lok∙hain - mhi · 2018. 10. 20. · to blockchain or not to blockchain what constitutes billion...

@richieetwaru [RE]

The Audacity To Break Into A New Economic Period

BLOCK∙CHAIN

@richieetwaru [RE]

scope of today’s conversation

v.s.

Bitcoin Blockchain

Just an instance of the blockchain

Requires miners, and personal computing power

Relies on “proof of work”

Where is commerce globally

Understanding blockchain

Where does commerce go next

@richieetwaru

@richieetwaru [RE]

Experience &EngagementEconomic Period2000 - 2020

@richieetwaru

@richieetwaru [RE]

2000 2020

The valley of death

Co

mp

etit

ive

gree

nfi

eld

@richieetwaru

@richieetwaru [RE]

How did we compete before the year 2000?

@richieetwaru [RE]

Price &QualityEconomic Period1960 - 2000

@richieetwaru

@richieetwaru [RE]

1940 2000

The valley of death

Co

mp

etit

ive

gree

nfi

eld

@richieetwaru [RE]

2000 20201960

40 Years 20 Years

@richieetwaru [RE]

What will we compete with after the year 2020?

@richieetwaru [RE]

2000 20201960 2040

@richieetwaru [RE]

What triggers one economic period to another?

@richieetwaru [RE]

@richieetwaru [RE]

2000 20201960 2040

Democratizing Credit

CompressingDistance

IndustrializingTrust

@richieetwaru [RE]

Trust &TransparencyEconomic Period2020 - 2040

BLOCKCHAIN

@richieetwaru [RE]

What is the problem that blockchain solves?

@richieetwaru

@richieetwaru [RE]

We manufacture trust with intermediaries, contracts and familiarity

@richieetwaru

@richieetwaru [RE]

(1) Blockchain reduces the time and cost of verifying data

@richieetwaru [RE]

Drivers license issued001 1996

First speeding ticket002 1997

License renewed003 2001

Stop light violation004 2003

Driving while intoxicated005 2003

License suspended (6 months)006 2003

License reinstated007 2004

Second speeding ticket008 2013

tamper-able data that requires significant effort to decipher if it was tampered with

005 2003

006 2003

007 2004

@richieetwaru [RE]

Drivers license issued001 1996

First speeding ticket002 1997

License renewed003 2001

Stop light violation004 2003

Driving while intoxicated005 2003

License suspended (6 months)006 2003

License reinstated007 2004

Second speeding ticket008 2013

immutable data that requires little effort to decipher if it was tampered with

DMV

NYC Police Dept.

DMV - Online

NYC Police Dept.

NYC Police Dept.

NYS Court

DMV

NJ State Police

@richieetwaru [RE]

this is one of the fundamental mental cornerstones of blockchain

“Trust me, you can trust me.”

“Easily test if I am trustable.”vs

@richieetwaru [RE]

trust new data which were once not worth the investment to manufacture trust around

Data that can be exchanged 1:1 without intermediary

Financial Data

IdentityData

ReputationData

InventoryData

MarketData

AgreementData

CorporateData

@richieetwaru [RE]

(2) Blockchain increases the reach of market consensus and partner

familiarity

@richieetwaru [RE]

DMV

NYCPoliceDept.

NJStatePolice

Richie’s Personal Copy

@richieetwaru [RE]

VSProof of

WorkProof of Stake

@richieetwaru [RE]

this is one of the fundamental mental cornerstones of blockchain

“I need to know you to transact with you”

“Your trustworthiness is publically availablevs

@richieetwaru [RE]

consensus and familiarity with unfamiliar trading partners in intimate ways

New trading partners at low cost and high confidence

Those that I already know and already

trust

Those I already know but don’t really trust

as yet

Those that I don’t know and as a result

don’t trust

Those that I don’t know that I don’t

know as yet

Intra-organizationInter-organization &

intra-industryInter-industry and intra-geographies

Inter-geographies

@richieetwaru [RE]

New data sets that can be trusted at low cost

Unf

amilia

r pa

rtne

rs t

rans

acti

ng in

inti

mat

ely

New information ecosystems

New business networks

New market structures

Blockchain is emerging as the exponential agent for IoTand AI

Blockchain IoT

Internet of Things

@richieetwaru [RE]

