© Z/Yen Group
2017
Z/Yen Group Limited
41 Lothbury
London EC2R 7HG
United Kingdom
tel: +44 (20) 7562-9562 www.zyen.com
“Mutual Distributed Ledgers (aka blockchains)
For Identity Authentication Infrastructure”
Professor Michael Mainelli
@mrmainelli
BrightTALK Webinar
14 March 2017, London
© Z/Yen Group
2017
♦ Special – City of London’s leading commercial think-tank
♦ Services – projects, strategy, expertise on demand,
coaching, research, analytics, modern systems
♦ Sectors – technology, finance, voluntary, professional
services, outsourcing
Independent Publisher Book Awards Finance, Investment &
Economics Gold Prize 2012 for The Price of Fish
British Computer Society IT Director of the Year 2004 for
PropheZy and VizZy
DTI Smart Award 2003 for PropheZy
Sunday Times Book of the Week, Clean Business Cuisine
£1.9M Foresight Challenge Award for Financial £aboratory
visualising financial risk 1997
Z/Yen
© Z/Yen Group
2017
♦ Distributed ledgers (1995-present)
♦ LIBOR and FX surveillance (2007-present)
♦ PropheZy and VizZy – automation &
visualisation of compliance monitoring
(2002-present)
♦ Prediction markets and bubbles (1998-
present) – www.extzy.com
♦ Market intelligence – Ministry of Defence,
e.g. Vision 2020 (1994-present)
♦ Avatars for Big Data (2010-2012)
♦ Financial £aboratory Club visualising risk
(1997-1998)
Z/Yen Fintech Research
© Z/Yen Group
2017
What Is A Ledger?
“A ledger is a book, file, or other record of
financial transactions.”
[SOURCE: https://en.wikipedia.org/wiki/Tally_stick]
[SOURCE: http://www.rootsweb.ancestry.com/~nygreen2/wpeF7.jpg]
[SOURCE: https://en.wikipedia.org/wiki/Ledger]
© Z/Yen Group
2017
♦ 1976 – Diffie-Hellman, Merkle, RSA
♦ 1990 – Mondex, Digicash, Flooz
♦ 1995 – Z/Yen Stacks & Sleeves
♦ 1996 – Ricardo payment system
♦ 1998 – Wei-Dai b-money, Bitgold
♦ 1999 – LOCKSS & CLOCKSS
♦ 2000 – Gnutella
♦ 2004 – Ripple
♦ 2007 – Estonia
♦ 2009 – Bitcoin
♦ 2012 – Term ‘blockchain’ used
♦ 2013 – Silk Road, FBI, Alderney
coin, Fintech ‘born’
♦ 2014 – Regulators – Jersey &
Alderney, Isle of Man, FATF, ECB,
State of New York
Mutual Distributed Ledger Timeline
♦ 2015 – IBM-Samsung, Bank of
England research agenda, UK budget
for cryptocurrency standards,
Barclays, UBS, BNY Mellon, Goldman
Sachs, USAA, NASDAQ, Honduras
land registry, Channel Islands
Standards for MDLs, Fine (sic) Sign of
having arrived – Ripple $700,000, Sign
of the Tines – Bitcoin forking hell,
Economist Special, FT Special
♦ 2016 – UK government, Blythe
Masters DAH, R3, SafeShare
Insurance, XLRAS, …
© Z/Yen Group
2017
Ledgerage Area Possible Applications Financial instruments, records, models
Currency, private and public equities, certificates of deposit, bonds, derivatives, insurance policies, voting rights associated with financial instruments, commodities, derivatives, trading records, credit data, collateral management, client monies segregation, mortgage or loan records, crowd-funding, P2P lending, microfinance, (micro)charity donations, account portability, airmiles & corporate tokens, etc.
Public records Land and property titles, vehicle registries, shipping registries, satellite registries, business license, business ownership/incorporation/dissolution records, regulatory records, criminal records, passport, birth/death certificates, voting ID, health and safety inspections, tax returns, building and other types of permits, court records, government/listed companies/civil society, accounts and annual reports, etc.
Private records Contracts, ID, signature, will, trust, escrow, any other type of classifiable personal data (e.g. physical details, date of birth, taste) etc.
Semi-private/semi-public records
High school/university degrees and professional qualifications, grades, certifications, human resources records, medical records, accounting records, business transaction records, locational data, delivery records, genome and DNA, arbitration, genealogy trees, clinical trials, etc.
