23 March 2017 | DoubleTree Hotel by Hilton Kuala Lumpur

Watson Malaysia Summit 2017

Blockchain Use

CasesEsra I. UFACIK,

z Systems Lead Architect - IBM Systems, Asia

Pacific

esra@sg.ibm.com

Table of contents

Preface

IBM Blockchain Explained

– Benefits

– How it works

– Blockchain for Business

Introduction to Hyperledger Fabric

Exploring Blockchain Application

& Docker Containers

Blockchain Use Cases

– Early Adopters

– Demo

How to start a Blockchain Project

Federal Reserve

Stress Test

The Stock Exchange

Trade Finance

Foreign Exchange Payments

Assets that Pay

Dividends or Interest

Structured Finance

Banking & Finance Use Cases

Insurance Industry Use Cases

Sales and Underwriting

Claims Processing

and Settlement

Assessment of Possible

Settlement Costs

Regulatory Compliance

Underwriting Expense

Healthcare Industry Use Cases

Patient ProfilePatient Data

Security

Validation & Payment of

Claims

Prescription & Drug

Information

Historical Data – Outcome-

Based Payments

Automotive Industry Use Cases

Supply Chain Markets

Navigating Regulatory Boundaries

Minimizing Vehicle Recalls

Auto Repair & Services

Buying & Selling on The

Secondary Market

Consensus use case – Shared routing codes

How

Each participant maintains

their own codes within a

Blockchain network

Blockchain creates single

view of entire dataset

Benefits

1. Consolidated, consistent

dataset reduces errors

2. Near-real-time of

reference data

3. Naturally supports code

editing and routing code

transfers between

participants

What

Competitors/collaborators in a

business network need to

share reference data, e.g.

bank routing codes

Each member maintains their

own codes,

and forwards changes to a

central authority for collection

and distribution

An information subset can be

owned by organizations

Immutability use case – Financial ledger

What

Financial data in a large

organization dispersed

throughout many divisions and

geographies

Audit and Compliance needs

indelible record of all

key transactions over

reporting period

How

Blockchain collects

transaction records from

diverse

set of financial systems

Append-only and tamperproof

qualities create high

confidence financial audit trail

Privacy features to ensure

authorized user access

Benefits

1. Lowers cost of audit and

regulatory compliance

2. Provides “seek and find”

access to auditors and

regulators

3. Changes nature of

compliance from

passive to active

Finality use case – Letter of credit

What

Bank handling letters of credit

(LOC) wants to offer them to a

wider range of clients

including startups

Currently constrained by costs

& the time to execute

How

Blockchain provides common

ledger for letters of credit

Allows all counter-parties to

have the same validated

record of transaction and

fulfillment

Benefits

1. Increase speed of execution

(less than 1 day)

2. Vastly reduced cost

3. Reduced risk,

e.g. currency fluctuations

4. Value added services,

e.g. incremental payment

Customer Documentation Provenance Use CaseKYC (Know Your Customer)

Customer creates public identity on the blockchain, then puts certain documents to prove identity on the

blockchain.

Customer gives Company A permission to view the documents

– the permission is recorded on the

blockchain.

Financial Services Provider A verifies

identity and signs the person’s identity on the

blockchain.

Customer applies. Instead of filling out all of the forms required, the customer simply permissions the bank to access the verified

identity. The bank trusts Financial

Services Provider A and therefore accepts the identity attestation

and saves on KYC verification cost.

A business network of financial services

providers cooperate to cut down KYC costs in

the long run. Customers are saved from having to enter

thousands of forms in their life.

Stock Exchange use case

Business Architecture:– Trading platform capable of handling 300

participants. Decentralized Peer-to-Peer architecture with nodes consisting of market participants (Banks, Securities Firms).

Client Value:– Reduce operating costs and settlement time.

Improved availability, through distribution of infrastructure

How it will transform the business:– Reduced costs by removing intermediate systems

and processing

End Game:– Listed products trading, clearing and settlements.

