2. 2
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Blockchain and
Distributed Ledger
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5. 5
What people say
“Blockchain” – to describe a wide range
of innovations around blockchain,
distributed and shared ledgers
What it actually means
Distributed ledger technology (DLT)
• a consensus of replicated, shared,
and synchronized digital data
• across multiple sites, countries, or
institutions (nodes)
• public, private or hybrid
• no central administrator or
centralised data storage
BLOCK CHAIN
6. 6
1. “Transactions and assets recorded across multiple
databases…often with a lack of consistency and
confidence about the true position
2. Enormous resources are deployed to reconcile
data and records and ascertain the true position
…while the risks of errors and inconsistencies still
remain
3. Manual reconciliation processes and fact checking
are costly, timely and subject to many errors
between the corporations, counterparties”.
DLT applies best in the following circumstances:
The 21st Century’s
“paperwork crisis”
7. 7The benefits?
Each node validates new information
via cryptographic processes before it
is added to the ledger
Reliable
The same data is stored locally in
every node
Replicated
Distributed means no single point
of failure
Available
Visible to all participants
Transparent
“Source of truth” - impossible to make
changes without detection
Immutable
Any document or asset can be
expressed in code
Digital
Creates trust and reduces cost
10. 10
Traditional Clearing House Fully Decentralised
Reliance on central
intermediary or custodian
Public blockchain model
(e.g. Bitcoin)
Trusted shared ledger
for private consortiums
Hybrid Private Model
The Models
Significantly
compromises confidentiality
Costly and time consuming
13. 13Applications
Replacing its CHESS post-trade cash equities
system with a private, permissioned
distributed ledger system solving two big
problems fractured data and double
spending.
Australian Stock Exchange
Rich variety of trials and concepts underway
Australian banks
Automatic payment upon title transfer or
physical delivery of grain, removing the risk
to growers of buyers becoming insolvent or
having problems with payments.
Agribusiness
• Alternative payment platforms for retail
• Simplifying car buying & leasing enabling
automatic lease payments
• Loyalty programs simplifying settlement
Consumer & industrial
Creates trust and reduces cost
Estonian government using shared ledgers
to verify and manage digital identity
Public sector
Enabling low cost micropayments e.g.
newspaper website charging per article or per
page
Media
14. 14
Blockchain technology is a “solution looking for a problem” - a “completely
backwards” approach to innovation.
Nobody really knows how long it’s going to take to get to [mainstream adoption].
And I think that’s the key for distributed ledger technologies - if they only make it a
little bit better than what we have today, I don’t think any of us are going to be able
to justify the cost, the time, and the effort to bring it to market.
Don’t believe everything you hear about blockchain. It is ridiculously hyped.
If you can solve your problem without distributed ledger technology, continue to do
so. I’ve had people in large organisations say they need to put blockchain in the
business case because that’s how they’ll get the money. Not a good reason.
Cliff Richards
General Manager of Equity Post Trade Services, ASX
Mike Baldwin
Head of Innovation and Implementation, Westpac Institutional Bank
15. 15
A Decentralised Autonomous
Organisation (DAO) whose goal
is to codify the rules decision
making of an organisation:
• eliminating the need for
documents and people in
governance
• creating a structure with
decentralised control
Lessons learned:
• Technical problems in coding
errors plus complexity of
what they were trying to
achieve
• Poor governance
Lessons from DAO
Raised $150m in April 2016
An unknown attacker took $50m
due to coding errors in the
Smart Contract.
16. 16
Critical success factors
1
2
3
4
5
Setting the consortium strategy
Choosing the right shared ledger platform
Choosing the solution design
Planning to mitigate potential pitfalls
Establishing the consortium framework
17. 17
Trial re shipments of cotton abroad - a humidity
monitor inside a cotton container, linked to GPS
technology connected to the "internet of
things", can provide the insurer of the goods and
the buyers with real-time status of the physical
condition of the commodity. .
Linkage to other tech
Internet of Things (IoT) Smart Contracts
Hellosent monitors the condition of French wine
being exported to Singapore, allowing insurers
to receive automatic, real-time data feeds about
the temperature inside the container and
conditions at sea that might spoil the wine
Programmable contracts that automatically
execute on the shared ledger when pre-
defined conditions are met
Self executing and self enforcing
Contracts with standard commercials
models e.g. mortgages, insurance
Some challenges that are being resolved
include interoperability, scaleability and
governance frameworks
18. 18
Do you even need Blockchain?
Do you need a
database?
Does it require shared
write access?
Are writers known and
trusted?
Do you want / need to
use a trusted 3rd
party?
Do you need to
control functionality?
Do you want
transactions to be
private or public?
USE A PUBLIC BLOCKCHAIN USE A HYBRID BLOCKCHAIN USE A PRIVATE BLOCKCHAIN
DON’T USE BLOCKCHAIN
Are writers’
interests unified?
no
yes
no
yes
yes
no
intra firm
inter firm
Where is consensus
determined?
no
no
public
yes
yes
yes
no
private
19. 19
Where to from here?
Overcoming technical challenges –
scaleability and transaction
processing speed
Overcoming challenges
New age of consortium and
collaboration will likely solve the “the
paperwork crisis”
New age
Governance frameworks are developing - e.g.
The CODE (Centrally Organised Distributed
Entity) where a real world governance board
manages real world activities, in parallel with
automated processing (via smart contracts on
the public blockchain).
Governance frameworks
21. 21
References
SLIDE SLIDE TITLE SOURCE
6 21st Century’s “paperwork
crisis”
• Gilbert & Tobin, Private Shared Ledgers, The New Age of the Consortium,
9 November 2016
• “Paperwork Crisis” is sourced from Richard Gendal Brown, R3 Corda:
What makes it different” on Richard Gendal Brown, Thoughts on the
Future of Finance, 25 October 2016
8 Billions of Dollars of
Investment to date
World Economic Forum (WEF), The Future of Financial Infrastructure,
August 2016
10 The Models Gilbert & Tobin, Private Shared Ledgers, The New Age of the Consortium, 9
November 2016
11 Vast number of use-cases George Samman 2016
16 Critical Success Factors Gilbert & Tobin, Private Shared Ledgers, The New Age of the Consortium, 9
November 2016
17 Linkage to other tech AFR, “why trade finance is a good use case for blockchain”, James Eyers, July
25 2016, Cap Gemini, Smart Contracts in Financial Services, 2016
Notas do Editor
Gilbert & Tobin, Private Shared Ledgers, The New Age of the Consortium, 9 November 2016
“Paperwork Crisis” is sourced from Richard Gendal Brown, R3 Corda: What makes it different” on Richard Gendal Brown, Thoughts on the Future of Finance, 25 October 2016
Source: World Economic Forum (WEF), The Future of Financial Infrastructure, August 2016
Source ??
Source: Gilbert & Tobin, Private Shared Ledgers, The New Age of the Consortium, 9 November 2016
Source: George Samman 2016
Source: Gilbert & Tobin, Private Shared Ledgers, The New Age of the Consortium, 9 November 2016
Source: AFR, “why trade finance is a good use case for blockchain”, James Eyers, July 25 2016
Cap Gemini, Smart Contracts in Financial Services, 2016
