Introduction to blockchain technology and exploration of the implications of migrating trust to automated applications and infrastructure on creating business value and established business models. Includes tools product managers can use to begin evaluating the business implications of blockchain technology on their business.
4. Blockchain is infrastructure that allows individuals to
trust consequential information without relying on
trusted institutions!
Individuals
Institutions
Applications
Infrastructure
(Internet and
Blockchain)
Trust is integral to every
transaction and is the
foundation for business
success. It drives the volume,
velocity and value of every
business transaction, and
accounts for 40-80% of a
company’s market
capitalization.
5. 1. Blockchain technology enables a distributed
database (or ledger).
Data Data & Logic (smart contracts)
Unilateral
& Opaque
Collaborative &
Transparent
6. 2. Blockchain technology enables an immutable
record of entitlement.
Source: http://sammantics.com/blog/2016/5/18/immutable-me-a-discussion-paper-exploring-data-provenance-to-enable-new-value-chains
7. 3. Blockchain technology enables autonomous
automation.
DAO
Source: http://sammantics.com/blog/2016/5/18/immutable-me-a-discussion-paper-exploring-data-provenance-to-enable-new-value-chains
and https://www.pinterest.com/pin/439734351088583336/
8. Ethereum is a decentralized platform that runs
smart contracts.
Ethereum
Foundation
Ether valued at $1B, second to
Bitcoin at $8B.
TheDAOLargest ever crowdfunding
project raised $150M
Trust
TheDAO?
The world’s first Decentralized
Autonomous Organization based
investment fund with 100%
participatory governance – more
than 20,000 token holders.
Source: http://www.ubergizmo.com/2010/08/couple-builds-a-robot-child-companion-called-aimec/
9. Where would value reside in a DAO-based eBay?
People
(minimal trust in
people)
Institutions
Applications
Infrastructure
(Internet)
People
(or legal persons)
Institution
(minimal role)
Application
(Smart Contracts)
Infrastructure
(Internet &
Blockchain)
TRUSTe
Seal
Reliability
of feedback
Escrow
ID Verify
Fraud
Insurance
Product
Authentication
PayPal Buyer
Protection
Safe Harbour
Investigations
User
Agreement
Today Tomorrow
Security
14. Is my product or service suitable for blockchain
technology?
Primary Considerations YES NO
Do third parties rely on the output?
Does the output convey an entitlement or attribute?
Could it run autonomously?
People
Organization
Application
Infrastructure
My Product / Service:
My Current Product / Service:
People
Organization
Application
Infrastructure
Competitor’s Future Product / Service:
15. Transparency
•Reporting of anomalies
•Transaction tracking
•Feedback forums
•Escrow services
•Performance Verification
•Identity verification
•Support responsiveness
•Fulfillment metrics
•Tracking status of
applications/proposals
•Satisfaction with funding
process
•Comparative economic
impacts
•Privacy protection
experiences
•Confirmations of
transactions
•Access to person offline
•etc.
Promises / Assertions
•Provision of adequate
information
•User awareness program
•Seals of approval
•Known merchant seals
•Security and Privacy seals
•Brands
•Security & Privacy policies
on web site
•Presentation
•Regional/cultural
perspectives
•Service/performance
opinions and grading
•Value appraisals
•Quality of service rating
•Fair, ethical and
responsible business
principles assertions
•Published FAQ/Help
•Available technical
support
•Rating of site and services
•Assurance rating
•Disclosure of funding
sources
•Supporting brands
•Co-branding
•Frequently Asked
Questions
•Assertions of competence
•Assertions of fairness
•Associations and
affiliations
•Reputation
•etc.
Empowerment / Choice
•Reliable providers of
feedback
•Referral to other sources
•Evaluating recommenders
•Links from other trusted
sites
•Recommendations from
other sources
•Introduction & matching
services
•Voting
•Opting out
•etc.
Reliability
•Redress mechanisms
•Rules for information
protection
•Laws and/or regulations
that protect privacy
•Governance structures
and practices
•Recourse mechanisms
•Business policies and
practices
•Safe harbour
investigations
•Disallowed conduct and
services
•Dispute resolution
•IP Infringement policy
•Commitment
•Organization’s integrity
•Values of participants
•Ethical standards
•Enforceability of conduct
•Regulations
•Culture
•Common social or legal
code
•Community member
interdependence
(continuity)
•Motivation to deliver
value
•Individual ethics
•Organizational charter
•Incentives
•etc.
