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Blockchain 101 for Government Officials

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At the 2017 NC Digital Government Summit, I gave a presentation to demystify Blockchain. The presentation explained what is blockchain, compared primitive trade to Burning Man -- and, highlighted the record and public key; then ended with specific use cases.

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Blockchain 101 for Government Officials

  1. 1. © 2017 IBM Corporation Blockchain 101 An Introduction to Blockchain for Government Officials Explained V5.0 By: Marquis Cabrera Global Leader of Digital Government Transformation IBM Global Government Solutions Center of Competence Date: August 30, 2017 Twitter: @MarquisCabrera IBM Global Government Industry
  2. 2. © 2017 IBM Corporation© 2017 IBM Corporation “If you are not trying to help people, crawl over and die.” – Former First Lady Michelle Obama 2
  3. 3. © 2017 IBM Corporation© 2017 IBM Corporation 3
  4. 4. © 2017 IBM Corporation Helping to activate citizen driven innovation in child welfare 4
  5. 5. © 2017 IBM Corporation Joined IBM to programrobots to dab and change the world 5
  6. 6. © 2017 IBM Corporation Contents 6 What is Blockchain? Why is it relevant for governments? How can IBM help us apply blockchain?
  7. 7. © 2017 IBM Corporation Business networks, wealth and markets 7 – Business Networks benefit from connectivity • Participants are customers, suppliers, banks, partners • Cross geography & regulatory boundary – Wealth is generated by the flow of goods & services across business network in transactions and contracts – Markets are central to this process: • Public (fruit market, car auction), or • Private (supply chain financing, bonds)
  8. 8. © 2017 IBM Corporation Bartering still happens at today – Burning Man 8
  9. 9. © 2017 IBM Corporation Transferring assets, building value 9 Two fundamental types of asset Intangible assets subdivide Cash is also an asset • Tangible, e.g. a house • Intangible, e.g. a mortgage • Financial, e.g. bond • Intellectual, e.g. patents • Digital, e.g. music • Has property of anonymity Anything that is capable of being owned or controlled to produce value, is an asset
  10. 10. © 2017 IBM Corporation Ledgers are key Ledger is THE system of record for a business. Business will have multiple ledgers for multiple business networks in which they participate. – Transaction – an assettransfer onto or off 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) 10
  11. 11. Introducing Blockchain ... 11 © 2017 IBM Corporation Blockchain A trusted, distributed ledger with shared business processes
  12. 12. © 2017 IBM Corporation Problem … 12 … inefficient, expensive, vulnerable Insurer records Auditor records Regulator records Participant A’s records Bank records Participant B’s records
  13. 13. © 2017 IBM Corporation … with consensus, provenance, immutability and finality Auditor records Regulator records Bank records Participant B’s records Blockchain Insurer records Participant A’s records A shared, replicated, permissioned ledger … 13
  14. 14. © 2017 IBM Corporation Blockchain underpins Bitcoin • An unregulated shadow-currency • The firstblockchain application • Resource intensive Blockchain for business differs in key areas: • Identity over anonymity • Selective endorsement over proof of work • Assets over cryptocurrency is: 14
  15. 15. © 2017 IBM Corporation Requirements of blockchain for business 15 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 ledger Smart contract Trust
  16. 16. © 2017 IBM Corporation 16 Blockchain Benefits
  17. 17. © 2017 IBM Corporation Contents 17 What is Blockchain? Why is it relevant for governments? How can IBM help us apply blockchain?
  18. 18. © 2017 IBM Corporation Example: 18 © 2017 IBM Corporation Record Record Record Public Key Public Key Public Key Record Public Key Record Public Key
  19. 19. © 2017 IBM Corporation Example: Volunteers with Papers 19 © 2017 IBM Corporation Record Record Record Public Key Public Key Public Key Record Public Key Record Public Key
  20. 20. © 2017 IBM Corporation 20 © 2017 IBM Corporation Blockchain is creating extraordinary opportunities for businesses to come together in new ways Optimize Ecosystems Streamline business processes and the exchange of value along your ecosystem Reduce Risk Replaceuncertainty with transparency and a trusted decentralized ledger Create New Value Exploit new business models and eliminate inefficiencies
  21. 21. © 2017 IBM Corporation 21 Benefits 1. Consolidated, consistent dataset reduces errors 2. Near real-time access to reference data 3. Naturally supports code editing and routing code transfers between participants What • Competitors/collaborators ina business network need to share reference data, e.g. bank routing codes • Each member maintains their own codes, and forwards changes to a central authority for collectionand distribution • An information subsetcan be owned by organizations How • Each participant maintains theirown codes withina Blockchain network • Blockchain creates single view of entire dataset Example: Shared reference data IBM Blockchain
  22. 22. © 2017 IBM Corporation 22 Benefits 1. Lowers cost of audit and regulatory compliance 2. Provides “seek and find” access to auditors and regulators 3. Changes nature of compliance from passive to active What • Financial data in a large organization dispersed throughout many divisions and geographies • Audit and Compliance needs indelible recordof all key transactions overreporting 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 Example: Audit and compliance IBM Blockchain
