Tag Archives: citychain17

What Blockchain Means (Part 2)

Our first post covered the morning sessions on blockchain at the #CityChain17 event organized by MBN Solutions and held at IBM’s spacious SouthBank offices. Our next speakers focused more on applying the technology in your business.

So, here are some more reflections from listening to those speakers, together with blockchain resources that I hope you’ll find useful.

How to get from concept to implementation

First up was Peter Bidewell (CMO of Applied Blockchain). Complementing the earlier technology detail, he unashamedly emphasized engaging the wider business, especially senior leaders (a popular topic for this blog).

He emphasized that his firm was finding real business uses for the technology and that it specialized in the “smart contracts” capability of blockchain.

The benefits of blockchain that he is seeing as more relevant for business clients are:

  • Tamper-proof actions/events
  • Peer-to-peer (avoiding cost of intermediaries)
  • Innately secure (built-in encryption and consensus)
  • Pre-reconciled data (automatically synchronized)
  • Smart contracts

But to apply this technology in business he has found the company needed to develop a number of other augmentations/supporting capabilities. This includes a blockchain “mantle” with:

  • Platform-agnostic implementation of blockchain
  • Data-privacy “capsule” used within the chain
  • Identity management service
  • System performance improvements

See also: What Blockchain Means for Insurance  

In addition to that “enhanced blockchain” capability, real world business applications have required a “full stack” of technologies:

  1. Blockchain (of choice)
  2. Mantle (the above enhancements)
  3. Integration with other key business systems
  4. Front-end (user experience, or UX)

Bidewell explained that a smart contract has nothing to do with replacing lawyers. Rather, it is a container of data and code (a block that can be placed on the chain/shared-ledger/network. It can contain:

  1. Data
  2. Permissions
  3. Workflow logic
  4. Token (if simulating passing of funds)

He finished by sharing some interesting applications. His company is working with Bank of America. Appii, Nuggets and SITA.

The first of those is perhaps the most relevant for readers. BABB is to be the first blockchain-based bank, “an app store for banking.”

The Appii pilot is also interesting, as it enables a sort of verified LinkedIn or CV (with qualifications/experience validated by providers). But the example that sticks in the memory best is real-time drone regulation for SITA; the world’s first blockchain-based registry of what all drones are:

What’s the path to mainstream adoption?

Acknowledging the emerging reality at this event (that commercial blockchain case studies are still in pilot stage), our next speaker shared his experience and thoughts on making greater progress.

Brian McNulty is a founder of the R3 Consortium (mentioned in part one). This is the world’s largest blockchain alliance, with more than 70 major financial services firms and more than 200 software firms and regulators already members.

R3 – Consortium Approach from R3 on Vimeo.

What does R3 do? Well, apparently it collaborates on commercial pilots. It also provides labs and a research center to support organizations during their innovation. R3 has its own technology (R3 Corda implementation) and own “path to production” methodology. So, perhaps some resources worth checking out.

Akin to what we have learned for customer insight and data science pilots, McNulty confirmed that the path to mainstream adoption will be a “burning platform.” What story will make the case for such an unacceptable status quo that organizations must make the leap to blockchain (to avoid the flames)?

He suggests a few pointers:

  • Collaboration is increasing, adding complexity;
  • The appetite of regulators in increasing, as they grasp the benefits of pushing for distributed ledgers as market solutions;
  • More work is needed on standards (but the dust is settling, and competition is reducing)
  • Will we get to cash on the blockchain? (probably more a move to digital assets on ledger being counted as monetary assets)
  • The real burning platform will probably be increased operating costs (currently $2.6 trillion annually, with blockchain promising 20% savings)

Despite all that, McNulty confirmed that most businesses are still only at pilot stage. But, apparently, some FS firms are having IT developers trained en masse (so that blockchain can be considered as just another technology option to meet business requirements).

