SMTAI PowerPoint: Blockchain for High Tech
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Blockchain can improve business processes by functioning as a shared system of record that eliminates the need for reconciling disparate ledgers. Each member has access rights so confidential information is selectively shared. Consensus from all members is required, and validated transactions cannot be deleted, providing an immutable record. The document provides examples of how blockchain could track high-resolution photos and product details for diamonds throughout the supply chain and maintain real-time payment records.
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SMTAI PowerPoint: Blockchain for High Tech
- 1. ©2018 IBM Corporation Blockchain and High-Tech Quentin Samelson IBM Global Business Services qbsamels@us.ibm.com / +1-224-407-7812 Applications in the Electronics Industry: Supply Chain, Manufacturing, and Engineering
- 2. 2 A little personal history • First job was in consumer electronics – had to come up with a way to repair surface-mount ICs in VCRs. • Second job was as a product engineer in a hybrid microelectronics factory – everything from a simple reset circuit – literally drawn on a napkin – to a Chip- on-Substrate controller for one of the first personal insulin pumps.
- 3. Executive Summary Blockchain is a new technology that removes cost and complexity from multi-party transactions. Benefits are shorter cycle times, reduced costs, lower risk. Costs to get started are reasonable. Partners may be suppliers, logistics companies, customers, design firms, outside manufacturers, or government agencies, banks, etc. Uses within High Tech industry include supply chain visibility, quality data exchange, secure document exchange, etc. ©2018 IBM Corporation
- 4. ©2018 IBM Corporation Outline/Agenda Foundational Principles Use Cases Application & Project Evaluation Q&A
- 5. Foundational Principles ©2018 IBM Corporation
- 6. 6 Blockchain’s key concept: a shared, secure ledger that creates a permanent record of transactions Source: IBM Institute for Business Value analysis “This is what the blockchain does at its core. It is a shared ledger technology that allows participants in a business network to transact assets where everyone has control but no one person is in control” Leanne Kemp CEO and Founder, Everledger ©2018 IBM Corporation
- 7. 7 A (non-blockchain) ledger most of us have encountered… a bank account At least 3 parties agree to most transactions: the bank, the other party, & myself. (May be more than 3.) Ledger is only updated when a properly configured transaction has been received. Ledger status may lead to actions (“suspicious transaction” notification, low balance, etc.) ©2018 IBM Corporation
- 8. 8 We can build almost any sort of process with Blockchain • This example is an e-Kanban process. Whenever a reel of 5000 parts leaves the stores area, it updates the ledger. When five reels (one box) have been issued, it issues an eKanban signal to the supplier. • The supplier’s acknowledgement, as well as its shipping notice and the receipt into stores, all update the ledger. Date Time Plant ID Part Number / Material Code Starting Inventory Level (Stores) Transaction Transaction Quantity Ending Inventory Level Cum Issue to WIP SPLRID 5-Jun-18 13:00NJ POLY - NKG01 1098753-01 185,000 Issue to WIP -5000 180,000 -5000 n/a 5-Jun-18 15:05NJ POLY - NKG01 1098753-01 180,000 Issue to WIP -5000 175,000 -10000 n/a 5-Jun-18 17:15NJ POLY - NKG01 1098753-01 175,000 Issue to WIP -10000 165,000 -20000 n/a 6-Jun-18 7:20NJ POLY - NKG01 1098753-01 165,000 Issue to WIP -5000 160,000 -25000 n/a 6-Jun-18 7:21NJ POLY - NKG01 1098753-01 n/a Issue eKanban to SPLR 25000 n/a n/a Panshiba 6-Jun-18 7:22NJ POLY - NKG01 1098753-01 n/a Acknowledge eKanban 25000 n/a n/a Panshiba 6-Jun-18 16:05NJ POLY - NKG01 1098753-01 n/a Shipping Notice 25000 n/a n/a Panshiba 7-Jun-18 10:05NJ POLY - NKG01 1098753-01 160,000 Receipt to Stores 25000 185,000 n/a Panshiba GMT+ 8
- 9. © 2018 IBM Corporation Block detail (simplified) - A blockchain is made up of a series of blocks with new blocks added to the end - The hash is “one way” – quick to calculate & verify, very difficult to deconstruct - Each block contains zero or more transactions and some additional metadata - Blocks achieve immutability by including the result of a hash function of the previous block Block 16 Previous Block Hash: 57ec2fda71 Block Hash: 87ea2ffe94Block Hash: 57ec2fda71 Block 15 Previous Block Hash: d68b2f0a3b Block 17 Previous Block Hash: 87ea2ffe94 Block Hash: 44bf2efe32 Transaction Transaction Transaction Transaction TransactionTransaction … …
