ibm blockchain explained
TRANSCRIPT
23 March 2017 | DoubleTree Hotel by Hilton Kuala Lumpur
Watson Malaysia Summit 2017
IBM Blockchain
ExplainedEsra I. UFACIK,
z Systems Lead Architect - IBM Systems, Asia
Pacific
Table of contents
Preface
IBM Blockchain Explained
– Benefits
– How it works
– Blockchain for Business
Introduction to Hyperledger Fabric
Exploring Blockchain Application
& Docker Containers
Blockchain Use Cases
– Early Adopters
– Demo
How to start a Blockchain Project
For centuries, global trade has been the single greatest creator of wealth in human history
Barter6000 BCE
600 BCE
Minted coins
Spice trade325 BCE
130 BCE
Silk road
Paper money1000 CE
1397 CE
Banking1776 CE
Capitalism
Globalization1986 CE
Imperial trade1500 CE
“Market friction: An inability of capital, labor and technology to move
forward to create economic success.” –Adam Smith, The Wealth of Nations, 1776
Source: See speaker notes
Institutions and instruments of trust emerged to reduce the risk inherent in business transactions
1776 CE
Capitalism1397 CE
Banking
1750 BCE
Hammurabi code
Barter6000 BCE
Spice trade325 BCE
130 BCE
Silk road
Paper money1000 CE
Globalization1986 CE
Imperial trade1500 CE
600 BCE
Minted coins
1300 CE
Letters of credit1952 CE
Uniform Commercial
Code (UCC)
1995 CE
Trade Agreements (WTO)New innovations in trust
Source: See speaker notes
Technology innovations helped overcome distance and inefficiencies in the era of modern capitalism
1837
Telegraph
New innovations in technology
Capitalism1776
Industrial Revolution1820
1837
Telephony
Commercial Aviation1938
1950
Credit cards
Globalization1986
1981
PC
1989
Internet
Social Media2006
2009
Bitcoin
1994
Mobile
Source: See speaker notes
Today’s asset transfer processes can be inefficient, expensive, vulnerable
Party D’s records
Party A’s records
Bank records
Party C’s records
Party B’s records
Auditor records
A mechanism for “digital trust” is required
Consensus, provenance, immutability, finality
Shared, replicated, permissioned
Party D’s records
Party A’s records
Bank records
Party C’s records
Party B’s records
Auditor records
Table of contents
Preface
IBM Blockchain Explained
– Benefits
– How it works
– Blockchain for Business
Introduction to Hyperledger Fabric
Exploring Blockchain Application
& Docker Containers
Blockchain Use Cases
– Early Adopters
– Demo
How to start a Blockchain Project
Blockchain defined
Blockchain is a design
pattern made famous by
its use in Bitcoin. But it’s
uses go far beyond.
Blockchain can reimagine
the world's most fundamental
business interactions and
open the door to invent new
styles of digital interactions.
IBM is adopting Blockchain
to a very broad range of
business applications
Total Bitcoin opportunity
Total Blockchain opportunity
Blockchain is a technology for a new generation of transactional applications that establishes trust, accountability and transparency while streamlining business processes. Think of it as an operating system for
interactions. It has the potential to vastly reduce the cost and complexity of getting things done.
Blockchain 101
Blockchains shift the paradigm from
information held by a single owner to the
lifetime history of an asset or transaction
Instead of messaging-based
communications, the new paradigm is
state-based: Information that was once
obscure now becomes transparent
Blockchains use a replicated ledger shared by all participants
Source: IBM Institute for Business Value analysis
©2016 IBM Corporation
Cryptographically secure, the shared
ledger is updated by consensus and
becomes an immutable and indelible
record of all transactions
Transactions are validated by consensus and become indelible records of the transaction
Participants
share a ledger
that is updated
with every
transaction
Source: IBM Institute for Business Value analysis
Full transformation value kicks in when a variety of industries and activities come together
Supply chains are prime examples of
blockchain’s potential for transformation that
spans industries
The value derived from something as
fundamental as a blockchain-enabled bill of
lading ripples out beyond the port of entry to
span many industries
Source: IBM Institute for Business Value analysis
“Blockchain is a team sport”
Jerry Cuomo, IBM Fellow & VP Blockchain Technologies
“Blockchain is the Sharpie® for the
Internet”John Wolpert, IBM Blockchain
Operating Director
“Banks Need to Form Consortiums For Blockchain to
Work”Deloitte
Some Quotes on Blockchain
How Blockchain Will Change Your Life?