Bursting the blockchain hype bubble

Next was a man who should seriously consider a second career in stand-up comedy. Dave Birch is innovation director for Consult Hyperion. He gave a hilarious comedy session on the hype around blockchain.

Using just genuine newspaper headlines, he revealed how blockchain is apparently the answer for every industry, transforming everything from banking to burgers and healthcare and ending global poverty. As an aside, he shared the amusing story of how Amex was conned during the “Great Salad Oil swindle” of 1963.

He used that as analogy to the crucial issue of how not to get swindled by hyped blockchain claims. The key, it appears, is to always ask: What’s in the blocks?

Birch also shared his four-layered model of a shared ledger:

  1. Contract (smart contract built upon)
  2. Consensus
  3. Content
  4. Communications (robust)

He described the lower three as a “consensus computer.” He also introduced a taxonomy of blockchain implementations. This was divided into a simple binary tree built on two layers of questions:

  • Is it a public or private ledger?
  • Is it permissioned or double-permissioned?

If you think about it, a shared ledger is really a practical example of the much talked about RegTech. Dave pointed out that a shared-ledger solution would have uncovered the Great Salad Oil Swindle, because the macro production numbers would have been unbelievable. A lot of the hype is misguided, because blockchain can’t fix individual problems, but it can spot systemic errors.

An interesting analogy he shared was an old idea of best way to avoid bank branch robberies. At the time when lots of architects were suggesting military-like protections for staff and vaults, one radical turn of the century designers suggested the opposite: a bank built mainly of glass. If everyone can see what is going on, the bank robber has nowhere to hide.

That is the principle of blockchain, the power of radical transparency. So, businesses may get more value thinking how to radically redesign, rather than just reengineer, existing database solutions into a blockchain app.

See also: Blockchain: What Role in Insurance?  

Getting back to the customer benefit of blockchain

Our final speaker brought us back to that emphasis during panel session – what is in it for the customer? (A topic that is preaching to the choir on this blog.)

Peter Ferry, commercial director at Wallet Services, suggested that blockchain is gradually becoming an invisible technology option. The focus will return to customer needs and business requirements, with IT departments worrying about when blockchain is the right technology solution for needs.

But when would it be relevant? How can blockchain make our lives simpler?

As Ferry rightly pointed out, the development of the internet and today’s digital applications should be a warning. Mostly, digital technology has not made our lives simpler; if anything, they are more complex and demanding. The internet has developed differently than was originally dreamed (distributed and robust network for military purposes).

Blockchain can potentially do a lot for customers, including: security by default, sovereignty of their own data and no single point of failure. Customer-focused design principles have to be applied to this enabling technology to deliver real value.

So, there is a strong case for customer insight teams to partner with blockchain development teams to help enable this.

For its part, Wallet Services used this event to launch its enabling technology. SICCAR can be thought of as Blockchain as a Service, including APIs, services and pre-fabricated business use cases. Might be worth checking out:

How will you approach the potential of blockchain for your business?

I hope this post was also useful, giving you food for thought and some useful resources/contacts.

Where are you on this journey? Are you still learning about blockchain?

Do you have plans to partner with blockchain development team? Are you already using customer insight to guide blockchain pilots?

If so, please let us know what’s working for you or any pitfalls to avoid (using the comments section below).

What Blockchain Means for Analytics

I recently had the pleasure of attending #CityChain17 (blockchain conference) at IBM’s SouthBank offices.

Chaired by Paul Forrest (chairman of MBN Solutions), the conference was an opportunity to learn about blockchain and how it is being applied.

In the past, I viewed the hype about blockchain (following excitement about Bitcoin its most famous user) as just another fad that might pass.

However, as more businesses have got involved in piloting potential applications, it’s become obvious that there really is something in this – even if its manifestations are now much more commercial than the hacking by Bitcoin fans.

CityChain17 brought together a number of suppliers and those helping shape the industry. It was a great opportunity to hear voices, at times contradictory,and see what progress has been made toward mainstream adoption. There was so much useful content that I made copious notes and will share a series of two blog posts on this topic.

