blockchain – a platform for the next generation connected world

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BlockchainA Platform for the Next Generation Connected WorldMarkus Hautala

Head of Accelerator ProgramTechnology Services and [email protected]

© Tieto Corporation

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Contents• What is blockchain?

• Why does blockchain matter?

• How will blockchain speed up digitalization?


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Blockchain technology is gaining huge interest


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Blockchain technology is gaining huge interest


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What is blockchain?

Distributed peer-to-peer network ensures the data integrity

Peer to Peer = No central authorityBlock

Blockchain

Transaction

• Block = all transactions within a certain time period• Blockchain = links all blocks together


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Bitcoin popularized the blockchain technology• Bitcoin was proposed in 2008 in a

whitepaper by Satoshi Nakamoto (pseudonym)

• Transaction parties can directly transfer a digital currency (bitcoins) without trusted third parties (i.e. payment service providers)

• Network of untrusted peers (nodes) ensures (consensus protocol) the validity and immutability of all transactions

• Nodes are rewarded by a lottery-based system

• All transactions are publicly verifiable through a public ledger (the Bitcoin blockchain)

Market cap 2nd Oct, 2016

$9.7 Bn


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Bitcoin is peer-to-peer payment system that enables users to transact without trusted third partiesHow is a bitcoin transaction executed?

1. Alice sends bitcoins to Bob

A

2. The transaction is configured into a block

B

3. The transaction is broadcast across the entire network which validates it

5. Bob receives bitcoins from Alice

B

4. The block is then added to the bitcoin blockchain which is a public ledger recording the entire immutable transaction history

BB

BB


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Cryptocurrency is just one of the applications for blockchain

Smart contractsSmart contractsAccount balances

Alice: 30 EurBob: 100 EurCarol: 150 Eur

Users

Money

Blockchaine.g. Bitcoin, Dash, Monero


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Cryptocurrency is just one of the applications for blockchain

Smart contractsSmart contractsSmart contracts

StorageCode

Blockchaine.g. Ethereum, Synereo, LiskUsers

Money

Data


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What are smart contracts?

Coding Distribution Execution• Pre-written logic (computer code) • Stored and replicated on a

distributed storage platform (eg a blockchain)

• Executed/run by a network of computers (usually the same ones running the blockchain)

• and can result in ledger updates (cryptocurrency payments, etc)


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Essential functions of a trusted third party can be automated with the Blockchain

Buyer

Business process

Business records

Seller

Business process

Business records

Middleman facilitated transactionsBuyer

Business process

Value adding service

provider

Value added

services

Seller

Business process

Shared business process(Smart contracts)

Shared business records stored on shared blockchain

Shar

ed p

latfo

rm

Blockchain facilitated transactionsTrusted 3rd

party

Shared business process

Shared business records

Shared platform

Messaging & management of discrepancies and duplicates

Modified from The Corda non-technical whitepaper, R3


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Dumb networks fuel innovation

Telephone network Internet of information


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Blockchain will fuel financial innovation on the edge of the network

Financial network

$

€¥

Internet of value


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As a platform for digital services blockchain can serve various use cases beyond currency

Source: Citi research

Use Case / Application

Record

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Blockchain comes in many flavors

Source: Distributed Ledger Technology: beyond block chain; A report by the UK Government Chief Scientic Adviser

1. How many copies of the ledger?

Traditional database

• Traditional ledger Personal bank accountOne

3. Who maintains the integrity of the ledger

Anyone

2. Who can access these copies?

Many Blockchain

• Private• Permissioned

Bankchain, a clearing and settlement network

Owner group

• Public• Permissionless

Bitcoin, a cryptocurrencyAny user by untrusted

consensus

• Public• Permissioned

Ripple, a global financial transactions system

Trusted ledger owners or actors

by validation


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Different flavors for different use cases

Intra-company space

• Private• Permissioned

• Scattered application landscape of a single corporation / institution.

Inter-company space

• Public / private• Permissioned

• Ecosystem/consortium of actors sharing blockchain utility platform.

End-user space

• Public• Permissionless

• Renders the role of trusted 3rd parties obsolete.


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In the future blockchain will lead towards decentralized, autonomous organisations

Adapted from source: William Mougayar, 2015

Increasing creation compexity & delivery timeframe

Smart contracts

Computer protocols that facilitate, verify, execute and enforce the terms of a commercial agreement. Betting, Inheritance pay-out, P2P insurance, Performance proofs, Escrow

Smart property

Ownership of property is controlled via the blockchain using contracts (car, home, office)

Payments, Tips, Crowdfunding, MicrofinanceCurrency

Identity, Land and property title, Business ownership, Voting, Data storageOther assets

Decentralised Autonomous

Organisations

Entities that fund and manage resources autonomously


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Future predictions


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The blockchain technology will speed up digitalisation

Transaction counterparties trust an autonomous

system instead of trusted 3rd party

Move to digital ownership from physical ownership

Machine controlled autonomous processes will

replace manual processes


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The blockchain technology will provide a platform for next generation connected world

Loosely coupled systems Ecosystem collaboration platforms

Asynchronous and offline processes

Synchronous and real-time processes

Stand-alone blockchains Interconnected blockchains

Local value chains Global value chains


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Blockchain is still in its infancy


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...but the choice to adopt the technology has already been made

•15% of global banks to roll out commercial blockchain products by 2017•Financial and technology firms are investing over $1 Bn to bring blockchain technology to capital markets in 2016

Financial service providers are adopting the technology dramatically faster than initially expected

•+$1.4 Bn venture capital invested in blockchain startups since 2012 ($300M in H1 2016)•Wanxiang’s $30 Bn Smart Cities initiative will be driven by blockchain

Investments are rapidly growing

•Market cap has exceeded $12 Bn (+70% in 2016)•The relative share of Bitcoin continues to decrease (over 90% -> below 80% in 2016)

Cryptocurrency and cryptoasset market surges and diversifies

•Technology platform vendors: Microsoft (Azure), IBM (Bluemix)•Service integrators: Accenture, Deloitte, Tata, Cognizant, Infosys, CGI, Atos …

Major technology vendors and service integrators have entered the market


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Technology is only developed when used

There was no rational reason to use them But they were the start of a revolution!

The early automobiles:• They looked like horse carriages• They didn't go faster• They often had breakdowns• They were a good deal noisier• and a man with a red flag had to go in front

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Markus Hautala

Head of Accelerator ProgramTechnology Services and [email protected]