An AP Stock Exchange is looking to introduce a Trading Platform for low liquidity equity and bond transactions to replace existing manually intensive approach

Issuers/Investors

AP Stock Exchange

Bank

(Securities)

Bank

(Securities)

• Apply for capital

• Buy/Sell Securities (Equities, Bonds)

Shared Ledger

(Low Liquidity Trading Platform)

• Issue Equities/Bonds

• Buy/Sell Trades

• Pay/Rec dividend/interests

• Clear/Settle Trades

• Manage Platform

Scheduled Personal Property Claims Processing

Dealer

Insurer

Manufacturer

1

2

5, 10

3

4, 7

6

1 Dealer provides custom guitar specification

2 Manufacturer ships to dealer warehouse

3 Buyer purchases guitar online

4 Buyer obtains quote from insurer

5 Insurer adds scheduled item to homeowner policy

6 After 3 policy periods, guitar is stolen and police report filed

7 Buyer files claim

8 Insurer verifies police report

9 Insurer determines payout or replacement

10 Insurer communicates claim determination to insured

Insured

Insurer

Police

Dealer/Buyer

Scheduled Personal Property; Police Report; Claim

1 Serial number, description, photos, etc registered on blockchain when

manufacturer builds guitar

2 Shipping info to dealer warehouse added to blockchain

3 Warehouse inventory control info added to blockchain

4 Electronic payment information is added when guitar is purchased

5 Smart contract initiates quote preparation based on market price to add

scheduled item to homeowner policy

6 Quote accepted and new premium payment info recorded

7 In each policy period, current value of guitar recorded

8 Police report registered by insured on blockchain

9 Claim registered on blockchain, smart contract validates claim using police

report evidence

10 Value determined by limit or tracked value; Payment or replacement

provided; Guitar tracking information updated

Manufacturer

Buyer (Insured)

Police

8

9

Blockchain for government: Building trust, demolishing bureaucracy

Deliver a Differentiated Brand

Experience

Optimize Supply and

Distribution Networks

Collaborate More Effectively with

Channel Partners

Reinvent Processes and Accelerate

Organizational Agility

Supply Chain

Marketing Channel

Operations

Flow of:

Goods

Money

Information

• Traceability

• Product recall

• Fraud

• Global trade

• Order tracking

• Loyalty

• Consumer warranties• Trade deductions / disputes management

• Data sharing platforms

• Internet of things integration

• Paper-intensive operational processes

(e.g. real estate contracts)

Consumer Products and Retail companies can leverage Blockchain in multiple areas of their business

Open, Trusted Product Traceability

Problem

Product recalls cost major $$, time, and brand impacts

Consumers demanding transparency on where and how their products are made.

Governments require more information about corporate supply chains, with penalties for non-compliance

Solution

• Blockchain enables safe digital transfer of property across the end to end supply chain, with full transparency

• Opportunity for additional IOT (sensors, etc.) to add value

Benefits

• verifiable, preventing any party from altering

• efficiencies through greater transparency

• consumers can make informed purchases

• governments get reliable information

Commodity leaves ‘ABC’

Farm. Data from sensors

(time, handling conditions)

Commodity

leaves Processing center @place.

Data from sensors (time, handling

conditions).

Commodity leaves Storage

/Ware house @place.

Data from sensors (time,

handling conditions)

Commodity loaded on

Storage truck.

Data from sensors (time,

handling conditions)

Commodity reaches

Market Center.

Data from sensors (time,

handling conditions)

BLOCKCHAIN

Customer queries Hyper

Ledger to confirm correct

product handling

Parties queries the blockchain before accepting the food to check

handling conditions

Parties writes periodically to the blockchain (Read/Write Access)

Public health centers and

Quality assurance entities

Entities queries Hyper

Ledger to check

mishandling and/or identify

contaminated batches

Supply Chain

Provenance use case – Vehicle maintenance

What

Provenance of each

component part in complex

system hard to track

Manufacturer, production

date, batch and even

the manufacturing machine

program

How

Blockchain holds complete

provenance details

of each component part

Accessible by each

manufacturer in the

production process, the

aircraft owners, maintainers

and government regulators

Benefits

1. Trust increased, no authority

"owns” provenance

2. Improvement in

system utilization

3. Recalls "specific"

rather than cross fleet

Returns; Authenticity/Fraud; Provenance

Problem

Product returns are a significant opportunity area for retail companies

Being able to trace authenticity of a product, and prevent fraud

Solution

• Blockchain enables a clear understanding of digital transfer of property across the end-to-end demand chain