So, without further ado, as a new topic for our blog, here is part 1 of my recollections from this blockchain conference.

Introducing blockchain and why it matters

The first speaker was John McLean from IBM. He reviewed the need that businesses have for a solution to the problem of increasingly complex business and market networks, with the need to securely exchange assets, payments or approvals between multiple parties. He explained that, at core, blockchain is just a distributed ledger across such a network.

In such a scenario, all participants have a regulated local copy of the ledger, with bespoke permissions to approve blocks of information.

However, he also highlighted that today’s commercial applications of blockchain differ from the famous Bitcoin implementation:

  • Such applications can be internal or external.
  • Business blockchain has identity rather than anonymity, selective endorsement versus proof of work and wider range of assets vs. a cryptocurrency.
  • Blockchain for businesses is interesting because of the existing problems it solves. Broader participation in shared ledger reduces cost and reconciliation workload. Smart contracts offer embedded business rules with the data blocks on the ledger. Privacy improves because transactions are secure, authenticated and verifiable. So does trust because all parties are able to trust a shared ledger – all bought in.
  • Several sectors are currently testing blockchain implementations, including financial services, retail, insurance, manufacturing and the public sector.

Finally, John went on to outline how IBM is currently enabling this use of blockchain technology (including through its participation in the Hyperledger consortium and its Fabric Composer tool).

See also: 5 Main Areas for Blockchain Impact  

Comparing blockchain to databases, anything new?

As someone who was involved in the early days of data warehouses and data mining, I was delighted to hear the next speaker (Dr. Gideon Greenspan from Coin Sciences) talk about databases. Acknowledging that a number of the so-called unique benefits of blockchain can already be delivered by databases, Gideon began by suggesting there had been three phases of solutions to the business challenges of exchanging and coordinating data:

  1. Peer-to-peer messaging
  2. Central shared database
  3. Peer-to-peer databases

He had some great examples of how the “unique benefits” of blockchain could be achieved with databases already:

  • Ensuring consensus in data (B-trees in relational databases)
  • Smart contracts (the logic in these equal stored procedures)
  • Append-only inserts (database that only allows inserts)
  • Safe asset exchanges (the ACID model of database transactions)
  • Robustness (distributed and massively parallel databases)

Even more entertaining, in a room that was mainly full of blockchain advocates, developers or consultants, Gideon went on to list what was worse about blockchain vs. databases:

  • Transaction immediacy (ACID approach is durable, but blockchains need to wait for consensus)
  • Scalability (because of checks, blockchain nodes need to work harder)
  • Confidentiality (blockchains share more data)

After such honesty and frankly geeky database technology knowledge, Gideon was well-placed to be an honest adviser on sensible use of blockchain. He pointed out the need to consider the trade-offs between blockchain and database solutions. For instance, what is more important for your business application:

  • Disintermediation or confidentiality?
  • Multiparty robustness or performance?

Moving to more encouraging examples, he shared a few that have promising blockchain pilots underway:

  1. An instant payment network (using tokens to represent money, it’s faster, with real-time reconciliation and regulatory transparency)
  2. Shared metadata solution (as all data added to the blockchain is signed, time-stamped and immutable – interesting for GDPR requirements, even if the “right to be forgotten” sounds challenging)
  3. Multi-jurisdiction processes (regulators are interested)
  4. Lightweight financial systems (e.g. loyalty schemes)
  5. Internal clearing and settlements (e.g. multinationals)

But a final warning from Gideon was to be on the watch for what he termed “half-baked blockchains.” He pointed out the foolishness of:

  • Blockchains with one central validator
  • Shared state blockchains (same trust model as a distributed database)
  • Centrally hosted blockchain (why not a centralized database?)

Gideon referenced his work providing the multichain open platform, as another source for advice and resources.

