an introduction to blockchain technology...(distributed ledger) challenges with a central register...
TRANSCRIPT
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www.strate.co.za©Strate
www.strate.co.za©Strate
An Introduction to Blockchain Technology
Tanya Knowles - Executive Director, Fractal Solutions, a Division of Strate
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Disclaimer (!)
No one will pay money to get from Berlin to Potsdam by train in one hour when he can ride his horse there in one day for free.(King William I of Prussia, 1864)
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Strate (Pty) Ltd
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OPERATING DIVISIONS
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What is money versus Bitcoin versus Blockchain?
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Yap Island – 1500 years ago
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Key Attributes of Money
• Scarcity - This is money's most important attribute. The island of Yap did not have limestone - all stones had to be imported from Palau -so stones were very scarce.
• Durability - The stones on Yap could last a very long time without being damaged or requiring maintenance.
• Divisibility - Individual stones were not easy to divide, however large stones could be exchanged for smaller ones.
• Verifiability - Real stones were easily distinguishable and identifiable against fake ones.
• Portability - Most smaller stones could be easily transported.
• Fungibility - On Yap, stones of equal size were equal in value. No one cared which specific stones they had.
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But how did they keep track of ownership?
Option 1: Go to the tribal chief as a central authority (who keeps a central ledger)
Option 2: Each islander keeps a mental record reached via consensus (distributed ledger)
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Challenges with a Central Register
•Complete trust in a single entity
•Single point of failure
•Vulnerable to corruption / can be tampered with
•Power of a single entity / Monopoly status
•Vulnerable to cyber attacks
•Etc
Option 2 looks very appealing …
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Bitcoins - Accident or Genius or Experiment?
≠?
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Bitcoin
“Peer to peer electronic cash system which allows online payments directly from one party to another without the burden of going through a financial institution (independent party)”
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Blockchain underpins Bitcoin
- Unregulated, censorship-resistant
Shadow currency
- First Blockchain application• Pioneer of Blockchain Technology
But the Blockchain is NOT Bitcoin
… Digital currencies (fiat currencies) different from cryptocurrency
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Blockchain/Bitcoin
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What is Blockchain?
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1970’s Mainframe
1980’s
PC
1990’s internet
2000’s social media
2010’s blockchain
Technology Trends
Transfer of Information
Transfer of Value / Asset
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VideoVoice
TC/IP and HTTP Blockchain ?
The World Wide Web
Source: Credit Suisse Research
Some consider Blockchain to be the “Missing Piece” of the Internet
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Don’t rely on Government or Regulations to protect your business!
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Areas Ripe For Disruption
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Collaborative Lab / Rachel Botsman 2014
Complex Industries
Broken Trust Redundant Intermediaries
Limited Access
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Blockchain Catch Phrases
Bitcoin Database Assets
Computer network
Decentralised Shared Ledger
Consensus Peer to peerPublic /
transparent
No central Authority
Immutability Provenance
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Blockchain Key Phrases
Database Assets
Single Shared Ledger
(Decentralised)
No central authority
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Blockchain
• Peer to peer transacting
• Open source technology on the web with no central authority (like the internet)
• Blocks of data – records a batch of transactions
• Electronically chained together with advanced cryptography to create a permanent and public record of every transaction that cannot be altered
• Secure, tamper proof and easily accessible
• Shared record of transactions (ledger) and data distributed over a vast network of users
• Miners are like librarians – cataloguing information
• Near instantaneous settlement at ‘peer’ / beneficial ownership level
• Public versus private blockchains
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What does a Single (Shared) Distributed Ledger actually mean?
(Distributed Ledger Technology DLT)
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Simplification of the current equities process (securities only)
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Equities on a Blockchain Simplified
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Single ledger
Near real time settlement
Encrypted data
No reconciliations
No single point of failure
Broker CSDP
Mary Jane ABC Brokers CSDP No 1
John Smith YXZ Brokers CSDP No 2
Alice Jones MNO Brokers CSDP No 6
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Regulatory, Central Bank and Industry
Body Developments
• A number of International securities regulators have announced that they will be ‘studying’ blockchain and
the impact on securities markets around the world as follows:
• International Organization of Securities Commissions (IOSCO) Board agreed on 22 February 2016 to
“intensifying work on technological change with particular relevance for securities regulators,
including blockchain”
• European Securities and Markets Authority (ESMA) has issued a blockchain paper requesting market
input
• The International Securities Services Association (ISSA) and a group of CSDs have formed a blockchain
working committee respectively
• Public announcements have been issued by a number of central banks on the topic including the
European Central Bank, Federal Reserve Bank, Central Bank of England and the Japanese Central Bank.
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What does this mean and what are the
possibilities?
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Our World Today
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• Independent parties verifying the transaction
• Control / keep a record (legal) assets
• Levy fees for the services
• They are a single point of failure that could lose those
assets / be corrupted
Our World Today cont
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Alice’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money / Cash
Qualifications
Digital Identity
Jewelry
House
Music
Shares
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Alice’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money
Qualifications
Digital Identity
Jewelry
House
Music
Shares
Sally’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money
Qualifications
Digital Identity
Jewelry
House
Music
Shares
Jane’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money
Qualifications
Digital Identity
Jewelry
House
Music
Shares
Mary’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money
Qualifications
Digital Identity
Jewelry
House
Music
SharesLiam’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money
Qualifications
Digital Identity
Jewelry
House
Music
Shares
Ron’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money
Qualifications
Digital Identity
Jewelry
House
Music
Shares
Jen’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money
Qualifications
Digital Identity
Jewelry
House
Music
Shares
Mike’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money
Qualifications
Digital Identity
Jewelry
House
Music
Shares
John’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money
Qualifications
Digital Identity
Jewelry
House
Music
Shares
“The” Blockchain
Peer to peer
No legal hassles
No Intermediaries
Immutable record
“Free” / Cheap
Speed
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Alice’s Assets
Marriage
Art
Medical Records
Electricity usage
Motor vehicle
Money / Cash
Qualifications
Digital Identity
Jewelry
House
Music
Shares
Real life examples
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• “The” Blockchain may never exist
• No standards / governance
structures
• Technology is in its infancy
• No laws, regulation, taxes governing
the system
• Dispute resolution
• Its not free! The computing power /
electricity to run the Bitcoin
blockchain alone is enough to power
half the country of Ireland daily
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#FOMOUS$ 1 billion in 2015
???Up to US$ 10 billion in 2016
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Any company not making the investment in adopting this technology will cease to exist, and even adopting it is no guarantee that they'll survive.By Roger Arnold
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How long before this becomes real?
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•Diamonds on the blockchain• Everledger is a permanent ledger for diamond
certification & related transaction history•Over 1 million diamonds have been issued onto
the Everledger blockchain •14 metadata reference points on the diamond•Aims to solve a £45 billion loss in insurance
fraud
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www.strate.co.za©Strate
www.strate.co.za©Strate
Tanya Knowles
Executive Director, Fractal Solutions
Strate (Pty) Ltd)