IoT Connects things other than computers to the Internet

@richieetwaru [RE]

what are some commercial opportunities from the Internet of Things

ThingsIn MyBody

ThingsOn MyBody

Things I CarryAround

Things Around

My Body

ThingsIn MyHouse

ThingsThat House

Me

ThingsThat

Transport

ThingsThat Help

Commerce

ThingsAt

Work

ThingsThatBuild

DigitalHealth

WearableClothing

ConnectedHomes

Smart Cities& Transportation

SupplyConstellations

IndustrialInternet

InvisibleComputing

Smart Consumer Electronics

ConnectedGovernment

@richieetwaru [RE]

where and how is IoT likely to evolve over time

Internet of dumb things

Internet of chatty things

Internet of obedient things

Internet of useful things

Internet of smart things

WHAT CAN THEY DO

Things that are connected

digitally

Things that can have

conversations

Things that can execute

instructions

Things that can report or trigger events

Things that can engage and add value

WHAT DOES IT FEEL LIKE

Light sensor can only report back

absence or presence of light

Camera connected to a

tall building

Controller that can change the

temperature in a house

Sensor in trunk of car learns from calendar that you are driving to golf game, notices the golf clubs not in trunk

Sensor on mattress or bedroom to know that a

person did not have enough rest at night

WHAT IS AN EXAMPLE

Sensor to see if a light is on or

off

Lens that can report back

remotely what it sees

Thermostat that can be told to

change the temperature in a

house

Network of sensors verifies that golf clubs are still in the garage, and orders a pickup service to bring your

golf clubs to the course

Sensor communicates with admin & calendar, moves an 7AM meeting

to 8AM, and informs alarm clock to allow

human one more hour

@richieetwaru [RE]

New data sets that can be trusted at low cost

Unf

amilia

r pa

rtne

rs t

rans

acti

ng

inti

mat

ely

New information ecosystems

New business networks

New market structures

Blockchain is emerging as the exponential agent for IoTand AI

New-erinformation ecosystems

New-erbusiness networks

Trusted Commerce

@richieetwaru

@richieetwaru [RE]

where does the roadmap potentially lead

Finance Data

Identity Data

Reputation Data

Inventory Data

Market Data

Agreement Data

Cooperate Data

TRUST 1A 2A 3A 4A 5A 6A 7A

CONSENSUS 2A 3B 3B 4B 5B 6B 7B

AUTONOMY 3A 4C 3C 4C 5C 6C 7C

Figure 1: Blockchain Institutional Revolution Maturity Model

@richieetwaru [RE]

2000 20201960 2040

Democratizing Credit

CompressingDistance

SpotlightingFraud

opportunity for new businesses

Experience & Engagement

Trust &Transparency

Price & Quality

Basis ofDifferentiation

50% 25%80%Survival of

Incumbents

SchizophrenicLoyalty

Low LoyaltyTo Untrusted Brands

Loyal to IncumbentBrands

State ofCustomer Loyalty

@richieetwaru [RE]

To Blockchain or Not to Blockchain

There is need for multiple types of companies to be interested in the state of a dataset

Some datasets are only important to one party, or a small fixed number of parties who have worked with each other a long time, hence very clear and trusted processes are in place to enable multiple well-known parties to access the same dataset

Types of companies greater than 25?

Normal distribution of company sizes?

Data equally important to all company types?

TOTAL

1 2 3 4 5 6 7 8 9 10

3-10

Unlikely Likely

01

@richieetwaru [RE]


Multiple parties can write new records to the dataset

While some datasets are viewed by many parties, it may only be written by one party. In some cases, one party writes a part of a complete transaction, and other parties will write the other parts.

Types of companies greater than 10?

Amount of times per day is greater than 12?

Some parties have permissions that others don’t?

TOTAL

1 2 3 4 5 6 7 8 9 10

3-10

Unlikely Likely

02

@richieetwaru [RE]


Each new record is additive, and changes derivatives from the entire dataset

The aggregates derived from the dataset is of primary importance, and said derived aggregates changes with every new record. For example, the price of a stock, each new record is important as it tells the most recent price. While a derived aggregate such as average price over a period of time can be useful, its secondary.

New records can be added daily?

New records create important derived data?

50+% of participants must know derived data?

TOTAL

1 2 3 4 5 6 7 8 9 10

3-10

Unlikely Likely

03

@richieetwaru [RE]


The parties that can write new records may be in competition, conflict, or low trust with each other

If all parties have the same goal, exposure and intent, it may not be a good blockchain use cases, as the behavior of each party is already aligned to good data.