Benefits

Verifiable, preventing any party from altering

Efficiencies through greater transparency

Simplify payments and reversing charges

Ensure smooth consumer process for maximum satisfaction and repeat purchase potential

Source: invesp, 6/23/16

Retailers lost 1.32 Percent of

Revenue to Fraud in 2015, up

94% from 2014

Source: Annual LexisNexis True Cost of Fraud Study

http://www.wsj.com/articles/ibm-pushes-blockchain-into-the-supply-chain-1468528824Article:

Digitization of Order Tracking

Problem

Lack of real time visibility to order status

All entities maintain “ their own version of the truth”

reducing trust on the entire process

Solution

• Blockchain enables digital tracking and audibility

across the value chain

Benefits

• Efficiencies through greater transparency

• Real Time data leading to improved supply chain

Ecosystem: CP Manufacturer, Retailer, Logistics Provider

Supply Procurement / Global Trade Logistics

Problem

Opportunity to improve compliance and performance of suppliers, as well as overall streamline the procurement process

Suppliers looking for simpler process and improved collaboration / visibility; Global synergies in procurement

Solution

• Blockchain enable digital understanding of all aspects of contract, costs, forecasting, inventory, capacity, and payments to improve shared benefit

• The blockchain could act as a distributed, single source of shared truth. Smart contracts can be leveraged to update the state of the transaction, but also be shared among parties

Benefits

1. Verifiable: preventing any party from altering or challenging the legitimacy of the information being exchanged. Increased and shared visibility

2. Efficiencies through greater transparency to complex global supply chains.

3. Improved collaboration between supplier- producer or supplier-retailer

4. Governments can quickly and easily request reliable information from across the supply chain.

5. Efficiencies through full digitization

Diagram Source: IBM Institute for Business Value analysis

Internatial trade demo example: https://www.youtube.com/watch?v=r0LsnzAe1Yg

Contract manufacturing: Real time integration between parties

Problem

A complex eco-system between the CP Mfg., Contract manufacturer, Logistics providers; 3PL’s and raw material suppliers causes transparency delays and disputes to the accuracy of the inventory, production planning and order status

Additionally, opportunities exist to improve leverage in negotiations on behalf of the primary CP

Solution

• Blockchain removes the friction between the trading partners and provides real time information, audit and transparency across the whole value chain

Benefits

• Efficiencies through greater transparency

• Real Time data leading to improved supply chain

• Improved negotiation leverage for ‘primary’ CP (e.g. pricing)

Ecosystem: CP Manufacturer, Contract Manufacturer, Suppliers, logistics companies

CP-Retail Trade Deductions / Disputes management

Problem

• Extremely lengthy process to manage through trade payments

and deductions between CP and Retail

• Currently constrained by tools available, manual work,

disputes

Solution

• Blockchain provides common means allow discrepancies to be

resolved electronically vs. manually through shared ledger,

contracts, and visibility throughout

• Allows companies involved to quickly remediate dispute

Benefits

• Increase speed of resolution

• Speed to payments / increased cash flow

• Improved financials – trust, accuracy, timeliness

Ecosystem: CP Manufacturer ( multiple dept’s), Distributor & Retailer

• Median time to resolve deductions : 90 days

• Average spend on trade: 15-18% of sales

• 80-90% of traditional CPG promotions settle

thru deductions

Source; 2015 Deductions Benchmarkt Survey; Attain Consulting

B2B Commerce – Digitizing Trade between Retailer / Wholesaler / Distributor / Supplier

Problem

B2B interactions between CP-Retailer, CP-Wholesaler (DSD), or

Wholesaler to Partner can be complicated, involving millions of

documents and transaction costs

Likewise, Food Service organizations face similar challenges in a three-

tier distribution network (manufacturer, wholesaler, customer)

Solution

Blockchain provides a shared record of the contract status which is

updated as the purchase and delivery progresses.

Business contracts can be codified to allow two or more parties to

automate contractual agreements in a trusted way.

