Investment Interest in Blockchain • Blockchain has the potential to reduce infrastructure cost by up to $20 billion a year. • P2P money Transfer across international borders - segment worth $500 B. • Anderseen Horowitz ( VC firm) has invested over USD $100 million into Blockchain technology • All time Public/VC investment into Blockchain startups - $894 million. • Over 4000 active fintech startups in the NY arena and investment in the sector tripling last year to $12 billion.

1. IBM : Systems Group :: © 2015 IBM Corporation
Making Blockchain Real for
Business
Explained
1
V2.01 29 Oct 15
https://ibm.box.com/BlockExp

2. IBM Blockchain 2015
Investment Interest in Blockchain
• Blockchain has the potential to reduce infrastructure
cost by up to $20 billion a year.
• P2P money Transfer across international borders -
segment worth $500 B.
• Anderseen Horowitz ( VC firm) has invested over USD
$100 million into Blockchain technology
• All time Public/VC investment into Blockchain startups -
$894 million.
• Over 4000 active fintech startups in the NY arena and
investment in the sector tripling last year to $12 billion.
Source – LTP,Finextra

3. IBM Blockchain 2015 Source: Lets talk Payments
Blockchain Adoption – Understanding the Disruption

4. IBM Blockchain 2015 Source: EverisDigital/LTP
FinTech Landscape – Disruptive Forces in Financial services

5. IBM : Systems Group :: © 2015 IBM Corporation 5
Blockchain in a nutshell
Smart
Contract
Smart
Contract
CryptographyCryptographyShared LedgerShared Ledger
ConsensusConsensus
Ensuring secure,
authenticated & verifiable
transactions
Business terms embedded
in transaction database &
executed with transactions
All parties agree to
network verified
transaction
Append-only distributed
system of record shared
across business network
Broader participation, lower cost, increased efficiency
What?

6. IBM Blockchain 2015
BLOCKCHAIN ESSENTIALS

7. IBM : Systems Group :: © 2015 IBM Corporation 7
Business Networks, Markets & Wealth
• Businesses don’t exist in isolation
– Connected to customers, suppliers, banks,
partners etc. through Business Network
– Networks cross geography & regulatory
boundary
• Wealth is sum total of value of goods & services
across business network
– Growth constrained if silo’d or inefficient
• Flow goods & services across business network
is a Market
– OPEN (fruit market, outcry commodities, or
– CLOSED (supply chain financing, bonds)

8. IBM : Systems Group :: © 2015 IBM Corporation 8
Transferring Assets, building Value
• Anything that is capable of being owned or
controlled to produce value, is considered
an asset
– can be tangible or intangible
– value can be converted into cash.
• Cash also an asset.
• Asset examples:
– Cars, value clothes (physical)
– Bonds, securities, repurchase agreements
(intangible)
– Licenses & patents (intangible assets)
– Music, video, games (intangible, digital)

9. IBM : Systems Group :: © 2015 IBM Corporation 9
Participants, Transactions & Contracts
• A participant is a member of a business network
– Customer, Supplier, Government, Regulator
– Usually reside in an organization
– Have specific identities and roles
• A transaction is an asset transfer between two or
more participants, for example
– John gives a car to Anthony (simple)
– John gives a car to Anthony, Anthony gives money to
John (more complex)
• A contract is set of conditions under which
transactions occur, for example
– If Anthony pays John money, then car passes from John
to Anthony (simple)
– If car won't start, funds do not pass to John (as decided
by independent third party arbitrator)
$

10. IBM : Systems Group :: © 2015 IBM Corporation 10
Blockchain in a nutshell
Shared
Contract
Shared
Contract
CryptographyCryptographyShared LedgerShared Ledger
ConsensusConsensus
Ensuring secure,
authenticated & verifiable
transactions
Business terms embedded
in transaction database &
executed with transactions
All parties agree to
network verified
transaction
Append-only system of
record shared across
business network
Broader participation, lower cost, increased efficiency

11. IBM : Systems Group :: © 2015 IBM Corporation 11
When is Blockchain useful?
Many companies are jumping on the blockchain bandwagon, but do not have fully vetted use
cases. Blockchain can work best when ALL of the following conditions are met:
Shared
Database
Transaction
Interaction
Disinter-
mediation
Absence of
Trust
Multiple
Writers
• There is a need for a structured repository of information, whether the data is structured in
spreadsheet like tables or like a filing system
• Databases are modified via “transactions” which represent a set of changes to the database whiuch
must be accepted or rejected as a whole
• Blockchains truly shine where there is some interaction or dependency between the transactions
created by different writers
• Blockchain transactions can be created collaboratively by multiple writers without either party exposing
themselves to risk
• There needs to be a lack of a trusted intermediary or central gatekeeper to verify transactions
• Blockchains enable databases with multiple non-trusting writers to be modified directly
• Transactions can be independently verified and processed by every node which maintains a copy of the
database
• There needs to be a level of mistrust between entities writing to the database
• Mistrust arises between separate organizations, but can also exist within a single large organization,
such as between departments or operations in different countries
• Mistrust means that one user will not accept the “truth” as reported by another user
• There needs to be more than one entity which is generating the transactions that modify the
database
• In most cases the writers will also run “nodes” which hold a copy of the database and relay
transactions to other nodes in a peer-to-peer fashion (but not required)

