Demystifying blockchain

BLOCKCHAIN : COMPUTER SCIENCE BIGGEST INNOVATION
Demystifying Blockchain

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Immutable, unhackable, distributed database of digital assets
WHERE DID YOU HEAR IT FIRST?

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SEEMS FAMILIAR?

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Bitcoin is peer-to-peer payment system that enables two parties to
transact without requirement of trusted intermediaries (like Banks,
Exchanges etc) as Bitcoin already is a decentralized & highly
trusted digital
First appeared in 2008 white paper by Satoshi Nakamoto
• It is Crypto Currency that allows parties to exchange value
BITCOIN

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Bitcoin is peer-to-peer payment system that enables two parties to
transact without requirement of trusted intermediaries (like Banks,
Exchanges etc) as Bitcoin already is a decentralized & highly
trusted digital
First appeared in 2008 white paper by Satoshi Nakamoto
• It is Crypto Currency that allows parties to exchange value
BITCOIN

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“[Blockchain] is to Bitcoin, what the internet is to email. A big electronic system,
on top of which you can build applications. Currency is just one.” — Sally Davies,
FT Technology Reporter
HOW BLOCKCHAIN AND BITCOIN?

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GENESIS
A decentralized & shared platform to

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Blockchain is shared, immutable ledger for recording the history of transactions.
• These blocks are stored in linear chain.
• Only one block can be added at a time.
• Every block contains a mathematical proof that verifies that it follows in
sequence from the previous block.
• Nodes that maintain and verify the network are incentivized by
mathematically enforced economic incentives coded into the protocol.
• Eliminates the need for a central authority to hold golden record.
• Keywords are – Consensus, Provenance, Immutability, Finality.
DEFINITION
Cryptographically
Secure
Tried and tested digital
signature technology to
create transactions that
reduce fraud and
establishes trust and
accountability. Shared
Little value within a
single organization.
More the number of
participants, more
streamlined process
will be and greater the
value.
Distributed
More the number of
nodes, more authentic
the ledger becomes
and more resilient the
network becomes.
Ledger
Write once, read many
database. Immutable
record of every
transaction. Mistakes
require compensating
transactions to be
post.

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BENEFITS
Disintermediation
& trustless
exchange
Two parties are able to make an exchange without oversight or intermediation of a
third party, strongly reducing or eliminating counterparty risk.
Empowered
Users
Users are in control of all their information and transactions.
Durability,
Reliability,
Longevity
Transparency &
Immutability
No central point of failure and more resistant to withstand malicious attacks
Changes to public blockchains are publicly viewable by all parties creating
transparency, and all transactions are immutable , meaning they cannot be altered
or deleted.
High Quality Data Blockchain data is completed, consistent, timely, accurate, and widely available.

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BENEFITS
Process Integrity
Users can trust that transactions will be executed exactly as the protocol commands
removing the need for a trusted third party.
Lower
Transaction
Costs
Faster
Transactions
Interbank transactions can potentially take days for clearing and final settlement,
especially outside of working hours. Blockchain transactions can reduce transaction
times to minutes and are processed 24x7.
By eliminating third party intermediaries and overhead costs for exchanging assets,
blockchains have potential to greatly reduce transaction fees.
Ecosystem
Simplification
With all transactions being added to a single public ledger, it reduces the clutter and
complications of multiple ledgers.

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CHALLENGES
Nascent
Technology
Transaction speed, Verification process, and data limits are crucial.
Uncertain
Regulatory
Status
Blockchain faces hurdles in widespread adoption by financial institutions and
Governments unless regulation status remains unsettled.
Large Energy
Consumption
Validating transactions on large networks can take sufficient computing power.
Control,
Security,
Privacy
Cyber security concerns are still there even with private and permissioned networks.
Cost
Tremendous saving in transaction cost and time but high initial capital costs can be
deterrent.
Integration
Concerns
Blockchain will require significant changes or complete replaces of existing
infrastructure.

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Blockchain – Emerging Landscape

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BLOCKCHAIN ADOPTERS

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• DTCC fielded (and successfully tested) a proposal for complete replacement of
its Credit Default Swap (CDS) settlement and reporting infrastructure.
• Australian Stock Exchange is attempting to address changing regulatory
requirements with a blockchain based pilot.
• In technology, media and telecom, 27% of executives said their companies will
invest $5 million or more next calendar year.
• In Consumer products and manufacturing, 42% of executives said their
companies will invest $5 million or more next calendar year.
• In financial services, 24% of firms plan to bring blockchain to production in
2017.
• 55% of blockchain-informed executives at large U.S corporations believe their
company will be at a disadvantage if they did not adopt blockchain.
• Sprint is exploring blockchain technology for Communication carries (backed
by Softbank).
• $1.4 billion were invested in Blockchain in 2016.
GEARING UP..

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Blockchain in Banks

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Blockchain – Applications – KYC and AML Process

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A contract whose terms are recorded in computer language instead of legal language.
• AKA self-executing contract.
• Can be automatically executed by a computing system, such as a suitable distributed
ledger system.
• Helps you exchange money, property, shares or anything of value in transparent,
conflict-free way.
• Defines rules and penalties around an agreement, and also automatically enforces
obligations.
• Being considered for multiple use cases, notably for regulatory compliance, product
traceability, fraud detection and prevention, and also to defeat counterfeit products.
Blockchain – Complementary Innovation
SMART CONTRACTS

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SECTORS EXPLORING SMART CONTRACTS
Financial Services Energy Health
Aerospace &
Aviation
Transport Utilities Agriculture Oil & Gas
Telecommunications Food Pharmaceuticals IT

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ICICI Bank
In partnership with Emirates NBD, exchanged and authenticated remittance transaction messages as
trade finance documents electronically on blockchain in real time. Typical transactions of this type
used to take few days and now were completed in minutes.
Yes Bank
Partnered with IBM and leveraged Hyperledger project to implement multi-nodal blockchain solution
in vendor financing for Bajaj Electricals. They use smart contracts and leveraged IBM Watson
Conversations. The entire process cycle for bill discounting reduced from four days (owing to manual
intervention and transit) to almost real-time.
Axis Bank
Has partnered with Ripple to do pilot transactions for cross-border remittances.
SBI
Formed a consortium (Bankchain) with IBM, Microsoft, Skylark, KPMG and 10 other commercial banks
to tackle bad loans and fraud.
USE CASES IN INDIA

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• Blockchain is not “disruptive” in the sense that it attacks traditional business models with a low
cost solution.
• Blockchain is foundational technology, which has potential to create new foundations for our
economy and society.
• The endgame for Blockchains is not digital currency – it’s digital business flows.
• It may take years or decades before it integrates with our society and economy.
• Progress will be gradual and steady and not sudden.
• Barriers need to be removed and that will not be easy
• Technological
• Governance
• Societal
• Organizational
Concluding remarks

Demystifying blockchain

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