  23. 23. © 2017 IBM Corporation Further examples by (selected) industry 23 Financial Public Sector Retail Insurance Manufacturing • Trade Finance • Cross currency payments • Mortgages • Asset Registration • CitizenIdentity • Medical records • Medicine supply chain • Supply chain • Loyalty programs • Information sharing (supplier– retailer) • Claims processing • Risk provenance • Asset usage history • Claims file • Supply chain • Product parts • Maintenance tracking
  24. 24. © 2017 IBM Corporation Patterns for customer adoption COMPLIANCE LEDGER CONSORTIUM SHARED LEDGER ASSET EXCHANGE HIGH VALUE MARKET • Created by a small set of participants • Share key reference data • Consolidated, consistentreal-time view • Sharing of assets (voting, dividendnotification) • Assets are information, not financial • Provenance & finalityare key • Transfer of high value financial assets • Betweenmany participants in a market • Regulatory timeframes • Real-time view of compliance, audit & risk data • Provenance, immutability & finalityare key • Transparent access to auditor & regulator 24 © 2017 IBM Corporation
  25. 25. © 2017 IBM Corporation 25 Key players for blockchain adoption Regulator Industry Group Market Maker • An organization who enforces the rules of play • Regulators are keen to support Blockchain based innovations • Concern is systemic risk – new technology, distributed data, security • Often funded by members of a business network • Provide technical advice on industry trends • Encourages best practiceby making recommendations to members • In financial markets, takes buy- side and sell-side to provide liquidity • More generally, the organization who innovates - Creates a new good or service, and business process (likely) - Creates a new business process for an existing good or service
  26. 26. © 2017 IBM Corporation Contents 26 What is Blockchain? Why is it relevant for governments? How can IBM help us apply blockchain?
  27. 27. © 2017 IBM Corporation IBM Blockchain Experts Collaborate with comprehensive services teamsfrom ideation all the way to production Solutions Solve critical industry challenges by building and joining new business networks As a founding and premier member of Hyperledger, we’re committedto open source, standards and governance Platform Develop, govern and operate enterprise blockchain networks with speed and security Bringing together the world’s most advanced expertise, technology and ecosystem to transform industries 27 © 2017 IBM Corporation
  28. 28. © 2017 IBM Corporation 28 Hyperledger: A Linux Foundation project • A collaborative effort created to advance cross-industry blockchain technologies for business • Announced December 2015, now around 150 members • Open source, open standards, open governance • Five frameworks and three tools projects • IBM is a premier member of Hyperledger www.hyperledger.org Brian Behlendorf Executive Director Blythe Masters Board Chair Chris Ferris TSC Chair
  29. 29. © 2017 IBM Corporation 29 Hyperledger members Premier General Associate Source: https://www.hyperledger.org/about/members Updated 21 August 2017
  30. 30. © 2017 IBM Corporation Hyperledger Fabric: Distributed ledger platform 30 • An implementation of blockchain technology that is a foundation for developing blockchain applications • Emphasis on ledger, smart contracts, consensus, confidentiality, resiliency and scalability. • V1.0 released July 2017 – 159 developers from 27 organizations – IBM is one contributor of code, IP and development effort to Hyperledger Fabric http://hyperledger-fabric.readthedocs.io/
  31. 31. © 2017 IBM Corporation 31 Making blockchain real for business with over 400 engagements and multiple active networks Trade Finance Pre and Post Trade Complex RiskCoverage Identity/ Know your customer (KYC) Unlisted Securities/ Private Equity Funds Loyalty Program Medicated Health Data Exchange Fraud/ Compliance Registry Distributed Energy/ CarbonCredit Supply Chain Food Safety Provenance/ Traceability
  32. 32. © 2017 IBM Corporation 32 IBM Engagement Model overview 1. Discuss Blockchain technology 2. Explore customer business model 3. Show Blockchain Application demo 1. Understand Blockchain concepts & elements 2. Hands on with Blockchain on Bluemix 3. Standard demo customization 1. Design Thinking workshop to define business challenge 2. Agile iterations incrementally build project functionality 3. Enterprise integration 1. Scale up pilot or Scale out to newprojects 2. Business Process Re-engineering 3. Systems Integration Remote Digital Face to face Face to face Let’s Talk Blockchain Hands-on First Project Scale
  33. 33. © 2017 IBM Corporation Getting started on your blockchain journey 33 Learn More About IBM Blockchain Schedule an IBM Blockchain Workshop Develop a Blockchain Application Activate and Grow your Blockchain Network
  34. 34. © 2017 IBM Corporation Personal Story What are these ingredients?? • Atta (chapati flour) •Einkorn (type of wheat) •Emmer (type of wheat) •Farina •Fu (a dried gluten product made from wheat and used in some Asian dishes)
  35. 35. Thank you Marquis Cabrera Global Leader of Digital Government Transformation www.ibm.com/blockchain developer.ibm.com/blockchain www.hyperledger.org © Copyright IBM Corporation 2017. All rights reserved. The information contained inthese 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 tochange or withdrawal, and representsonly goals and objectives. IBM, the IBM logo, and other IBM productsand services are trademarks of the International Business Machines Corporation, inthe United States, other countries or both. Other company, product, orservice names may be trademarks or service marks of others.

At the 2017 NC Digital Government Summit, I gave a presentation to demystify Blockchain. The presentation explained what is blockchain, compared primitive trade to Burning Man -- and, highlighted the record and public key; then ended with specific use cases.

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