- 10. 10 Blockchain’s key attributes enable building powerful business applications on a shared ledger Source: IBM Institute for Business Value analysis Shared: All parties can access the ledger. Blockchains aren’t owned by any one organization. Secure and immutable: Cryptography ensures that network participants see only the parts of the ledger relevant to them. Transactions can’t be altered after the fact. Synchronized and Transparent: Transactions are updated in real time across the Blockchain. Consensus-Based and Controlled: Participants can ensure valid transactions before they are recorded using smart contracts. Government requirements & audit can be built into the Blockchain application too. ©2018 IBM Corporation
- 11. 11 Other types of blockchain exist The first blockchain application Defines an unregulated shadow-currency Resource intensive • Blockchains for business are generally permissioned and private, and prioritize: Identity over anonymity Selective endorsement over proof of work Assets over cryptocurrency • Blockchain technology is a core component of bitcoin. • But bitcoin has no role in blockchain technology when used to enable business processes. is an example of an unpermissioned, public ledger: ©2018 IBM Corporation
- 12. Use Case Examples ©2018 IBM Corporation Blockchain’s power is that it can solve complex, real-world business problems – especially those involving multiple parties.
- 13. Major Use Case Categories Supply Chain Visibility & Control Secure Document Exchange Secure Device Control Know Your Partner Quality Supply Chain Finance Provenance ©2018 IBM Corporation
- 14. Use Case: “Where’s my stuff?” Use a blockchain shared ledger to track and trace product all the way from the EMS’s production line, through the shipping process, to each possible destination. Blockchain solution shared ledger Custom e r Dist. center O EM whse OEM EMSProvider 3PL OEM OEMs working with EMS providers can spend a large amount of time tracking and determining exactly how many products have been completed. Problem Tracking Althoughsome of this tracking maybeautomated, mostofitrequires frequentpersonal interactions. Product Tracking: Visibility across the supply chain ©2018 IBM Corporation
- 15. Use Case: Counterfeit Prevention Blockchains create immutable audit trails which improve counterfeit detection ©2018 IBM Corporation The manufacturer adds a unique code to each device, then registers it in a ledger where it is tracked and traced. Blockchainsolution Registerseachdevice viauniquecode Shared ledger OE M factory EMSfac tory Updatesledgerwhere eachdevicesold Linkeach devicetoa product’s serial# High-end semiconductors & subassemblies are sometimes faked and sold on the grey market. Problem Counterfeit Semiconductorsold on grey market
- 16. Use Case: Supplier Quality Data Blockchains create immutable audit trails which improve counterfeit detection ©2018 IBM Corporation Suppliers feed quality/ process/ parametric data to a blockchain-based ledger as they produce components, for review by the OEM. The OEM can review each production lot’s data before it is received (or even shipped), to ensure that inbound materials meets all requirements. When quality data is needed, it usually gets transmitted via email (no security, limited access). Low reliability that data will be transmitted on a consistent basis, hard to verify and validate data. Data formatted inconsistently. Difficult to count on data availability. Problem Custome r Supplier 3 Supplier1 Supplier2 Suppliern OEM Blockchain Solution Supplier 3 Supplier1 Supplier2 Suppliern OEM
- 17. Two projects in Europe to utilize solar batteries or Electric Vehicle batteries to store or provide energy to the electric grid. Blockchain connects via client-preferred cloud & IoT to devices. Same concept could be used to control, disable/enable, update other kinds of devices on a network or cloud. Remote Device Access & Control Power Grid Operator EV 1010 EV 1010 EV 1010 EV 1010EV 1010EV 1010 EV 1010 EV 1010EV 1010EV 1010 EV 1010 EV 1010EV 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Solar Batt. 1010 Network Operator 3rd - party cloud Clien t Cloud ©2018 IBM Corporation
- 18. Use Case: Design Data Sharing ©2018 IBM Corporation OEMs work with outside design companies as well as external manufacturing services. In some cases, a reference design may be provided by a component supplier; in other cases, the OEM’s own design may need to be shared securely – and kept perpetually coordinated – with outside assemblers. Blockchain not only enables secure sharing, but provides an indelible audit trail. External Design Company Factory #1 OEM Design Staff Ledger Factory #2 Program Management controls which factories see which design versions Program Management Design Data