Keys accounts, home, hotel, office, car, locker, deposit box, mail box, Internet of Things, etc. Intellectual property
Copyrights, licenses, patents, digital rights management of music, rights management of intellectual property such as patents or trademarks, proof of authenticity or authorship, etc.
Other records Cultural, historical events, documentary (e.g. video, photos, audio), (big) data (weather, temperatures, traffic), SIM cards, archives, geostamping, etc.
© Z/Yen Group
2017
Smart contract:
“legal contract terms implemented as
executable computer code”
Smart Contracts & Straight-Through
Processing
© Z/Yen Group
2017
♦ ledger – a record of transactions
♦ distributed – divided among several or many, in multiple
locations
♦ mutual – shared in common, or owned by a community
♦ mutual distributed ledger (MDL) - a record of
transactions shared in common and stored in multiple
locations
♦ mutual distributed ledger technology – a technology that
provides an immutable record of transactions shared in
common and stored in multiple locations
♦ blockchain - “a transaction database shared by all nodes
participating in a system based on the Bitcoin protocol”
Terminology Evolving
© Z/Yen Group
2017
Some Of Our MDL Research
© Z/Yen Group
2017
INSERT OTHER
Host details Property details Peroid of cover Policy
cancelled
Reason for cancellation
Premiu
m IPT
From To
First Name
Surname
Unique Refere
nce Address Poscode Address Postcod
e Date Time Date Time 9.50%
John Smith VR000
1 123 Bank
Street EC2V 5AY 54 Woodhill
Lane W17 RQ No £2.00 £0.19
Select £-
Application:
Sharing Economy Broker and Underwriter
© Z/Yen Group
2017
♦ Usable
visualisation, apps, XML partial matching engines
key structures, sprites (smart contracts)
♦ Mutual - validate
validation methods – NPL timing project
‘genetic splicing’ and integrity
♦ Distributed - safeguard
surveillance – support vector machines
transmitting & receiving, high volumes, multiple transmitters
♦ Ledger - preserve
immutability and standards
partial data holding, long-term data storage
Ongoing Research
© Z/Yen Group
2017
MDLs Are Database Technologies
Centralised Databases
Distributed Databases
Mutual distributed ledgers
(unpermissioned)
Mutual distributed ledgers
(permissioned)
Storage Single master Multiple copies
Definition of data
Multidimensional, typically using some approximation to
the relational database design of Codd
Specialised single dimensional for e.g. ownership, amount
Participation Closed Open. New nodes can be freely added.
New nodes added subject to
agreement by core participants.
Rights e.g. for updating of entries
Governed by separate data base management system
Built into the ledger protocol.
Configuration file determines all node
rights to decrypt/ update
Validation of data
Uses ‘proof of work’ or some weighted voting schema such as ‘proof
of stake’
Typically based on confirmation by core participants
Reconciliation of data
Only necessary when data is
moved.
Iterative, trading off consistency against availability
Robustness Historically vulnerable to server failure
Resilient, continues to update even with partial node availability
© Z/Yen Group
2017
? Validate – “a trust model for timestamping”
Safeguard – “a set of rules for updating
state via blocks”
Preserve – “a shared state”
Reducing Natural Monopolies
© Z/Yen Group
2017
No
Trusted
Third
Parties
Single
Trusted
Third
Party
Efficient
Inefficient
Master Node
Supervisor Nodes
Majority Nodes
Collective Nodes
Free for All Nodes
Bitcoin Ethereum
Ripple
Central Database
‘Woven’ Broadcasting
Mistrust Costs Coins
Paper
© Z/Yen Group
2017
Report Conclusions
♦ Ambitious claims for mutual distributed
ledgers and lots of initiatives working on
‘proof of concepts’
♦ Few easy wins:
MDLs and associated standardisation of
data lowers switching costs and potential for
exploiting market power
So there will be resistance from incumbents
♦ Honouring the full promise of mutual
distributed ledgers (and other FinTech)
for existing infrastructure will not come
automatically, easily, or cheaply
© Z/Yen Group
2017
Process Change Difficulty
Technology
Change
Difficulty Asset Transfer
Archiving
Contract Execution
Shared Data Timestamping
Market
Wholesale Payments
Asset Maintenance
Regulatory Reporting
Identity
Deal Rooms
Too Smart By Half?