“The blockchain will do for transactions what the internet
did for information”Ginni Rometty, IBM CEO
“Blockchain Is Foundational, Not
Disruptive”Harvard Business Review
“A parallel foundational technology is distributed
computer networking technology, seen in the adoption of TCP/IP”
Harvard Business Review
Table of contents
Preface
IBM Blockchain Explained
– Benefits
– How it works
– Blockchain for Business
Introduction to Hyperledger Fabric
Exploring Blockchain Application
& Docker Containers
Blockchain Use Cases
– Early Adopters
– Demo
How to start a Blockchain Project
Blockchain benefits
Saves time
Transaction time
from days to near
instantaneous
Removes cost
Overheads and
cost intermediaries
Reduces risk
Tampering, fraud
and cyber crime
Increases trust
Through shared
processes and
recordkeeping
Blockchain Will Become ‘Beating Heart’ of the Global Financial System
Blockchain Promise…
Table of contents
Preface
IBM Blockchain Explained
– Benefits
– How it works
– Blockchain for Business
Introduction to Hyperledger Fabric
Exploring Blockchain Application
& Docker Containers
Blockchain Use Cases
– Early Adopters
– Demo
How to start a Blockchain Project
Blockchain underpins Bitcoin…
First Blockchain application
But
Blockchain
is not
Cryptography 101
23 Feb 2017'First ever' SHA-1 hash collision calculated. All it took were five
clever brains... and 6,610 years of processor time *
Samplesentencetoexplain
howSHA256works
Samplesentencetoexplain
howSHA256works.
79e8a584005254f7717547b5829fd01fa6c6831bd92a2d28c93305636c71b499
c19617618972f1dc643b2bb7075c7cac
ac3aea970581ca5c6ec30aee59a74c07
Extradot
Inputdata
Hashvalue(32bytes)
Hashing Hashing
Confidentialtexttobesecuredbyencryption a66b311c9b158c1e55d4e6cc555016d2e554ac….
Encryption
Confidentialtexttobesecuredbyencryption
Decryption
PrivatekeyrecipientPublickeyrecipient
2100f86450888dc01725af78a0e70415… 2626043be7d913ff5d8520b39253eef6240e31d…
Encryption
2100f86450888dc01725af78a0e70415…
PublickeysenderPrivatekeysender
Hashofdatatobesecured Hashtobecheckedwithoriginaldata
Decryption
Hashing Guarantees integrity of data
Encryption Guarantees confidentiality of data
Digital signature Guarantees the authenticity of the sender of data
How it actually works
1. It all starts with one node
4. Users submit transactions
2. Each node has the shared ledger
5. Consensus and leader election
3. Nodes form a peer network
6. Execution & Recovery
Each block has a digital fingerprintof the previous block
Has an Owner Issues Transaction
ID = Digital Cert Copy of Ledger
Sign Transactions
Answer Validated
UpdateA = 100
ThenA=10
NowA=100
Blocks
Shared Distributed Ledger – Blockchain
Block 1575
Transaction: Hash: 76f0ec56ce04423
Block Hash: 0000057ec2fda71
Block 1574
Transaction: Hash: 8d0df86ffc15cd62
Transaction: Hash: feb359ad27c907d
Previous Block Hash:000000d68b2f0a3b
Previous Block Hash00000057ec2fda71
Block Hash:0000087ea2ffe94
Block 1576
Previous Block Hash0000087ea2ffe94
Block Hash:0000044bf2efe32
Made up of a series (chains) of blocks added in chronological order Transactions are recorded in each block
Proof of Work - Consensus For Public Blockchains
Proof of Work asks for nodes to demonstrate they have burned CPU in order to win the right
to create the next block
Mining is usually the process by which this proof occurs
Nodes attempt to solve mathematics problems
Called ‘miners’ because they receive payment for being the first to solve a problem.