Benefits

Increased efficiency and transparency across the supply/demand chain

Elimination of extra costs associated with millions of documents

Increased cash flow and cost reduction

Ecosystem: CP Manufacturer, Wholesalers, Suppliers, Retailer, Banks

Problem

• Opportunity to use Blockchain in combination with

Internet of Things (sensors, etc.) to drive visibility and

speed throughout process

• Currently constrained by costs & the time to execute

Solution

• Blockchain provides common means to tie sensor

output into suppliers (e.g. product in a cooler tracked all

the way back to food origin, expiration dates, and price)

• Allows companies involved to quickly remediate / action

Benefits

• Increase speed of execution / action / maintenance

• Reduced costs or reduced spoilage

• Reduced downtime

“The so-called Internet of Things will need blockchains to manage ultimately

trillions of daily transactions. Traditional financial services companies cannot

manage micropayments and settle payments, such as when a factory light

purchases power from a public power auction. The Internet of Everything

needs a Ledger of Everything.” - Harvard Business Review – 5/10/16

Internet of Things networks

Explore Watson IoT with Blockchain

Loyalty programs for merchants

Problem

Opportunity exists for better ‘cross sharing’ of loyalty points

among merchants and participants

Opportunity exists to improve cross-country loyalty for one

brand/company, as well as cross-franchise

Solution

Blockchain enables points to become ‘digital tokens’

Points could be immediately credited and tradable

Benefits

• Increased efficiency and transparency

• Cost reduction to participants

• Consumer benefit in flexibility and better real-time use of

points, resulting in positive brand experience

• Eliminates direct liability on balance sheets for merchants

Deliver a Differentiated

Brand Experience

http://blogs.wsj.com/moneybeat/2015/07/02/bitbeat-how-bitcoin-technology-could-shake-up-the-loyalty-points-business/

Ecosystem: Retailer, CP manufacturers, restaurants,

Smart Refrigerator

What?– Value of connected smart

devices limited by ability to interact with business systems

How?– Blockchain to manage

automated interactions with the external world

– ordering and paying for food to arranging for its own software upgrades and tracking its warranty.

Benefits– business value from connected

technology– efficiencies in network and

supply chains.– status transparent to all network

members

On Line Gaming

What?– Game player wants to trade “gold”

earned in current game for the currency or assets of another game

– Use experience with the current game to put me ahead and not have to start cold in the new game

How?– Blockchain holds tokens of value

shared across on line gaming platform

Benefits– Transparency to game

player, game owners & infrastructure providers

– Efficiencies through elimination of intermediaries

– Increased trust for all involved parties.

More use cases here...Other potential use cases

Securities– Derivative contracts– Securities issuance

Trade Finance– Bill of Lading– Cross-currency payment

Industrial– Manufacturing Process

Government– Government Tender Process– Voting

IOT– Decentralized device registration,

management, and communication– Auto insurance -- e.g., driver habits tracking – Manufacturing provenance– Device-to-device transactions

Retail Banking– Cross border remittances– Mortgage verification & contracts

Public Records – Real estate records – Land Registry– Citizen Identity– Birth/death records, inheritance– Business license and ownership records

Media & Gaming– Micro-payments, Content licensing, Virtual

goods exchange – Digital Rights Management

Cross Industry– Identity Management– Trusting Industry– Capital Asset Management

Table of contents

Preface

IBM Blockchain Explained

– Benefits

– How it works

– Blockchain for Business

Introduction to Hyperledger Fabric

Exploring Blockchain Application

& Docker Containers

Blockchain Use Cases

– Early Adopters

– Demo

How to start a Blockchain Project

Patterns for customer adoption

Compliance ledger

Real-time view of

compliance, audit

& risk data

Provenance,

immutability &

finality are key

Transparent

access to auditor

& regulator

Consortium

shared ledger

Created by a

small set of

participants

Share key

reference data

Consolidated,

consistent real-

time view

Asset exchange

Sharing of

assets (voting,

dividend

notification)

Assets are

information, not

financial

Provenance &

finality are key

High value

market

Transfer of high

value financial

assets

Between many

participants in a

market

Regulatory

timeframes

Blockchain for IBM Global Financing

What

Improve the efficiency of

our commercial financing

business by sharing data in

a secure and transparent

manner on Blockchain

How

Blockchain enables

comprehensive view of key

operational data:

Purchase Order > Transaction

Approval > Shipments >

Invoices > Remittances

Benefits

1. Fewer disputes & faster settlement

2. Reduction in dispute resolution

time: 40+ days to under 10 days

3. Improved capital efficiency; freer

flow of capital

Full Demo on YouTube

Commercial Financing business provides working capital to IT suppliers, distributors and partners through

financing of inventory and accounts receivables

Partners SuppliersIGF

Orders IGF world-wide statistics

4000+Partners and

Suppliers

2.9MInvoices / year

$44BFinanced / Year

$100MCapital tied up

any time!