Blockchain is more complex, hence the need for technical expertise

A useful complement (or contradictory voice, depending on your perspective) was offered next. Simon Taylor (founder of 11:FS and ex-Barclays innovation leader), shared more on the diversity of technology solutions.

Simon is also the founder of yet another influential and useful group working on developing/promoting blockchain, the R3 Consortium. He credits much of what he has learned to a blogger called Richard Brown, who offers plenty of advice and resources on his blog:

One idea from Richard that Simon shared is the idea that different technology implementations of blockchain, or platforms for developing, are best understood as being on a continuum, from more centralized applications for FS (like Hyperledger and Corda) being at one end and the radically decentralized Wild West making up the other end (Bitcoin, z-Cash and Ethereum). He suggests the interesting opportunities lie in the middle ground between these poles (currently occupied by approaches like Stellar and Ripple).

Simon went on to suggest a number of principles that are important to understand:

  • The shared ledger concept offers better automated reconciliation across markets.
  • But, as a result, confidentiality is a challenge (apparently Corda et al. are solving this, but at the expense of more centralization).
  • No one vendor (or code-base/platform) has yet won.
  • It is more complicated than the advertising suggests, so look past the proof of concept work to see what has been delivered (he suggests looking at interesting work in Tel Aviv and at what Northern Trust is doing).

To close, Simon echoed a few suggestions that will sound familiar to data science leaders. There continues to be an education and skills gap. C-Suite executives recognize there is a lot of hype in this area and so are seeking people they can trust as advisers. Pilot a few options and see what approach works best for your organization.

He also mentioned the recruitment challenge and suggested not overlooking hidden gems in your own organization. Who is coding in their spare time anyway?

In his Q&A, GDPR also got mentioned, with a suggestion that auditors will value blockchain implementations as reference points with clear provenance.

See also: Why Blockchain Matters to Insurers  

Time for a blockchain panel

After three talks, we had the opportunity to enjoy a panel debate. Paul Forrest facilitated, and we heard answers on a number of topics from experts across the industry. Those I agreed with (and thus remembered) were Tomasz Mloduchowski, Isabel Cooke and Parrish Pryor-Williams.

I took the opportunity to ask about the opportunity for more cooperation between the data science and blockchain communities, citing that both technology innovations needed to prove their worth to the C-suite and had some overlapping data needs. All speakers agreed that more cooperation between these communities would be helpful.

Isabel’s team at Barclays apparently benefits from being co-located with the data science team, and Parrish reinforced the need to focus on customer insights to guide application of both technologies. What panelists appear to be missing is that, in most large organizations, blockchain is being tested within IT or digital teams, with data science left to marketing or finance/actuarial teams. This could mean a continued risk of siloed thinking rather than the cooperation needed.

An entertaining, question concerned what to do with all the fakes now rapidly adding blockchain as a buzzword to their CVs and LinkedIn profiles. Surprisingly, panelists were largely positive about this development. They viewed it as an encouraging tipping point of demand and a case that some will need to fake it ’til they make it. There was also an encouragement to use meetups to get up-to-speed more quickly (for candidates and those asking the questions).

The panel also agreed that there was still a lack of agreement on terms and language, which sometimes got in the way. Like the earlier days of internet and data science, there are still blockchain purists railing against the more commercial variants. But the consensus was that standards would emerge and that most businesses were remaining agnostic on technologies while they learned through pilots.

The future for blockchain was seen as being achieved via collaborations, like R3 and Hyperledger. A couple of panelists also saw fintech startups as the ideal contenders to innovate in this space, having the owner/innovator mindset as well as the financial requirements.

It will be interesting to see which predictions turn out to be right.

What next for blockchain and you?

How do you think blockchain develops, and do you care? Will it matter for your business? Have you piloted to test that theory?

I hope my reflections act as a useful contact list of those with expertise to share in this area. Let us know if this topic is something you would like covered more, on Customer Insight Leader blog.

That’s it for now. More diverse voices on blockchain in Part 2….