Integrity
•Security controls
•Current technology
•IT scalability
•Privacy controls
•Dependable technology
•Knowledgeable and
competent staff
•Operational resources
•Reliable processes
•Information protection
functionality
•Information validation
functionality
•Secure infrastructure
•Operational resiliency
•Ability to deliver expected
value
•Controls on use of
information
•etc.
Risk Transference
•Contract formation
•Liability protection
•User agreement
•Fraud protection
insurance
•Satisfaction guarantee
•Warranties
•Insurance
•Credit protection
•Fiduciary responsibilities
•Privacy guarantee
•Confidentiality guarantee
•Identity theft guarantee
•Accountability
•Inducements
•etc.
Common trust enabling mechanisms
16. Is my product or service suitable for blockchain
technology?
Primary Considerations YES NO
Do third parties rely on the output?
Does the output convey an entitlement or attribute?
Could it run autonomously?
People
Organization
Application
Infrastructure
• Identity verification
• Co-branding
• Dispute resolution
• User agreement
• Privacy guarantee
• Confirmations of transactions
• Presentation
• Links from other trusted sites
• Security controls
• Dependable technology
My Product / Service: Loyalty
My Trust Enabling Mechanisms
People
Organization
Application
Infrastructure
• Co-branding
• Dispute resolution
• Confirmations of transactions
• Presentation
• Links from other trusted sites
• User agreement
• Privacy guarantee
• Identity verification
• Security controls
• Dependable technology
Competitor’s Trust Enabling Mechanisms
17. Blockchain suitability exercise results.
Primary Considerations YES NO
Do third parties rely on the output?
Does the output convey an entitlement or attribute?
Could it run autonomously?
People
Organization
Application
Infrastructure
My Product / Service:
My Current Product / Service:
People
Organization
Application
Infrastructure
Competitor’s Future Product / Service:
18. Thank you!
Alex Todd – your blockchain strategist
@Trust2Pay
Alex.Todd.Trust2Pay@gmail.com
https://ca.linkedin.com/in/alextodd
Notes de l'éditeur
I would like to take this opportunity to sensitize you to the profound implications of blockchain technology on current business models, and to help you asses the possible impact on your obusienss.
I will first attempt to provide you with a high level overview of blockchain technology and its implications. Then I will walk you through one approach to assessing what it might mean to your business. I had originally hoped to walk you through a one hour exercise during this session, based on the handout materials you have. However, I suspect we won’t have enough time to do it justice, so I would be happy to schedule an alternate time to do so, either in groups or one-on-one.
In simple terms, blockchain technology allows people to confidently transact with each other without needing to rely on trusted third party intermediaries. Since trust is integral to every transaction, blockchain technology promises to radically reduce transaction costs by helping to move critical trust functions away from organizations to software applications running on a blockchain infrastructure. Since trust underpins most business value creation, value will follow by also moving away from traditional institutions.
Blockchain technology is based on a distributed architecture, analogous to the DNS (Domain Name Service) works on the internet. Every participating server, or blockchain node, independently maintains a complete copy of the blockchain. Everybody has access to all the information recorded by the blockchain and all nodes help validate new information being posted to the blockchain. Whereas traditional databases are application specific and store only data, the blockchain serves as a database the stores both data and applications, called smart contracts. A blockchain can therefore act as a global supercomputer that is as ubiquitous as the internet. It takes the internet from being a communication infrastructure to becoming a transaction infrastructure.
People can create and control access to their identities on the blockchain using highly secure and anonymous cryptographic keys, and use their virtual identities to access resources, as well as acquire, exchange and selectively present recorded privileges and credentials (such as citizenship, proof of ownership, insurance certificates, medical records, money, etc.) that are easily validated by relying parties.
And the same is true for a special class of smart contracts, called Distributed Autonomous Organizations, that have their own unique identity on the blockchain.
