Evaluating the potential of blockchain technology to radically transform business [Feel free to download the presentation if you'd like to view it offline]

1. Blockchain for Enterprise
Evaluating the potential of blockchain technology
to radically transform business
Floyd DCostaFeb, 2016

2. 2
Source: CoinDesk, Mckinsey and Company
Blockchain technology has swiftly grown in the past few
years alongside the popularity of Bitcoin
Since its launch in 2009 as the underlying technology powering the Bitcoin payment system,
blockchain development has seen a growing number of applications
2009-12
2012-14
2014-
Present
The blockchain – a cryptographic ledger comprising a digital log of transactions shared across a public or
private network – could be one of the most disruptive innovations since the advent of the internet
Early Days
• Blockchain regarded exclusively as backbone to Bitcoin
• Bitcoin only adopted by marginal number of users
• Overall ecosystem seen as experimental and obscure
• Awareness limited largely to cryptographic community
• Broader perception of digital currencies as fad or Ponzi scheme
• Pronouncements by financial industry dismissing potential threats
and opportunities
Turbulence and recognition
• High-profile investments, public interest, “Silk road”
effect put Bitcoin in the spotlight
• High volatility, criminal associations and mis-
conceptions make the Bitcoin ecosystem suspicious
for important players
• Nevertheless, Bitcoin establishes itself as a legitimate
value-transfer vehicle, averaging 50,000 transactions
per day worldwide
• Multiple remittance payment and wallet provider start-
ups emerge
Experimentation
• Dissociation of blockchains from Bitcoin for many players and
increasing sophistication in approach to technology
• Serious interest from regulators (Bank of England, Fed) towards the
technology (not just currency)
• Venture capital and financial institutions see potential disruptive effect
of the technology and invest (e.g., UBS, Santander, Nasdaq)
• High-profile executives join and found start-ups
• Announcements of prospective consortia collaborating to and
common protocols for adoption

3. 3
Source: Gatecoin, CNN Money, Coindesk, CCN.
Sensing opportunity, institutions and regulators are getting
directly involved and experimenting with the technology
The first electronic value transfer protocol Main benefits of Blockchain technology
Open source
value transfer
protocol
Distributed
P2P network
Secure
math-based
system
Financial institutions experimenting Blockchain >USD1bn invested in Blockchain start-ups
IrreversibleCounterfeit
resilient
Auditable
& traceable
Blockchain
Venture
s
Accelerator
Automatic
verification
Investments too continue to grow exponentially, with investors already having poured millions of dollars
into Blockchain related firms.

4. 4
The financial crisis and rising use of cryptocurrencies are
key factors driving the adoption of blockchain technology
Growth in
Cryptocurrencies
Growth Drivers
Blockchain
Technologies
Recognition of
Transformational
Impact
Financial
Crisis
Market at
POC Phase
High interest
from Wall
Street & WEF
Effective
Collaboration
With record US$ 1 billion invested in Bitcoin firms so far,
the underlying technology that powers bitcoin and other
cryptocurrencies is bound to grow
The recent financial crisis led
to a significant loss of
customer trust and increased
regulatory scrutiny. Industry
leaders opine that industries
which integrate blockchain
technology into their core
payments infrastructure will
cut costs, appease
regulators and even reduce
the risk of another crippling
financial crisis
With the market largely at
POC Phase, Blockchain-
based implementations can
replicate or complement
existing infrastructure
The World Economic Forum expects 10% of global gross
domestic product (GDP) to be stored on Blockchain
technology by 2027
Broad recognition of
potential
transformational impact
for financial institutions
with benefits estimated
in tens of billions
annually in infrastructure
savings alone
Blockchain technology
providers have adopted
a collaborative approach
to working with financial
institutions, who
themselves are major
investors
Source: Accenture - Blockchain in the Investment Bank, McKinsey – Blockchain in Capital Markets, Press Releases.

