

Anyone can join or contribute

Built from the ground up for enterpriseWith a maturity model to help companies move to production

Performance

Designed for speed and scalability

Confidentiality and privacy

Built-in channels for isolation and membership services for signing and

encryption. Supports IBM High Security Business Network.

Modularity and flexibility

Choice of consensus algorithms and programming languages

© 2017 IBM Corporation

Blockchain: Protocol comparison

MUST HAVE Hyperledger Fabric Ethereum Quorum Corda Casper

Maturity First Hyperledger project to

graduate to General availability

with multiple production networks

✕ Limited POC implementation

of mainnet forks for

enterprise

✕ Developer sandbox only✕ Limited to R3 Consortium

and Financial Services

✕ Barely a few months in

existence, not finalized and

proven

Confidentiality Partitioned execution, channels,

and permissioned membership

✕ Only possible through forks

of the mainnet

✕ All nodes are aware of the

existence of transactions

Supported through ”flow”

logic structure

✕ Only possible through forks

of the mainnet

Security

Internal and external security

review

FIPS 4+ and HSMs

SSC protect entire blockchain

stack

✕ No data encryption or

channel partition

Private transactions, limited

confidentiality

✕ Intel SGX chips only protect

verification portion of

blockchain

Added accountability and

penalties to PoS

× No data encryption or

channel partition

Modularity Pluggable consensus, database,

and membership✕ None

Pluggable, supports

QuorumChain and RAFT-

based consensus

✕ Modular data store and some

programmable modularity

through flows

Adds PoS to PoW blockchain

Interoperability Designed to integrate with

external blockchain fabrics

Backwards compatible

✕ Interoperability dependent on

third-party extensions✕ Unclear Supports interoperability

✕ Interoperability dependent on

third-party extensions

Governance Linux Foundation’s Hyperledger

Project

✕ Ethereum Foundation drives

development

✕ Developed internally at

JPMC

✕ Developed internally at R3,

no governance structure for

open-source code

✕ Ethereum Foundation drives

development

Licensing Apache 2 or MIT licensing✕ Numerous licenses for

different parts of the code✕ GPL/LGPL Apache 2

✕ Numerous licenses for

different parts of the code

Developer tools Hyperledger Composer free to

use for developers

✕ Only available through third

parties Cakeshop

✕ None – written in Kotlin, a

very limited programming

language

✕ Only available through third

parties

Scalability Designed for consortium

deployment with high throughput

✕ Designed for public network,

limited by proof of work

consensus

Design for consortium

deployment, expected to

reach high throughput

✕ Potential for nodes to get out

of sync at scale as a result of

non-deterministic execution

Designed for public

networks, but added

accountability moved to proof

of stake consensus

Industry Cross-industry Cross-industry✕ Financial Services, aiming to

become multi-purpose✕ Financial Services Cross-industry

a)c)e)

b)

d)

g)

h)

i)

IBM’s Blockchain view

Blockchain in real life• Supply chain• Food Safety• Vehicle crime Reduction

Challenges starting a blockchain journey

Agenda

© 2017 IBM Corporation18

Making blockchain real for business with over

400 engagements and multiple active networks

Trade Finance Pre and Post Trade Vehicle Crime Reduction

Identity/ Know your customer (KYC) Unlisted Securities/ Private Equity Funds Loyalty Program

Medicated Health Data Exchange Fraud/ Compliance Registry Distributed Energy/ Carbon Credit

Supply Chain Food Safety Provenance/ Traceability

© 2017 IBM Corporation

Recurring themes in Blockchain

Use cases:Supply Chain

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-Registers e-bike- de registers e-bike as= as wreck= exported

- Registrers lock to e-bike- Registers lock /e-bike with new owner

- closed/open status- gps location

- Reports theft- Insurance claim- Registers new owner

-Reports e-bike found-Reports e-bike as wreck- (confirms theft to insurer)

Insurance company

- Checks theft- Receives claim- Manages claim case

- Monitors/analyzes anonymized e-bike movements

BikeBlockChain

RDW: BikeBlockchain – Hyperledger Blockchain for IoT PoC

| I B M C O N F I D E N T I A L

22

SC Provenance – Key Benefits

The cost of foodborne illness in the U.S. alone ranges from $55 -

$93B. Meanwhile, food fraud costs the industry $10 - 15B annually.

Blockchain provides a permanent record of food supply chain

transaction, digital product information such as farm origination

details, processing data, and shipping details that are digitally

connected to food items. Faster traceability and increased

provenance allows for quicker recalls, reduced fraud and the

protection of brand value.

P R O V E N A N C E : N O T J U S T “ T R A C K A N D T R A C E ”

Provenance

Increase in chain

traceability speed

99%

Allows for faster recall

and protection of brand value.

6 Days

13 seconds

The ability to trace a product’s origin from

To

| I B M C O N F I D E N T I A L

23

Provenance – Client Scenario

Transparency

in supply chain

Digitally tracing food products from an

ecosystem of suppliers to consumers

Provides a permanent record of food supply chain

transaction, digital product information such as farm

origination details, processing data, and shipping

details that are digitally connected to food items.