Hash functions make it easy for other nodes to validate solutions
– Difficult to find (Brute Force)
– Easy to Check
Very CPU intensive process!
Consensus
Node
Node
NodeNode
Node
Distributed to all nodes by Peer2Peer
Smart ContractShared Ledger
Block
Hash
Regulator1. Manufacturer
2. Dealer
3. Lease Company
4. Lessee
5. Scrap Merchant
Node
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Create V5C(Send transaction)Proof of WorkDiscover nonce!
OK
OK
OKOK
V5CData
Owner: Regulator
VIN:
Make:
Model:
Method Create
Transaction
Create V5C
Create BlockConsensusCreate V5C(Execute transaction)
635840321837
000000012345
OK
Block
Hash
Transfer V5C(Send transaction)
Hash of TX
nonce
OK
Proof of Work
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Timestamp
759710275638
000000067890
Discover nonce!Create BlockConsensus
OK
OK
OKOK
OK
OK
Transfer V5C(Execute transaction)
Block
Hash
Manufacturer
Transfer
Update V5C(Send transaction)
Transaction
Update V5C
Proof of Work
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Hash of TX
nonce
Discover nonce!Create Block
Hash of TX
nonce
Timestamp
387291845274
000000037648
OK
OK
OKOK
OK
OK
Consensus
Update
123
Alfa Romeo
MiTO
Update V5C(Execute transaction)
Shared
LedgerSmart
Contract
Transaction
Transfer V5C
Timestamp
Management Entity None Multiple Organizations Single Organization
Network Type Public Consortium Private
Participants
Free Permissioned
Anonymous, could be
maliciousIdentified and trusted
Consensus Mechanisms
Mining
(Proof-of-Work) Voting / multi-party consensus algorithm
• Large energy
consumption
• No finality
• 51% attack
• Lighter, faster
• Low energy consumption
• Enable finality
Transaction Approval
FrequencyLong (e.g., 10 min) Short (100x msec)
Use Cases Crypto CurrencyTransactions in business networks, e.g., cross-
border payment, securities transactions, etc.
Comparison of consensus approaches
In business use, it is important the the platform supports different consensus mechanisms depending on the use case
Table of contents
Preface
IBM Blockchain Explained
– Benefits
– How it works
– Blockchain for Business
Introduction to Hyperledger Fabric
Exploring Blockchain Application
& Docker Containers
Blockchain Use Cases
– Early Adopters
– Demo
How to start a Blockchain Project
Industrial Blockchain Characteristics
Confidential
permission
control
Private
un-linkable identity
Shared
single source of truth (ledger)
Secure
tamper proof
Auditable
prove identity &
ownership
Scalable
architecture
What is required to make blockchain ready for business?
Shared ledger
Append-only
distributed system of
record shared across
business network
Smart contract
Business terms
embedded in transaction
database and executed
with transactions
Privacy
Ensuring appropriate
visibility; transactions
secure, authenticated
and verifiable
Consensus
All parties agree to
network verified
transaction
Broader participation, lower cost, increased efficiency
Building a blockchain for business – details matter
Permissioned network
Collectively defined
membership and access
rights within your
business network
Confidential transactions
Gives businesses the
flexibility and security to
make transactions visible to
select parties with the
correct encryption keys
No cryptocurrency
Does not require mining
and expensive
computations to assure
transactions
Programmable
Leverage the
embedded logic in
smart contracts to
automate business
processes across
your network
Table of contents
Preface
IBM Blockchain Explained
– Benefits
– How it works
– Blockchain for Business
Introduction to Hyperledger Fabric
Exploring Blockchain Application
& Docker Containers
Blockchain Use Cases
– Early Adopters
– Demo
How to start a Blockchain Project
Thank You