25,000Disputes /

year

$31KAvg.

disputed

invoice value

44 daysAvg. time to

resolve a dispute

“CLS Netting is a significant step forward

in reducing risk and providing further

efficiencies and resilience across the

global FX market.”David Puth

CEO, CLS Group

Post Trade: Foreign Exchange Payment Netting

The need:

Lack of standardized payment netting process for

trades not settled within current CLS environment

Institutions intervene manually and inconsistently

to complete netting process

Higher costs and increased intra-day liquidity

demands.

Solution:

CLS Group has partnered with IBM

Payment netting service, CLS Netting, for buy-side

and sell-side institutions’ FX trades that are settled

outside the CLS settlement service.

Hyperledger based platform which delivers a

standardized suite of post-trade and risk mitigation

services for entire FX market

Dubai government, companies team up with IBM on blockchain project

Real-time Financial Audit and Compliance Ledger Use Case

Business Architecture:– A shared ledger for asset quality

inspectors. Future step extends ledger access to a variety of external inspectors

Client Value:– Cost effective audit and compliance

process.

How it will transform the business:– An efficient and cost-effective Asset

Quality Review (AQR) process provides real-time, accurate insight on key assets.

End Game:– Full regulatory and audit access in

real-time to all financials. IBM establishes leadership in auto-compliance technologies. Ledger data helps existing IBM Algorithmic Credit and Asset Inspector solutions

Walmart – Food Safety, Supply Chain, Provenance, Pedigree…

FreshTurf, Singapore – logistics app for Federated Lockers Network

Everledger uses Blockchain on IBM LinuxONE™

ADEPT: IBM + Samsung: trustful P2P IoT transactions with blockchain in 2015!

Supply Chain

Smart Object

Retailer

Project ADEPT

IBM + Samsung

1. Autonomous detergent reorder

2. Autonomous power usage negotiation

3. Autonomous service parts reorder

A Samsung W9000 washer participated autonomously in consumables, service and energy marketplaces

+ +

BikeBlockchain – Vehicle registration

Plastic Bankmaking plastic waste a safe and secure digital currency with the power to alleviate global poverty and ocean plastic through an ethically sourced Social Plastic recycling supply chain.

Some Other Public References

Developing application for securities lending using

blockchain to securely trade and transfer assets

logistics / supply chain

Reward points management

Contract Management

novel, digital trade finance instrument

Know Your Customer

supply chain finance

cotton trading consortium

secure, efficient and scalable

exchange of health data

asset custody system

Table of contents

Preface

IBM Blockchain Explained

– Benefits

– How it works

– Blockchain for Business

Introduction to Hyperledger Fabric

Exploring Blockchain Application

& Docker Containers

Blockchain Use Cases

– Early Adopters

– Demo

How to start a Blockchain Project

Car Lease Demo

Blockchain Asset Transfer Demo we will be transferring cars

( …but it could be anything )

bonds

Blockchain Asset Transfer Demo: Disclaimer

Note:

Some of the industry processes are simplified and have been

adapted for demonstration purposes.

For those unfamiliar with the UK car industry:

- A ‘V5C’ is the log book and certificate for a vehicle

- The ‘DVLA’ (Driver and Vehicle Licensing Agency) is the UKs

Regulator

“In house”

(ledger)

“In house”

(ledger)

“In house”

(ledger)

“In house”

(ledger)

Regulators

(ledger)

How do participants typically work today?

(1)

Manufacturer

(2)

Dealership

(3) Leasing Company

(4)

Lessee

(6)

Regulator

Synchronisation is

× Slow

× Error prone

× Multiple ledgers

× Who owns what,

when, could get

confused?

Ownership

Transfer

How could participants work with Blockchain?