5. 5
Open, secure and decentralized, blockchain technology
can help smartly address many modern day issues
The absence of the need for an intermediary is a key aspect of the technology, providing the
opportunity for an array of network-validated digitized transactions
Source: FT - Banks see the key to blockchain, Consensys, McKinsey – Blockchain in Capital Markets, Press Releases
Blockchain technology can be highly effective in any
venue where trading occurs, where trust is critical, and
where people need protection from identity theft
For example, in Financial Services:
• The technology has the potential to help minimize
counterparty risk, reduce settlement times, improve
contractual term performance and increase
transparency for regulatory reporting
Other sectors; select examples:
• Public sector - managing public records and elections
• Healthcare – medical records; anonymous but easily
available
• Supply Chain - build transparent, ethically minded
and community driven value networks for
provenance & effective supply chain management.
Select Use Cases

6. 6
Blockchain technology could also play a pivotal ‘change-
maker’ role and deliver large scale positive social impact
Source: ImpactGrid.org, Investrata Foundation for Social Entrepreneurship, McKinsey – Blockchain in Capital Markets, Press Releases.
“Virtual currencies and their underlying technologies can provide faster and cheaper financial services, and
can become a powerful tool for deepening financial inclusion in the developing world”
- Christine Lagarde, Managing Director, IMF
Blockchain based applications could help provide financial services to the billions of those
unbanked, unlock new forms of economic value as well as facilitate a host of coordinated social
services in a transparent, secure and decentralized way
Increased
Access to
Services
Micro-
payments
Coordinated
social
services
Select
Examples
Provide financial services to the billions of
people around the world who lack access to
banks and currency exchange — without
having to prove ownership of assets or
meetother qualifications that are challenging
in many countries.
Enables micropayments – that could
unlock whole new forms of economic
value
From coordinating multi-agency
disaster relief and aid efforts to scaling
social support and impact investing,
blockchain technology could provide a
transparent, secure and decentralized
platform to smartly deliver positive
social impact

7. 7
However, challenges remain and continue to hamper
mainstream adoption
Blockchain applications are at the proof-of-concept stage, with areas such as existing market, legal
and operational framework in need of further development
Lack of
Awareness
Lack of awareness
of the technology,
especially in sectors
other than banking
is hampering
investment and
exploration of ideas
Cost &
Efficiency
Speed and
effectiveness with
which blockchain
networks can
execute peer-to-
peer transactions
comes at a high
aggregate cost
Security &
Privacy
Many potential
applications of the
blockchain require
smart transactions
and contracts to be
indisputably linked
to known identities
– thus raising
importantquestions
about privacy and
the security of the
data stored
Regulation
Although there are
volumes of
regulations for the
financial markets,
there isn’t a
regulatory
framework that
defines ‘good
practice’ for the
blockchain
Organization
Organizations are
developing their
own blockchains
and applications –
this defeats the
purpose of
distributed ledgers,
fails to harness
network effects and
can be less efficient
than current
approaches
Culture
It is estimated that a
blockchain is about
80 per cent
business process
change and 20 per
cent technology
implementation –
thus representing a
total shift away from
the traditional ways
of doing things,
placing trust and
authority in a
decentralized
network – this loss
of control can be
unsettling
Other challenges include
cyber-security risk
management, scalability in
question due to block sizes,
role of miners – how to
incentivise, fraud, volatility of
the value, and time taken to
verify the transactions
As the ecosystem evolves and different use cases emerge, organizations across sectors will face a complex
and potentially controversial array of issues, as well as new dependencies
Source: Accenture - Blockchain in the Investment Bank, McKinsey – Blockchain in Capital Markets, Press Releases. Deloitte Report on Blockchain, 2015, Press Releases

8. 8
While market-wide adoption will not happen overnight,
enterprises can assess impact & engage in development
Assess impact and plan
for the long term
Evaluate. Invest in
technology and expertise
related to blockchain.
Secure alignment. Press for
industry-wide change.
Perform Comprehensive
Assessment
Perform a comprehensive
assessment of business,
technology, and the legal
implications of using the
blockchain
Launch a few pilot
projects
Set up a lab. Start small.
Begin with select processes
that could be showcased to
a wider audience to highlight
benefits and prime adoption.
The potential for rapid uptake once open questions are resolved, means all market participants must be
aware of the potential and have a plan in place to respond
The blockchain revolution, in any industry, will require co-operation among market participants,
regulators and technologists.
Source: Institute of International Finance - Banking on the Blockchain, Mckinsey - Beyond the Hype: Blockchains in Capital Markets
Participate in consortia and
work with regulators
Collaborate and work together
to design solutions for specific
use cases and processes .
Form consortia and work with
regulators early in the process.