- 19. Application & Project Evaluation ©2018 IBM Corporation
- 20. 20 Some key questions • Are you solving a problem only for you and your immediate partners? Will the solution be of sufficient value that it will be worth the investment? • Does this problem extend across your industry? (If so, it could become a consortium based network.) Would it be of value to your company and your value chain to be the first mover(s), and to have the biggest influence on the blockchain application? • Do you see an opportunity that extends outside your industry? If you were to collaborate with non-traditional partners, would that open up new opportunities for business? ©2018 IBM Corporation
- 21. 21 Making the case for Blockchain Companies may discover a compelling business case to be made for Blockchain, because it: •Enables compliance with applicable laws and regulations, or with a customer’s requirements •Eliminates a major problem (such as counterfeit materials in their supply chain, via Blockchain’s provenance capabilities) •Saves time in a complex business transaction or process •Saves money (by reducing time spent, reducing labor, or eliminating certain process steps or costs) in a complex business transaction or process •Eliminates a middleman or a non-value-added process step, resulting in time and cost savings •Enables a new process that would be impossible or impractical without some aspect of the shared, secure ledger ©2018 IBM Corporation
- 22. Thank you! 22 Contact for further info: Quentin Samelson +1 224 407 7812 qbsamels@us.ibm.com LinkedIn: (Blogs on Blockchain & other topics) https://www.linkedin.com/in/qsamelson/
- 23. 23 For more information: Some useful videos: https://youtu.be/lD9KAnkZUjU (diamond example) https://youtu.be/tdhpYQCWnCw (Maersk) https://youtu.be/pee0kixUN2Q (Power Grid) https://youtu.be/ZKscEx2lO-4 (Blockchain + IoT) A more comprehensive foundational presentation: https://www.slideshare.net/EsraUfacik/blockch • “Fast Forward” white paper is at https://www-935.ibm.com/services/us/gbs/thoughtlea • Blockchain in Electronics white paper is at www.ibm.biz/blockchainelectronics • Additional info at https://www.ibm.com/blockchain/ • Helpful paper on selecting a blockchain framework: https ://developer.ibm.com/blockchain/2017/05/11/guidelin Contact Quentin Samelson for links to “Blockchain for Dummies,” the Quick-Start Guide for Developers, or the Founder’s Handbook.
- 24. ©2016 IBM Corporation24 Contact for further info: Quentin Samelson +1 224 407 7812 qbsamels@us.ibm.com It works as a system of record that is shared among participants of the business network, eliminating the need to reconcile disparate ledgers. Each member of the network has access rights so that confidential information is shared on a need-to- know basis. Consensus is required from all network members, and all validated transactions are permanently recorded. No one, not even a system administrator, can delete. How does blockchain improve processes? Maintain high- resolution photos of each diamond at every touch point along its journey. Keep a record of product details like cut, clarity, color, carats, and diamond serial numbers. Hold certificates of authenticity. Track real-time records of every payment transaction.
Editor's Notes
- https://www.itnews.com.au/news/everledger-uses-blockchain-to-stamp-out-blood-diamonds-455537
- This has been simplified, of course! In real life, the issues to WIP wouldn’t stop when the eKanban signal is issued… but the math would be hard to follow on one screen in that case.
- Optional slide to explain why it’s called Block – Chain … Slight changes to an input will produce a completely different hash. It is close to impossible to figure out what input data created a particular hash; but hashing the same value twice will result in the same hash. This slide looks at the block in more detail and how it achieves immutability. The crucial aspect is the hash function. Each block contains a hash of the previous block, which itself is used to calculate the next block’s hash. This means that if any block were to be tampered with (e.g. a transaction added, deleted or modified) then the hash values would change and the blockchain would no longer be integral. The first block is known as the “genesis” block.The genesis block usually contains an arbitrary key value that is used to initialize the hash function. This is a simplification of the block detail. Generally, each block contains a Merkel root that links off to a tree of transactions. There is also other metadata, depending on the blockchain implementation (e.g. nonces and timestamps).
