15+ CFOs from the Pacific Northwest joined me a lively discussion of all things crypto and blockchain.

1. Cryptocurrencies & Blockchain
True Tales from a Blockchain Realist
January 2018

2. Confidential Information
#FollowTheMoney
• Token sales of blockchain are north of $2,000,000 this year
• CME (12/18) and CBOE (12/10) begin trading Bitcoin futures
• $500M in VC money in 2016
• Bitcoin hit $4,000 $7,300 $10,000 $12,000 $19,000
• 18,000 cryptotokens launched
• Crypto-millionaires investing
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3. Confidential Information
Blockchain Evolution – FinTech Emerges
• 1.0 – Currencies
– Hardwired to crypto fund transfers. Uni-tasker
• Consensus based
– 2.0 – Contracts
• Recorded agreements across transactional processes. Multi-tasker
– 3.0 – Organizing Activity
• Assets are owned and may transact with one another.
• Smart homes, distributed devices in remote areas (E.g., farms)
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4. Confidential Information
Bitcoin- Just Three Things
1. The value of a bitcoin is market reactive
(volatile)
- Like stocks
2. Bitcoin transactions are not reversible
- Like cash
3. There are no bitcoins
– There are only bitcoin transactions
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5. Confidential Information
Lifecycle of Bitcoin Transactions
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Transactions are visible
and recorded for
everyone to see and
examine

6. Confidential Information
Steps in a Transaction
• Only transactions may be traded
• Wallets create the transaction details
• Networks in bitcoin transactions create transparent
ledgers
• Identity is ensured by a “key” system
• Proof not trust is what the system relies upon
– Proof establishes identity (of the transaction)
– Proof of work established in a hash
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7. Confidential Information
Non-Repudiation
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In cryptography, it means preventing an individual or
entity from denying that a particular action occurred
related to data

8. Confidential Information
Why separate the Blockchain from Bitcoin
• Common vocabulary
– The blockchain – The underlying
ledger solution for Bitcoins
– A blockchain – The technology
solutions that solve distributed
record keeping
– Distributed Ledger Transactions
(DLT) – Consensus based
transactions
– Proof of Work
– Proof of Stake
8Byzantine General Scenario

9. Confidential Information
What is a blockchain?
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Recorded events (ledger entries) recorded chronologically and
verified by multiple third parties. May be public or private

10. Confidential Information
What’s in a Blockchain Ledger?
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1. Eye Exam 5/12/2017
Patient 8931
2. Visit on 5/12/2017
3. Need new glasses
4. New prescription
Patient 8931
5. Prescription 99881
filled
6. Follow-up appt
scheduled 6/12/2017
7. Annual Checkup
5/12/2018
1. Eye Exam 5/12/2017
Patient 8931
2. Visit on 5/12/2017
3. Need new glasses
4. New prescription
Patient 8931
5. Prescription 99881
filled
6. Follow-up appt
scheduled 6/12/2017
7. Annual Checkup
5/12/2018
1. Eye Exam 5/12/2017
Patient #8931
2. Office visit on
5/12/2017
3. Need new glasses
4. New prescription
Patient 8931
5. Prescription 99881
filled
6. Follow-up appt
scheduled 6/12/2017
7. Annual Checkup
5/12/2018
• Rows of information, like
a database
• Validation and
verification is based on
mistrust
• Public audit trails, (we’ll
talk about private ones
later)
• Record keeping by many
third parties often
unknown

11. Confidential Information
Why will Blockchains get Adopted?
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• 400,00 transactions per day
• Median transaction fee of $3.25
• Average time for median block size is up to 45 minutes
$1,000
• 600,00 transactions per day
• There are a total of 18,140 ERC-20 Token Contracts
• See the token values at https://etherscan.io/tokens
Ether
$17,000

12. Confidential Information
Why will Blockchains get Adopted?
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13. Confidential Information
Platforms = Wealth: Amazon Web Services
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• Spun-off from Retail
business in 2006
• AWS Q1 2016
– $604 MM
• AWS Q1 2017
– $890 MM
• Operating Margin
– 24%+
https://www.recode.net/2017/4/27/15451726/amazon-q1-2017-earnings-profits-net-income-cash-flow-chart

14. Confidential Information
and verified by multiple, independent third parties
Blockchains are…
Recorded events or transactions (called ledger entries)
recorded chronologically, mathematically signed
Blockchain in 3D
• Decentralization
• Disintermediation
• Distributed [Ledger]
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15. Confidential Information
What Makes a Good Case for using
Blockchain?
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1. Multiple parties share data
– Multiple participants need views of common
information
2. Multiple parties update data
– Multiple participants take actions that need to be recorded
and change the data
3. Verify Trust
– Every participant requires validation of the transactions
and integrity of data written
4. Decentralized
– No single repository or owner of the repository locations
5. Distributed Ledger
– Data is written across multiple ledger entries