There can be private and public sector involved?

There are large existing intermediaries?

Less that 50% of the parties share common goals?

TOTAL

1 2 3 4 5 6 7 8 9 10

3-10

Unlikely Likely

04

@richieetwaru [RE]


Rules to validate the sanctity of new records can be different from one writing party to another

When records are written, rules are applied (beyond CRUD) such as business rules, or industry regulations and they need to be applied uniformly to each writing party; not left up to interpretation.

Over 50% of rules have changed in 10 years?

Regulations are different in geographies?

Something to be gained by parties breaking rules?

TOTAL

1 2 3 4 5 6 7 8 9 10

3-10

Unlikely Likely

05


What constitutes billion dollar blockchain business cases The core difference between an on-chain business and an off-chain business is the way data is managed. Blockchain is not a raw material such as silicon, plastic, iron or electricity, instead it is a method to manage data. For example, one cannot manufacture an aircraft using blockchain to replace aluminum or leather, instead all of the data that represent how, when and with what the aircraft was built can be put on-chain so that the airline purchasing the aircraft has a trusted dataset longitudinally created on a blockchain by multiple participants and people who manufactured the aircraft. While a dataset like this is possible to assemble today and sell with an aircraft, it is not done because of the complexity of integrating multiple participants and people, and the absence of a method to guarantee that the data representing the aircraft’s manufacturing history was not manipulated before provided to the airline in the time of sale. Providing an immutable history of the how, when and with what of an aircraft at the time of sale is not a billion dollar blockchain business cases. It is a business case for blockchain, but would not create a billion dollar of valuation in the first year if launched. Creating the systems to make sure that data representing the operation of the aircraft continues to be on a blockchain, and the data representing the servicing of the aircraft, accompanied with the performance of its parts and wear and tear can all be easily and in real time uploaded to a blockchain by dozens or hundreds of organizations, machines at airports across the world, airline staff, and passengers is more of a billion dollar blockchain business case. Here this dataset can then be used to determine pricing of a flight (safer airplanes are more expensive to fly in), airline safety and compliance to government agencies, and predictability of breakdown for logistics and preemptive service scheduling are attributes of a billion dollar blockchain business case. This example illustrates that billion dollar blockchain business cases are more likely to be a change in the method of commerce between multiple participants

(private, public, and people) to change the way they use data to trust each other, and the transparency that exist between trading entities in a business ecosystem. But how do we find these business cases? For a long time we have been building businesses as islands in an ocean of opaqueness, and low trust. There are not many good examples (as yet) and no emerging best practice. This paper is an attempt to trigger the revolution to Trusted Commerce.

BBBC Scoring System There are 10 principles of a billion dollar blockchain business case here to be evaluated, and each principle has three questions that can be scored from 1-10. The score range is then between 30-300. Bellow 100 is a dead no. Between 100-200 requires more research and inspection. Anything over 200 can be a billion dollar blockchain business case, the closer to 300 the better.

1. There is need for multiple types of companies to be interested in the state of a dataset a. Some datasets are only important to one party, or a small fixed number of

parties who have worked with each other a long time, hence very clear and trusted processes are in place to enable multiple well-known parties to access the same dataset

Unlikely ß------------------------------------------------------------------à likely

1 2 3 4 5 6 7 8 9 10 Types of companies greater

than 25?

Market sizes of largest company type less than 5X

smallest?

Dataset equally important to each company type?

TOTAL 3-30

2. Multiple parties can write new records to the dataset a. While some datasets are viewed by many parties, it may only be written by one

party. In some cases, one party writes a part of a complete transaction, and other parties will write the other parts.


1 2 3 4 5 6 7 8 9 10 Types of companies greater

than 10?

Amount of times per day is greater than 12?

Some parties have views/perspectives that other

parties don’t have?

TOTAL 3-30

3. Each new record is additive, and changes derivatives from the entire dataset a. The aggregates derived from the dataset is of primary importance, and said

derived aggregates changes with every new record. For example, the price of a stock, each new record is important as it tells the most recent price. While a derived aggregate such as average price over a period of time can be useful, its secondary.


1 2 3 4 5 6 7 8 9 10 New records can be added

daily?

When a new record is added, the aggregate derived is very

important?