© Z/Yen Group
2017
Real World Economics Matter
Factor Bitcoin Ethereum Custom
Speed – transactions per second
7 tps 20 to 30 tps >10,000 tps per single transmitter; unlimited transmitters
Storage Fixed Fixed Fixed or Variable
$/transaction $0.10 to $2.50 $0.20 to $5.00 <$0.000001
Validation time circa 10 minutes circa 15 seconds <0.0001 second
© Z/Yen Group
2017
♦ Transaction chain: A distributed ledger that records the creation
keys, the upload of files, sprites, and the use of sprites.
♦ Content chain: A distributed ledger that holds all the uploaded
files
♦ Content key: A key that allows access to a single document
♦ Document ring: A depository for content keys that allow access
to different documents
♦ Document ring key: A key that allows access to a document ring
HEALTHchainZ document ring keys are sprite contracts which allow the
subject to set time and use limitations and to revoke access
♦ Master ring: A document ring that has no parent ring, that is no
other ring holds its KRID or KRIDH
♦ Sub-ring: A document ring that is attached to another ring that
holds its KRID and KRIDH
♦ Sprite: A program written on the transaction chain which when
run will allow access to a file under certain conditions
Definitions
© Z/Yen Group
2017
Subjects
IDchainZ
IDchainZ
Professionals
Certifiers
Health
Documents
Certified
Health
Documents
Document
Ring Key
Payment
Request
Certified Documents
Document Ring Key
© Z/Yen Group
2017
IDchainZ Functionality Summary
1) Interface – User interface / access / administration / billing
2) Keys – Private and public key management
3) C#ASM – On ledger and off ledger content storage and
management
4) Data protection – “Right to be forgotten”
5) Disputes – Arbitration, mediation and expert determination
6) Integrity – Content entry, hashing, cryptography and public keys
7) Validity – Consensus model
8) Scalability – Technical architecture and system management
9) Transparency – Publication and safety (ledger status and trust)
© Z/Yen Group
2017
Load IDchainZ
A – Subject visits Certifier
B – Certifier provides Subject with the key
to their master ring
Certifier uploads:
• certified health documents
• identity documents
Certifier destroys:
• their copies of the original
• their record of the Subject’s keys
© Z/Yen Group
2017
A – Subject visits certifier
Create Master
Ring for
Elizabeth
Windsor
Create Identity or
Health Sub-ring
Upload Certified
Documents
© Z/Yen Group
2017
B – Certifier provides Subject with the key
Certifier Subject
1) Certifier gives Subject the key to their master ring
2) Certifier destroys their copies of the key and the
underlying files?
Master Ring Key:
280d98e3-361f-491b-8631-5c19e942d6d1
Access:
1) by App
2) or https://185.77.66.18:3000/api
Subject
View Files View Ring History
Subject uses master ring key to view the certified files and monitor
activity on the ring
© Z/Yen Group
2017
C – Subject shares Health sub-ring with Inquisitor
Subject
Inquisitor
1) Subject saves selected Identity ring files onto a new sub-ring for the Inquisitor
2) Subject sets time and use limits on the Inquisitor’s ring
3) The Subject sends the Inquisitor the key for this limited access ring
Inquisitor's Ring Key:
2fb41e7e-99cf-4110-aab4-ec401f4fd6c6
Access:
1) by App
2) or https://185.77.66.18:3000/api
© Z/Yen Group
2017
♦ Inquisitor can only see the contents of the Inquisitor’s ring and its
time and use limits
C – Subject shares
Time & Use Limits Identity Documents
© Z/Yen Group
2017
♦ The Subject can monitor access to the ring by the Inquisitor
♦ The Subject can revoke the Inquisitor’s ring
C – Subject controls
© Z/Yen Group
2017
♦ Mutual distributed ledgers help communities
share information across time and space, less
vulnerable to natural monopolies
♦ Mutual distributed ledgers provide persistent
and permanent ‘contract’ utilities:
safeguarding transactions
preserving transactions & data
♦ Immutable identity document exchange may be
the ‘killer app’
… try one out … www.MetroGnomo.com
Closing Thoughts
© Z/Yen Group
2017
♦ http://www.zyen.com/what-we-
do/mutual-distributed-ledgers.html
♦ http://www.idchainz.com
More resources