(1)

Manufacturer

(2)

Dealership

(2)

Dealership

(3)

Leasing Company

(4)

Lessee

(5)

Scrap Merchant

(6)

Regulator

(3)

Leasing Company

(4)

Lessee

(5)

Scrap Merchant

(0)

Regulator

Shared

Ledger

(1)

Manufacturer

Representing a car using Blockchain technology

“Smart” Contract

Contract

Rules

(Vehicle Template)

• Blockchain “Smart Contract” feature is used to define the

“Vehicle Template”

• Regulator creates an instance of a “Vehicle Template” and

commits it to the Block chain

Rules govern

definition of

vehicle

Vehicle

Template

Instance

(Committed to

Blockchain)

Takes an instance of a

“Vehicle Template” Adds

VIN, Make, Model &

Registration

(0)

Regulator

Takes a “Smart Contract”,

commits it to the blockchain

creating a “Vehicle

Template”

Modelling a Transfer using Blockchain technology(example: Manufacturer -> Dealership)

Vehicle A:

Owned by Manufacturer

Committed to the blockchain TRANSFER

Shared

Ledger

(1)

Manufacturer

(2)

Dealership

Modelling a Transfer using Blockchain technology(example: Manufacturer -> Dealership)

Vehicle A:

Owned by Manufacturer

Committed to the blockchain TRANSFER

Shared

Ledger

(1)

Manufacturer

(2)

Dealership

Demo

1) Changes ownership on

Smart Contract

2) Waits for “Consensus”

Modelling a Transfer using Blockchain technology(example: Manufacturer -> Dealership)

Vehicle A:

Owned by Manufacturer

Committed to the blockchain TRANSFER

Shared

Ledger

(1)

Manufacturer

(2)

Dealership

Demo

1) Changes ownership on

Smart Contract

2) Waits for “Consensus”

Vehicle A:

Now owned by Dealer

Change committed to the blockchain

(consensus achieved)

Vehicle A no longer under Manufacturer controlNote: previous history captured

through blockchain events

LIVE

DEMO

Table of contents

Preface

IBM Blockchain Explained

– Benefits

– How it works

– Blockchain for Business

Introduction to Hyperledger Fabric

Exploring Blockchain Application

& Docker Containers

Blockchain Use Cases

– Early Adopters

– Demo

How to start a Blockchain Project

Blockchain NOW

Supporting serious blockchain deployment!

Hyperledger fabric on

Docker Hub

Fastest development of blockchain solutions

Certified Hyperledger fabric instances

Supported by IBM – available cross platform

High security business

blockchain on Bluemix

Dedicated compute power – isolated partition

Secure key management (FIPS 140-2 Level 4)

Tamper resistant service container

Performance optimized (Operating System & Privacy Services)

Bluemix blockchain

service

Fast blockchain network on Bluemix – also now China

Samples for deployment, customization & usage

Tool support for development and deployment

Deploying Blockchain on Cloud

LinuxONE Community Cloud

IBM is prepared to engage on any level

Let’s talk

Client Center Briefings

Customer visits

Industry Conferences

Blockchain Application demonstrations

Blockchain detailed

Blockchain Exploration Days (IT Focus)

Use Case Exploration Workshop (Business Focus)

First project

Blockchain Garage Engagement:

2-3 day detailed use case workshop using design thinking,

2-8 wk agile application development

Scale

Large Scale deployments supplemented by

Use case expansion, costs and benefits analysis

Design Workshops deployment and integration

Onsite, virtual or in Client Center

Free of charge

Onsite or in Client Center

Free of charge

Face to face

For fee

Face to face

For fee

AND MORE

LIKE THISTHE AIM IS TO BE

LESS LIKE THIS

IBM Design Thinking…

IBM knows blockchain

IBM has amassed a wealth of real experience with scores of real customers across industries

We know that blockchain usage only makes sense if a business network involved, and we’ve experimented with different approaches to network formation

We offer objective advice on what, how, when to build business network

Choice of first use case is critical! Our ideation approach quickly cuts through the hype

https://www.hyperledger.org/news/2017/03/20/3-20-17-forbes-ibm-and-hyperledger-launch-enterprise-ready-blockchain

SummaryBlockchain …

is a shared, replicated, permissioned ledger

technology

can open up business networks by taking out

cost, improving efficiencies and increase

accessibility

addresses an exciting and topical set of business

challenges, which cross every industry

IBM …

supports the Linux Foundation Hyperledgeropen standard, open source, open governance blockchain

delivers an enterprise-grade blockchain service underpinned by the industry’s most secure Linux server

has an easy to access, proven and incremental engagement model giving customers the confidence to get started NOW

Thank You