4. 4
“
The business value-add of blockchain will
grow to slightly more than $176 billion by
2025, and then it will exceed $3.1 trillion by
2030 ”
Gartner 2017 Report
https://www.gartner.com/doc/3627117/forecast-blockchain-business-value-worldwide
5. WHAT WE ARE GOINGTO COVERTODAY
5
1 2 3
Distributed Ledger and
Blockchain Fundamentals
Blockchain Applications in
Financial Industry
Blockchain and Data
Science
8. Blockchain technology leveraged
decades of computer science
research to create the first
cryptocurrency Bitcoin in 2009.
In the words of Satoshi Nakamoto,
the creator of Bitcoin-
“ I’ve been working on a new
electronic cash system that’s fully
peer-to-peer, with no trusted third
party. ” 8
GENESIS OF BLOCKCHAIN LIES IN CREATINGTRUST AMONG
THE PARTIESWHO DON’T KNOW EACH OTHER
10. 10
WHAT IS A BLOCKCHAIN? (CONT.)
Digital Record Distributed
Like a
traditional
ledger, they
can be record
of anything
Spread over
many
systems
across
different
sites or
geographies
Decentralized
No one in
particular
controls the
ledger it’s the
network that
controls what
happens
Secure
Immutable,
Irreversible
and follows
consensus
mechanism
to add info
Replicated
Each
member of
the network
has full and
identical
copy of the
info
Automated
Actions are
taken based
on the
agreed
criteria
without any
intervention
11. 11
KEY CONSTITUENTS OF A BLOCKCHAIN
Hash
A series of encrypted numbers and letters of a fixed length to create a digital fingerprint
unique to the data or block , as human finger prints are unique. Plays a vital role in
securing the chain.
Public Key
A digital signature in the form of encrypted hash to identify users on the network. This is
known to other users
Private Key
A digital signature in the form of encrypted hash only known to a specific user to validate
and push a transaction on a blockchain.
Mining /
Proof of Work
Computationally intensive part to guess a random number (nonce) and use it to compute
correct hash to add new information as a block.
Block
Contains details about transactions or any data, cryptographic reference to the current
block, previous block, time stamp etc. Several blocks are chained together to create a
blockchain. Any new information is added as a new block, post validation.
12. 12
EXAMPLES OF SOME POPULAR BLOCKCHAIN NETWORKS
Bitcoin
• The very first and the largest blockchain
• Permissionless or Open- Anyone can join the network
Ethereum
• Open Source and Pemissionless
• Popular for the Smart Contracts
Ripple
• Permissioned and used for real time settlement
• Popular for the cross border payments
R3CEV
• Pemissioned and a consortia of 100+ financial institutions
• More focused on financial applications
14. BLOCKCHAINVS DATABASE COMPARISON
• Decentralized and Distributed- Same data
resides on many nodes. Hence no single point
of failure
• Disintermediation and Transparency- Same
view available to all nodes in the chain
• Integrity- Better quality data as information is
validated using consensus mechanism
• Immutable and Append only - All historical
information remains intact and hence more
auditable over a period of time.
• Resource Hungry- Requires high amount of
energy and computing
• Suitable for network-effect and real time
sharing of info among all who have access
14
• Generally centralized and controlled by a
central authority and database
administrators
• Data can be altered or even deleted
• Prone to more errors or poor quality if the
correct information is not fed
• More private and maintains confidentiality
• Generally faster than blockchain
• CRUD (Create, Read, Update, Delete)
• Less suitable for peer to peer transactions
16. 16
“ The Blockchain will do to the Financial
Systems what the Internet did to Media”
– Harvard Business Review
17. 17
BLOCKCHAIN APPLICATION IN FINANCIAL INDUSTRY
P2P Lending
Real Time
Payments
Syndicated
Loans
Capital
Markets
Clearing &
Settlements
P2P Payment
International
Payments
Regulation
and
Compliance
Assets
Ownership
Fraud
Consortium
KYC/KYB Insurance
18. 18
SAMPLE USE CASE- COLLABORATIVE LENDING
• One's trash is another's treasure
• Consortia of lenders where they share reject prospects and loan data with the fellow members on the
blockchain
Idea
• Share reject applications data on a private and confidential blockchain (with customer consent)
where other lenders/investors with different risk appetite and priorities may be able to underwrite
them
• Lenders earn a fee or royalty for each referral
Benefits
• Faster execution and settlement due to digitized loan contracts- Traditional process may take days
by which time customer may not have this need
• Scalable, robust and minimal requirements for manual or software driven validation
Why
Blockchain?
19. 19
SAMPLE USE CASE- SMART CONTRACT LEDWORKING
CAPITAL
• Leverage third parties transaction to provide company’s customers timely cashIdea
• Customer get cash right away rather than waiting for weeks and months
• Newer ways of evaluating “Ability to Pay (ATP)” as we have better visibility of customers businessBenefits
• Near real time execution and settlement due to digitized smart contracts- Traditional process may
take days
• Even the third parties transaction are as transparent and real time as company’s itself
Why
Blockchain?
20. 20
SAMPLE USE CASE- SMART CONTRACT LEDWORKING
CAPITAL (CONT.)
Single Source
of Truth
Triple Entry
Accounting and
Real Time Info
Sharing via
Blockchain
Company
Customer’s
Stakeholders
Company’s
Customer
Cash
Invoices
Info /
Payment
BLOCKCHAIN
22. 22
TOP FIVE BENEFITS OF BLOCKCHAIN FOR DATA SCIENTIST
❶ Data is the King- Access and sharing of large amount of diverse data leads to better models
❷Garbage in, Garbage out- Blockchain’s consensus mechanism fixes many data quality issues
❸ Higher Processing Power- Blockchain based shared computing platform will give the needed boost to the
processing power for churning out more complex model. Example- https://golem.network/
❹ Real-time Analytics- Since each block contains stream of data over a period of time, real time analytics for areas
such as fraud detection is much easier.
❺ Crowd Solutioning- Combining predictive analytics solutions from different sources may address the bias variance
tradeoff and lead to better models.
23. 23
HOWTO ACCESS AND DEVELOP BLOCKCHAIN
APPLICATIONS USING PYTHON
There are many packages/APIs being created in Python and R for blockchain analysis and mining. Some of them
include-
• bitcoin- python [conda install -c auto bitcoin-python]
• Steem [ pip install steem]
• Blockchain.info [ pip install blockchain]
• Populus [pip install populus]
• Etc.
Most of these packages will allow you to do the following and many more activities-
• Build a brand new blockchain and cryptocurrency
• Smart Contract
• Explore data on blockchain- statistics, network details, # of blocks etc.
• Get specific data from blocks
• Proof of Work
• Add new blocks (with appropriate permission)
• Wallet and payment processing
• Etc.
24. 24
SOME KEY SKILLS REQUIRED
• Strong understanding of blockchain platforms such as – Ripple,
Hyperledger, Bitcoin, R3, Corda etc.
• Experience working with distributed databases and computing
• Strong coding experience- Python, Java, C++ etc.
• Keep abreast with latest development, use cases, and
architectural changes