T I M E T O T R A C K

F O O D F R O M S T O R E

T O S O U R C E

Decrease

99%

T E N A C T I V E N E T W O R K

M E M B E R S I N C L U D I N G

L E A D I N G R E T A I L E R S

A N D S U P P L I E R S

Participants

10F O O D A U T H E N T I C A T I O N P RO BLE M :

Walmart Video

Food Safety Solution

Overview

24

• Providing end-to-end global

traceability to improve

transparency and efficiency

• Creating trusted connection with

shared value for all ecosystem

participants – including strong

consumer focus

• Leveraging existing standards

(e.g., GS1) and offering

connectors for interoperability

© 2017 IBM Corporation/ Confidential

How Blockchain HelpsThe entire ecosystem shares a single trusted source of information on the food system

Retailers

Regulators

Customers

Growers

570M

Food Suppliers

1M

Processors

126K

33K

Logistics

1.9M

600

2.7B

Millions of participants

will view their

permissioned section

of the same

information in a

trusted, scalable

network

TX

© 2017 IBM Corporation/ Confidential

26

Determine your Network LifecycleExample: Growing the Food Safety Ecosystem

Increased Impact

Social Media increases the

impact of any issue

Regulations

Increase in regulations on safety & fraud globally (e.g., FSMA)

Device Proliferation

Even very small growers can afford a smartphone

Pa

rtic

ipa

tio

n

Adoption by leaders:

Early adoption by key

influencers and innovators

Timeline

Shared Value:

Value proposition/pricing resonate for

all ecosystem participants (retailers,

regulators, consumers, growers,

logistics companies, processors,

suppliers, etc.)Amplified Value:

Analytic tools dramatically raise

the value of the more complete

data set

User Experience:

Easy to onboard and use system

Enterprise Ready:

Built for business usage with

security, scalability, reliability,

etc.

Adoption by ecosystem

Industry Trends

27

Hyperledger Fabric

Peer network

Ordering service

Certificate Authority

invokes

IBM Blockchain Platform

deploys and

manages

deploys and

manages

deploys and

manages

deploys and

managesruns

Smart Contracts

App server Presentation

Logic

Food

Provenance

App Logic

Food producers

Stores

Consumers

Distributors

LogisticsService Providers

Government AgenciesFounders

Every participant has its own role: Who does what in the Food

Safety Network

Thank you

Louis de Bruin

Blockchain Leader Europe

Louis_de_Bruin@nl.ibm.com

+31 653 319 130

www.ibm.com/blockchain

developer.ibm.com/blockchain

www.hyperledger.org

© Copyright IBM Corporation 2017. All rights reserved. The information contained in these

materials is provided for informational purposes only, and is provided AS IS without warranty

of any kind, express or implied. Any statement of direction represents IBM's current intent, is

subject to change or withdrawal, and represents only goals and objectives. IBM, the IBM

logo, and other IBM products and services are trademarks of the International Business

Machines Corporation, in the United States, other countries or both. Other company, product,

or service names may be trademarks or service marks of others.

| I B M C O N F I D E N T I A L

29

SC Transparency: Document Digitization – Key Benefits

One shipment can require sign-off from 30 unique

organizations and up to 200 communications. One lost

form or late approval could leave the container stuck in port.

The entire process can take more than one month, leading

to costly waste.

The digitization of documents with blockchain will reduce

delays, resulting in significant cost savings for all parties.

The cost of the actual

transportation of a

container shipment is

spent on processing

documents without

blockchain.

2x

R E M O V E C O S T L Y F R I C T I O N S

Document Digitization

More than

Reduction in

document workflow

97%

of fruits are lost due

to spoilage in the

supply chain resulting

in $29B thrown away

annually.

63%

| I B M C O N F I D E N T I A L

30

Document Digitization – Client Scenario

Improving in-transit

inventory management

Real-t ime tracking shipment of goods across

multiple global supply chain checkpoints

Digitizing the end-to-end supply chain process to increase

transparency and security among business partners, reduce

fraud and errors, decrease product time spent in the transit,

and lower waste and cost.

T R A N S P O R T R E M A I N S H I G H L Y D E P E N D E N T O N

A F L O O D O F P A P E R T H A T I S N E V E R

D I G I T I Z E D .

P RO BLE M :

I N DO CUM E NT

W ORKFLOW

Reduction

97%

P E R U L T R A - L A R G E

C O N T A I N E R

S H I P *

Saved

* M A R I N E T R A N S P O R T I N T E R N A T I O N A L E S T I M A T E S T H A T B L O C K C H A I N C O U L D S A V E $ 3 0 0

P E R C O N T A I N E R I N T E R M S O F L A B O U R A N D P R O C E S S I N G A S S O C I A T E D D O C U M E N T S . F O R

O N E U L T R A L A R G E C O N T A I N E R S H I P , W H I C H C A R R I E S U P T O 1 8 , 0 0 0 C O N T A I N E R S , T H E

S A V I N G S A M O U N T T O $ 5 . 4 M .

$5.4M

Maersk GTD Video

31

Global Trade Digitization Platform

Use cases:Vehicle Crime

Reduction

32

33

34

What makes a good first use case

Select a first Blockchain use case: Start small, succeed and then grow:

1. A limited scope, but still solves a real business problem

• Minimum Viable Product in approx. 3 months of effort

• Or first start with a PoC of a couple of weeks to validate the use case

2. A smaller business network

• Usually without requiring regulators and consortia.

• A Minimum Viable Ecosystem

3. Allows for scaling with more participants and scenarios

• Consider shadow chains to mitigate risks

35

Determine your role in the future network

Member

Founder

MemberMember

MemberFounderDirectedNetwork

Member

Founder

Member

ConsortiumBasedNetwork

B3i

DubaiSmart

Govt

Founder

Founder

Member

MemberMember

MemberCommunityBasedNetwork IBMWatson

SCBN

1. Consortium Network: founder(s) is (are)

‘equal’ among other participants, may

include a joint legal entity among the

founders (e.g. – JV)

2. Founder Directed Network: individual

founder in a position to provide strong

direction

3. Existing Community Based Network

(emerging concept): Driven by industry

standards bodies or existing non-

blockchain network owners

© 2017 IBM Corporation 36

IBM starts this journey with a Design Thinking Workshop

In a 2 - d ay wo rkshop we h e l p yo u se l ect th e u se ca se(s) a n d d ef i ne th e M V P