- Blockchain architecture give participants the ability to share a ledger, which is updated every time a transaction occurs. This happens through peer to peer replication – meaning that each participant’s ledger is updated and synchronized. Cryptography is used to ensure that network participants see only the parts of the ledger that are relevant to them, and that transactions are secure, authenticated and verifiable. Blockchain also allows a contract to be embedded in the transaction database determining the conditions under which the transaction can occur. Network participants agree how transactions are verified through consensus or similar mechanisms. Government oversight, compliance & audit can be part of the same network. To restate: Shared: both (or all) parties to the business relationship have a complete copy of the ledger, showing all transactions made. Secure: only the parties to the business relationship have access to the ledger. Security can be set up so that some parties only see part of a transaction, or don’t see some transactions at all. Synchronized: when one party performs a transaction, everyone in the business relationship will see that transaction. (When the buyer acknowledges receipt of the vehicle, for instance, the seller’s copy, and the finance company’s copy, of the ledger would also be updated.) Stable: The Ledger is “immutable” – it can’t be changed after the fact. CONSENSUS– means all participants agree that a transaction is valid PROVENANCE– means participants know where the asset came from and how it’s ownership has changed over time IMMUTABILITY– means no participant can tamper with a transaction once it’s agreed. If a transaction was in error then a NEW transaction must be used to reverse the error, with both visible FINALITY– means that there is ONE place to determine the ownership of an asset or completion of a transaction. This is the role of the SHARED LEDGER. .
- This and the next slide are optional, in case you need to address the difference between bitcoin & blockchain for business. Note that the key characteristics of bitcoin above – unpermissioned and public – create the situation people have heard of, where ”mining” bitcoin requires a LOT of computing power. This is because bitcoin requires “proof of work” – which is achieved through solving massive mathematics problems. In contrast, Hyperledger (blockchain for business) is permissioned and private. Proof of work is achieved through consensus – sometimes by having two parties agree to a transaction, for instance. So the need for massive amounts of computing power isn’t there (unless, of course, your business process is going to handle huge amounts of data and thousands of transactions per minute). The key is that the technology itself doesn’t create a need for computing power, in the case of blockchain for business. With cryptocurrencies, that’s not true. Blockchain technology enables the Bitcoin crypto currency and is best known for this usage. However, the shared ledger technology is separate & separable – applicable to a whole range of business challenges that cross all industries. IBM is not interested in crypto currency, but is missioned to help our customers make the most from Blockchain technologies. We see this as a major transformation opportunity for many of our customers. Digital currencies (i.e. the representation of FIAT currency as an asset on a blockchain) are auditable and permissioned, hence excellent Blockchain use case
- You either do blockchain: “because you have to” “because you want to save time or money or both” Or because it opens up a new opportunity.
- Hyperlinks are built into the pictures, but you can also use these links (all of which are public): “Fast Forward” report is at https://www-935.ibm.com/services/us/gbs/thoughtleadership/blockchain/ Blockchain in Electronics report is at www.ibm.biz/blockchainelectronics Additional info at https://www.ibm.com/blockchain/ More videos: IBM Global Finance: https://youtu.be/0DSNdLDOZ5w Northern Trust (Private Equity application): https://youtu.be/uXx2vpDngPU AIG (Insurance): https://youtu.be/mgUK0cPoasw Supply Chain Visibility/ Inbound supply chain demo: https://youtu.be/mIbAHiOr9ms IoT, Blockchain combined in inbound supply chain at Kouvola: https://youtu.be/oiLUtBiSTqQ Walmart Food Safety Video with IBM: https://youtu.be/SV0KXBxSoio Some good non-IBM resources: http://www.ozy.com/need-to-know/blockchain-the-new-technology-of-trust/81602 http://www.ozy.com/fast-forward/wtf-is-blockchain-inside-the-most-disruptive-tech-since-the-internet/81567 https://hackernoon.com/wtf-is-the-blockchain-1da89ba19348 Blogs: And a few blogs that may provide some food for thought: The problem with Blockchain: https://www.linkedin.com/pulse/problem-blockchain-quentin-samelson/ Finding good Blockchain projects: https://www.linkedin.com/pulse/finding-good-blockchain-projects-quentin-samelson/ Why use Blockchain instead of another technology? https://www.linkedin.com/pulse/why-use-blockchain-instead-another-technology-quentin-samelson/ Blockchain for the EMS Supply Chain: https://www.linkedin.com/pulse/blockchain-ems-supply-chain-quentin-samelson/
- Infographics are not available via publicly accessible links; they can be downloaded internally and provided via email. A second useful infographic is available at https://w3-03.sso.ibm.com/services/lighthouse/documents/I973757M47254S75 Most of the use cases shown in previous slides are available in a single infographic at https://w3-03.sso.ibm.com/services/lighthouse/documents/R470930L14344Q20