You are likely familiar with Bitcoin, the original and most popular blockchain. It is designed for one specific application, namely P2P payments. Ethereum, much newer and less well known, is the second-largest blockchain initiative, founded by Canadians. Ethereum is a general purpose, programmable blockchain that allows users to conditionally record and exchange value by executing smart contracts. Smart contracts are programs that reside and automatically execute on an Ethereum blockchain, based on objectively triggered events. A special feature of these smart contracts is the ability to automatically execute transactions as agents on behalf of their owners. The most notable example is TheDAO, an autonomous venture capital fund that makes investments in proposals based on vote results from its token holders (shareholders). However, the governance of such an organization is more challenging than its developers anticipated, so all proposal voting is temporarily on hold until a more robust governance system is implemented. Governance of DAOs will be a critically important competency.
What would a DAO based eBay look like? You may recall that eBay was emerged as a way of establishing trust between buyers and sellers over the internet – inconceivable by conventional wisdom of the day. eBay accomplished this by incorporating a rich suite of trust enabling mechanism. Organizational services such as ID verification and product authentication, and application functions such Product Opinions & Grading and TRUST seals. An Ethereum enabled, smart contract based eBay, as a DAO might look something like this – whereby most of the organizational services migrating to the application and blockchain infrastructure, while others become totally redundant. In fact, one such DAO already exists. It effectively commoditizes most of the eBay’s organizational value into generic software.
Inherent to all smart contract applications is cryptocurrency payments (Ether is the equivalent of Bitcoin in the Ethereum environment), used to pay for using the infrastructure, the transacting parties, and the application owners. Ethereum also facilitates recording and transfer of other assets, such as securities (TheDAO tokens are case in point) and other entitlements, such as property ownership – and these can be held and transferred conditionally, such as blockchain based escrow services based on smart contracts that do not necessarily require trust in third parties.
The blockchain ecosystem is big, complex and fast-growing recently extending far beyond Bitcoin. It comprises many startups most have never heard, as well many fortune 500 companies in the financial services, marketplaces, and rights management. The left side of the chart is the Bitcoin ecosystem, while the rights side illustrates the institutional initiatives. Ethereum appears on the right side, but is promises to straddle both worlds. I have boxed areas of the blockchain ecosystem domains that might be of particular interest to the payments industry, such as merchants, P2P, payment networks and banks.
I would like to close off by offering a model that could help you start the process of determining the prospective impact of blockchain technology on your business. My intention was to facilitate a workshop that gives you an opportunity to experiment with this approach on a variety of products and services in a group setting, as I thought we had one hour together. Instead, in the remaining few minutes, I will only be able to explain the model and briefly walk you through an example, so that you will have some familiarity with the exercise material in your handouts. I would be very happy to make arrangements anytime after my presentation or after the conference to help you apply the tools to your specific business.
The first questions you might want to ask yourselves for determining whether your product or services is suitable for blockchain technology is: Do third parties rely on the output? For example, do you issue some kind of credential, such as a driver’s license that other people rely on? Second, does this output have represent tangible value, such as ownership rights that could be transferred? Finally, could the product or service run autonomously, without any person or organization needing to be involved in executing the process? If you were AirB&B, could a competitor create a DAO that does the same thing for a fraction of the cost? Answering YES to even one of these questions is an indication that blockchain could be relevant for your business.
If so, then you can examine your most valuable trust enabling services by allocating them according the how they are executed (by individuals, the organization, applications, or a shared infrastructure). Then take each of those entries and see whether a competitor could use blockchain technology to either automate them, move them to individuals, or eliminate them altogether.
To help you get started, here are some examples of trust enabling mechanisms that you might employ in your business. Use any additional ones that might be more most valuable to your business. You have these in your Exercise handouts.
Here is a hypothetical example, for illustrative purpose only. I haven’t given this one much thought, but randomly chose a Loyalty application, then selected some plausible trust enabling mechanism to insert, then contemplate the implications of a blockchain implementation. So, for example, Identity Verification and User Agreements could reasonably expected to shift from the Organization/Institution the infrastructure and application layers. As expected, I found a shift toward automation. I suspect you might find the same with your own examples.
Again, I wish we had more time so we could work on a few examples together. However, I would be more than happy to sit down with you in groups or individually to help you work through some of your own scenarios. The last page of your handout is a request form. Just fill it out and I would be happy to follow up with you.