12. IBM : Systems Group :: © 2015 IBM Corporation 12
Public Network Fabric
Business Adoption Challenges
1. Designed for public network
2. Slow and inefficient
3. Built‐in virtual currency
4. Difficult to push upgrades
5. Heavily forked
6. Lack enterprise support
Private Network Fabric
Business Adoption Challenges
1. Incomplete & usually untested
2. Usually too simple & inflexible
3. Still lack critical enterprise features
such as identity management system
4. Generally lack community support
5. Not standardized
There are two options for building private network for businesses 1) Reconfigure a public network
fabric for private use, or 2) Build on top of a untested private network fabric that’s available
Is blockchain ready for business?

13. IBM : Systems Group :: © 2015 IBM Corporation 13
Industrial Blockchain – IBM’s Perspective
Private & permissioned (not public)
• Private = known set of participants,
known identity
• Permissioned = members need to
fulfill criteria to join
• (Public = open set of participants,
potentially unknown identity)
Privacy through Cryptography
• Transaction privacy
• Participant identity & trading privacy
Appropriate consensus
• Mechanism by which participants
agree on state of shared ledger.
• Public needs heavyweight consensus
for anonymous participants
• Known participants opens up other
forms (e.g. participant bonds)
Compliance & audit
• Current spend can be vastly reduced
• Automated processes possible
What?

14. IBM : Systems Group :: © 2015 IBM Corporation 14
Blockchain vendors – Offer specialization
Each Vendor – Offers Specialization
- Variant trust systems –
Consensus, Mining, Proof of
Work etc.
- Lock into single trust system
- Purpose built infrastructure
components for a specialized
use case
- Design being field tested in
form of POCs.
- Crates fragmented blockchain
models for enterprise.

15. IBM : Systems Group :: © 2015 IBM Corporation 15
How can IBM Blockchain be Different?
How Do we differentiate ?
- Open Design
- Providing flexibility with pluggable
and modular trust system
- Open for specialized blockchains
e.g. Ripple
- Trust Intermediary – a trust system
provisioning layer
- Enterprise blockchain platform
concept
- Separate Business domain with
technology that supports it.

16. IBM : Systems Group :: © 2015 IBM Corporation 16
Blockchain – Transaction Processing vehicle
Enterprise Integration Considerations
- Integration with incumbent SoR
- Compliance and regulatory
requirements
- Data formats – ISO20022, EDI
820 etc.
- Blockchain to enable transaction
processing, and preserve the
enterprise SoR systems.
- Design Intent
- Path of least disruption
- Accelerate Enterprise
adoption

17. IBM : Systems Group :: © 2015 IBM Corporation 17
Our Approach

18. IBM : Systems Group :: © 2015 IBM Corporation 18
Our support for HYPERLEDGER

19. IBM : Systems Group :: © 2015 IBM Corporation 19
InfoGraphic

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Summary
• Disruption – Everywhere there is Friction AND costs.
• P2P Network – Exploit underutilized Capacity
• Business Network – Emergence of New Networks
• New Payment Models – P2P, Virtualized Financial Services, Overlay services
• Discern between Virtual, cyber and Cryptocurrency.

21. IBM Systems Group :: IBM Confidential :: ©2015 IBM Corporation
Thank You!

22. IBM Systems Group :: IBM Confidential :: ©2015 IBM Corporation
Back up

23. IBM Systems Group :: IBM Confidential :: ©2015 IBM Corporation http://www.digifinancegirl.com
Silos of the Financial Services Industry

24. IBM : Systems Group : IBM Confidential :: © 2015 IBM Corporation 24
Summary
1. Blockchain is a shared, replicated ledger technology
2. IBM supports an open standards, open source, open
governance Blockchain
3. Blockchain can open up business networks by taking out
cost, improving efficiencies and increase accessibility
4. Blockchain addresses an exciting and topical set of
business challenges, which cross every industry
5. IBM has an easy to access, proven and incremental
engagement model giving customers the confidence to
get started NOW

25. IBM : Systems Group : IBM Confidential :: © 2015 IBM Corporation

26. IBM : Systems Group : IBM Confidential :: © 2015 IBM Corporation