16. Confidential Information
Is This a Hammer In Search of a Nail?
• Inter-Company Transfers (manual hand-offs)
– Insurance
– Property and title transfers
– Anything with government as a third party
• Verifiable Record Management
– Formally physical assets now digital (stocks, currency, prescriptions,
vehicles)
• Identity Management
– Identity and “certificates of trust” for mobile economy companies such as
AirBnB and Uber
– Reputation
• Smart Contracts
– It’s the new Software as a Service
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17. Confidential Information
Private vs. Public Blockchains
• Public
– Many third parties
validate ledger entries
– No single “owner”
– Harder for the black hats
to take over
– Policy changes are by
consensus unlike
companies (e.g.,
Facebook)
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Private
– Faster to close or clear transactions
– Potential for a single owner – Bad scenarios
for trust
– Good for small autonomous networks
– Internet of Things

18. Confidential Information
Namespaces
• A namespace is simply a boundary not unlike the
borders of a country or the address
– (Washington Monument, CenturyLink Field).
• Namespace architectures are addresses
– The are used to bound the scope of a set of activities
or actions
– Some blockchains (Ethereum, RChain) allows us to
compose name spaces. That is, they may or may not
be shared
• This allows us to search through or for an exact
node allowing transactions via smart contracts to
both process faster and more precisely.
• Namespaces can be both public and private.
– Private Namespaces are valuable for transactions
between two parties (e.g., funds transfer) or complex
ones between select partners such as supply chain.
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19. Confidential Information
Smart Contracts and Oracles
• Used loosely as ‘contract’, a
smart contract is a process with
– Persistent state
– Associated code
– Deterministic which is why you
need…
• Oracles are connections to the
outside world
– They are designed to ”edge trigger”
smart contracts.
– When one or more conditions are
true they cause a smart contract to
run 19

20. Confidential Information
Zero Knowledge Proof
• Completeness:
– If the assertion is true, the verifier is convinced of the truth
of the statement
• Soundness:
– If the statement is false, no bad prover can convince the
honest verifier that it is true, except with some small
probability.
• Zero-knowledge:
– If the statement is true, no verifier learns anything more
than that
– Example:
• “I keep a speckled colored dragon”
• “I am over 21”
• “This is the password to my bank account”
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Proving you have knowledge of something without having to share the source
of data.
Trust
Verifier
Prover
did: x17lkee0ekimcubutadi4soqnz
duplicate :: [a] -> [a]
duplicate [] = []
duplicate (x:xs) = [x, x] ++
duplicate xs
main = print $duplicate
"abc"
Smart
Cont ract
Yes/ No
a8a7ljtykbktj5
trsnj8did8rm
5ubf6i3kg3ls
chgtha95zqa6
Encrypted
Asset

21. Confidential Information 21

22. Confidential Information
Where are Some Immediate Opportunities?
• Onboarding
– Costs
– Opportunities
– Churn in the industry
• Fraud Detection
– Estimates show that 5 – 10% of non-healthcare claims are fraudulent.
Identity resolves tracking the information
• Document Packages
– Requires the least amount of group participation
– Signing and sharing is well established
• Identity
• Micropayments
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#FollowTheMoney

23. Confidential Information
Barriers/Opportunities
• Regulators want to address single entities and not
networks
• Too many use cases where everyone must participate
• Hot potato of risk
– Last one holding it, gets stuck with the check
• PII
– Right to be forgotten
– Where is the data shared/stored
– Keep the data only for as long as necessary
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24. Confidential Information
Thank You!

25. Confidential Information
Lawrence I Lerner
• Bridging the gap between the Business and Technology
– 25 years executive leadership (PricewaterhouseCoopers, Cognizant)
– Every day technology product launched Motorola, Discover Card, The
New York Times, Safeway Stores, in-store coupons
– Four years of blockchain related work
– 15 startup companies – leadership and funding
– Public and Private board roles
• lawrence@lawrenceilerner.com
• Direct: +1.630.248.0663 (Seattle Based)
• Twitter: RevInnovator
• LinkedIn: https://www.linkedin.com/in/lawrencelerner/
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27. Confidential Information
Blockchain Projects and Technologies
• Open Source and Open Source projects
• Hyperledger – Hyperledger.org
– Open source projects supported by the Linux Foundation
• Fabric – IBM supplied technology for distributed ledgers
• Iroha (ee-roh-ha) - Soramitsu, NTT Data, Colu
• Sawtooth Lake – Intel
• Ethereum – Ethereum.org
– Distributed scripting language which is “coin-operated”
– Smart contracts between individual entities
• Enterprise Ethereum (Entethalliance.org)
– Business consortium based project. Technologies that acknowledge the need for regulatory compliance
• Eris (now Monax) Monax.com
– Pre-built blockchain solutions
– Examples Asset Managements, Claim Management
• Ripple (Ripple.com)
– Basic settlement process between banks
• Quorum (https://www.jpmorgan.com/country/US/EN/Quorum)
– Open Source from JPMorgan Chase to validate transactions amongst trust third parties
• R3 (R3cev.com)
– Company based consortium developing a blockchain technology (Corda) for permissions and privacy. Ledgers are
selectively transferred 27