True Tales from a Blockchain Realist
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Blockchain represents a new era of generational wealth creation similar to the rise of the Internet. In 2018, over $3.9 billion was invested in blockchain by VCs. While 2018 saw major losses in cryptocurrency values, blockchain use cases solving real-world problems such as title transfers, micro-payments, and stakeholder coordination are here to stay. Enterprises are increasingly investing in blockchain solutions while investors are still investing in the technology and following the money.
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True Tales from a Blockchain Realist
- 1. 0 True Tales from a Blockchain Realist January 2019 © 2018 Confidential & Proprietary
- 2. 1 Blockchain represents the type of generational wealth creation previously seen with the rise of the Internet in the late 1990s. In 2018 alone, more than $3.9B1 has been invested in blockchain by VCs. Some big names such as Circle raised around $250 M and Coinbase around $215M 1 1. https://diar.co/volume-2-issue-39/ Pitchbook
- 3. 22 2018 Saw Major Loses Across the Market Ripple -92% $113B 2019 $538B 2018
- 4. 33 Tangible use cases solving real- world problems Title transfers Micro-payments Stakeholder coordination Cryptocurrencies and tokens have shed most of their value A two-edged sword for blockchain Investors are still investing Enterprises are investing #FollowtheMoney 2019 Whole solutions are here to stay
- 6. 5 Crafting the First Ledger • First accounting records • Token counting • Contracts recorded • Final and immutable
- 7. 6 Luca Pacioli 1447 – 1517 Distributing the Ledger
- 8. 7 Why Separate Blockchain from Bitcoin? 7 Trust
- 9. 8 Blockchain Ledgers Enable Value Exchange
- 10. 9 “What the internet did for communications, blockchain will do for trusted transactions.” - Ginni Rometty, CEO of IBM Blockchain is the Internet of Value
- 11. 1010 Second Generation of the Internet • Trust is achieved via math and cryptography • One-way exchange of assets. No double spending • Payment, remittances and settlement are close to instant § Payment, settlement and audit are the same activity • Blockchain enables the 98% ReceiverSender
- 12. 11 What is a Blockchain? 11 Recorded events (ledger entries) recorded chronologically and verified by multiple third parties. May be public or private
- 13. 12 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 What’s in a distributed leader?
- 14. 13 • 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 Smart Contracts and Oracles
- 15. 14 What Makes a Good Business Case for Blockchain? 14 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 § Append only 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. 1515 Traditional Multi-Central Data Management Decentralized Distributed Ledger
- 17. 16 Exchange Value Authenticate & Attest Value Transfer Value Store Value Fund & Invest Lend Value Account for & Audit Value Insure Value & Manage Risk Blockchain transform the Financial Services Industry Don Tapscott : The Blockchain Revolution
- 18. 1717 The Killer Use Cases Supply Chain Payments § Fiat-Crypto-Fiat transactions (remittance) § Multi-coin wallets § Loyalty programs Identity, Internet of Things (IOT) & blockchain based security Third generation blockchain platforms and their ecosystems Digital Records and Assets § Digitized transaction records (venues and ticketing) § Virtual avatars, utility tokens and other digital items (games) § Digital record keeping (real estate) 17
- 19. 18 • Removing the Middleman • Infrastructure and scale § IOT (Internet of Things) § Identity § Supply Chain § Micro-payments • Reduce friction when onboarding data • Overlooked or underserved populations § The unbanked § Manual processes § Serving the 98% Where are the opportunities? This central authority shutdown for weeks Blockchain never closes
- 20. 19 Image courtesy CCN.com • $4T worth of goods shipped each year • 80% via ocean shipped freight • Documentation is approximately 20% of shipping cost • Maersk – Integrated shipper and transportation company § All parties share the same data on the blockchain § Information is shared and written with finality § Reduces paperwork § Reduce opportunities for fraud Global Shipping
- 21. 20 • Food Traceability Initiative • Runs in Hyperledger by IBM • PCI-DSS like initiative • Tier 1 vendors must be compliant by Jan 31, 2019 • All vendors in the supply chain must be compliant by Sept 30, 2019 Walmart Leafy Green
- 22. 21 It’s me. Digital Identity Identity - $19.5B Industry • Password Managers • Identity Access Management • Physical identity cards • Returning personal data control to consumer reducing identity theft ($16.8 B in 2017). • Hacks which made marquee headlines from companies such as Marriott (500M accounts), Yahoo, Anthem and Target
- 23. 22 Trust Verifier Prover did: x17lkee0ekimcubutadi4soqnz duplicate :: [a] -> [a] duplicate [] = [] duplicate (x:xs) = [x, x] ++ duplicate xs main = print $duplicate "abc" Smart Contract Yes/No a8a7ljtykbktj5 trsnj8did8rm 5ubf6i3kg3ls chgtha95zqa6 Encrypted Asset • 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: o “I keep a speckled colored dragon” o “I am over 21” o “This is the password to my bank account” Proving you have knowledge of something without having to share the source of data. Zero Knowledge Proof
- 24. 23 • Regulators want to address single entities and not networks • North American regulators moving very slowly • Too many use cases where everyone must participate • Hot potato of risk • Personally Identifiable Information (PII) & GDPR Barriers / Opportunities • Look for businesses that are rewriting the rules of traditional systems • Look for companies solving existing problems with a decentralized ledger § Exchanging data in a peer-to-peer manner • Government & Voting • Financial Technology or FinTech • Entertainment – Liquid economies • Machine Learning Hana Yori Dango “Dumplings over flowers”
- 25. 2424 Since the beginning of the 21st century, global scientific and technological innovation has entered an era of unprecedented and active activity. A new round of scientific and technological revolution and industrial transformation is reshaping the global innovation map and reshaping the global economic structure. A new generation of information technology represented by artificial intelligence, quantum information, mobile communication, Internet of Things, and blockchain accelerates breakthrough applications, and new fields of life sciences represented by synthetic biology, gene editing, brain science, and regenerative medicine well-being as it is today. President Xi Jinping – People’s Republic of China
- 27. 26 Thank You! Lawrence I Lerner, CEO Lawrence.Lerner@pithia.com Pitches@pithia.com www.pithia.com revinnovator@revinnovatorrevinnovator
- 28. 27 Principled Investing: We Do What We Know Works Ideas are 10% Execution is 90% Put foundational elements before long term speculative opportunities Create Sustainable Advantages within the portfolio Select Limited Partners for their “quality of self” and the quality of their relationships, rather than just their ability to provide funds Quantify and qualify risks by market opportunity Only experience helps you measure the success of a venture
- 29. 2828 Pithia | Catena Fund I Capital Deployed in 2018 Target industries: Identity and Identity Services Financial Services Media, Entertainment and Advertising Digital Records Key Investment Criteria: Foundational to the blockchain ecosystem Growth oriented Focus on making blockchain every day Select Portfolio Companies Investment/Deal Style: Significant minority (15 – 20% equity) Board Seat and Operational Support Headquarters: Seattle, WA North America (primary focus) Worldwide for FinTech, Supply Chain, and Identity, in RChain ecosystem 28