Over 50% of the participants need to know about the new

aggregate derived after a new record is written?

TOTAL 3-30

4. The parties that can write new records may be in competition, conflict, or low trust with each other

a. If all parties have the same goal, exposure and intent, it may not be a good blockchain use cases, as the behavior of each party is already aligned to good data.


1 2 3 4 5 6 7 8 9 10 There can be private and

public sector involved?

There are large existing intermediaries?

Less that 50% of the parties share a common stated and

agreed goal/outcome?

TOTAL 3-30

5. Rules to validate the sanctity of new records can be different from one writing party to another

a. When records are written, rules are applied (beyond CRUD) such as business rules, or industry regulations and they need to be applied uniformly to each writing party; not left up to interpretation.


1 2 3 4 5 6 7 8 9 10 Over 50% of rules have

changed in 10 years?

Regulations are different from country to country?

There is financial incentive to be gained by some parties to

break the rules?

TOTAL 3-30

6. Conflicts in records must be resolved to maintain stability in the network of participants

a. In some cases, the life of a dataset can go on while conflicting records, or perspectives on what a record should be are unresolved. When conflicts cannot go unresolved before the next record can be written, you have a good blockchain use case.


1 2 3 4 5 6 7 8 9 10 Conflicts in records can

happen hourly?

Conflicts must be resolved within 24 hours?

When conflicts occur, there is not single person that can

resolve it?

TOTAL 3-30

7. Rules of the network do not change frequently a. The rules that all of the parties on the network have to follow can change

frequently, or infrequently. The more infrequently the rules change, the better blockchain use case you have. Frequent changes in rules can be coded in smart contracts, however this can create unnecessary overhead when compared to a centralized database, as the rules are deployed into the distributed network as well.


1 2 3 4 5 6 7 8 9 10 Rules are clear, published and

agreed on by over 80% of parties?

Rules are changed usually by government/regulatory

trigger?

When rules do change, they are variables to a formula, not

the formula itself?

TOTAL 3-30

8. A single entity deputized to centralized the dataset is not optimal, or not preferred a. In some cases an single control entity or function may be preferred, having said

that, when a single control entity or function is entrusted with the sanctity of important data, the imbalance in power usually breathes fraud


1 2 3 4 5 6 7 8 9 10 A single entity has the power

to cripple an entire organization participating on

the network?

Multiple single entities/intermediaries

currently exist?

When the single entity fails, there is material the history of the network/transactions must be preserved/rebuilt?

TOTAL 3-30

9. The size of the network of participants is large and varies a. When the network participants are known, and fixed, it is easier to establish

contracts and well document processes to maintain the sanctity of a dataset, when this is not the case, it can get very difficult and a blockchain can help


1 2 3 4 5 6 7 8 9 10 The size of the network is

larger than 100 organizations?

There are human “endpoints” considered to be in the network in addition to

organizations?

The network size can vary up or down 25% with a month?

TOTAL 3-30

10. Some data is private to some network participants, and some are public to all a. In many cases, access to a dataset particularly when it changes, and varies by

participant can be a complex and burdensome overhead to manage. Blockchains uses the method of public and private keys to facilitate this at scale


1 2 3 4 5 6 7 8 9 10 Over 50% of companies,

would want over 50% of the data kept private?

There is a need to issue, manage, and revoke the

permission of organizations or human endpoints to have

access to private data?

The public data is important to all organizations and human end points, and should be in real time?

TOTAL 3-30

Author [RE] Richie Etwaru Patron Saint of Trusted Commerce | Blockchain Futurist | Adjunct Professor | Serial Entrepreneur

Richie Etwaru (born January 2, 1976) is an American business executive, author, global keynote speaker, adjunct professor and patent holder who specializes in the next era of commerce termed “Trusted Commerce”. He has held c-level roles at Fortune 500 companies for two decades, and serves as advisor to venture capitalists, startups, governments, academia, and large organizations on transitioning to Trust Companies. Richie’s book Blockchain Trust Companies, Every Company is at Risk of Being Disrupted by a Trusted Version of Itself (2017) is used by universities, consulting organizations, and governments, and his TEDx talk Blockchain Massively Simplified has been viewed almost 1 million times. li: linkedin.com/in/richieetwaru/ t: @richieetwaru e: [email protected]

lok∙hain - mhi · 2018. 10. 20. · to blockchain or not to blockchain what constitutes billion...

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