9. 9
With Blockchain-as-a-Service [BaaS], businesses can
additionally leverage all the benefits of cloud computing
BaaS allows customers to evaluate different Blockchain technologies in a ’fail fast and cheap’
ecosystem as well as the opportunity to mix and match technologies in a Dev-Test sandbox
Here are a few of the many considerations that any
enterprise would need to look into when evaluating
blockchains and associated platforms:
• Security - A good first step is to look at the security of
blockchain systems. Its important to consider the
potential for disruption and the measures for
protection required
• Scalability - The platform should be able to handle
large increase in users, workload or transactions
without undue strain
• Extensibility - How easily can the platform be
extended to have other supplementary
services/applications built on top of it.
• Cost - Identify the different cost components for
starting up and running a blockchain application,
evaluate potential sources of additionalblockchain-
related costs and calculate the impact on Return On
Investment (ROI)
Considerations
Source: CoinnDesk.com, Capgemini - Blockchain: A Fundamental Shift for Financial Services Institutions, Consensys, Ethereum, Microsoft, IBM
• Blockchain-as-a-Service allows businesses to
leverage all the benefits of cloud computing while
evaluating / deploying Blockchain technology
• Flexibility
• Capex-free
• Scalable / Elastic
• Pay as you go
• etc
• …. allowing businesses to
• Spin up a Blockchain network in one click
• Spend less time creating and managing a
blockchain networks and more time designing
and developing apps
• Swiftly pilot and validate use cases
• Rapidly scale and roll out blockchain based
services
Benefits

10. 10
10 Extras

11. 11
It’s important to analyze the existing requirements before
embarking on the blockchain journey
• What is the business case for
implementing a blockchain? How do
we make it pay?
• What are the bottlenecks in the
processes we are replacing with the
blockchain?
• What are the main drivers of cost in
our implementation of the
blockchain?
• Where can we pilot new blockchain
approaches on the edges of our
business?
• Have we thought about impacts on
our strategy organizational structure,
business processes, governance,
talent and legacy systems?
Culture, Cost &
Efficiency
• How do current regulations impact our
application of blockchain?
• What will a regulator want to know
about our application?
• How do we work with the regulator to
bring our application to market?
• How are we applying security to our
application and is privacy a priority?
• Who has access to the ledger and how
is access controlled?
• How are updates to the software or
application agreed and made?
• Have we thought about what our
customers think about our application
beforehand?
Regulations, Security
& Privacy
• Is a blockchain right for my
organization?And, if so, how are we
thinking about applying it and what
would this mean organizationally
and culturally?
• To whom do I turn to in my
organization to explain blockchains?
• With whom do I interact within my
organization to collaborate and
deliver? What are my competitors
and peers saying about blockchain?
• What problems or opportunities
does my organization share with
others in the sector?
• What are the bottlenecks that might
prevent us from working together?
• What are the common standards
we require?
Awareness &
Organisation
Source: Blockchain Enigma. Paradox. Opportunity – Report by Deloitte
It would also be short-sighted to completely discard the existing set up with well established safety
mechanisms and the legal certainty they carry

12. 12
SMEs and large enterprises alike can evaluate, start with
small investments and look to pilot the technology
Step Parameter Considerations
 Security
A good first step is to look at the security of blockchain systems. Its important to consider the
potential for disruption and the measures for protection required
 Decentralisation
The design of protocol with respect to how the actors and participants interact with each other, the
governance and scenario analysis
 Privacy
Consider how the platform protects information that may compromise the privacy of customers
and users – Eg: the platform’s cryptography, tools used to collect, analyse and report, etc
 Scalability
The platform should be able to handle large increase in users, workload or transactions without
undue strain
 Usability
Assess how easily the user can interact with the blockchain. The lesser the effort and friction, the
better
 Extensibility
How easily can the platform be extended to have other supplementary services/applications built
on top of it. Also asses integration capabilities with existing systems
 Cost
Each blockchain application will have a set up and operating expenses. Identify the different cost
components for starting up and running a blockchain application, evaluate potential sources of
additional blockchain-related costs and calculate the impact on Return On Investment (ROI)
 Operational
Impact
Analyse integration points between blockchain solution and existing systems, develop a new
operating model for blockchain. Also assess the need for a new support model
 Community
Support
Take inventory of different community groups, resources and services available for sustained
growth. Note the service models required and available. A risk analysis might be needed.
Before embarking on the journey, businesses should evaluate blockchain technology platforms on a
wide set of parameters – For one: Illustrated below is Capgemini’s 9-step approach
Source: Capgemini - Blockchain: A Fundamental Shift for Financial Services Institutions