Blockchain and Smart Contracts Joe Guagliardo

Transcription

1 Blockchain and Smart Contracts Joe Guagliardo Partner and Vice Chair, Technology Practice Group

2 The [financial services] industry has a once-ina-generation opportunity to reimagine and modernize its infrastructure to resolve longstanding operational challenges, Michael Bodson Depository Trust & Clearing Corp President, CEO You should be taking this technology as seriously as you should have been taking the development of the Internet in the early 1990s, Blythe Masters CEO of Digital Asset Holdings consequences are hard to overstate Marc Andreessen Silicon Valley venture capitalist

3 What We Will Cover Today History Bitcoin Key Characteristics and Ecosystem Smart Contracts Real-World Applications Challenges Investor Perspective / Q&A

4 Source: Bitcoin Properly by Rutger van Zuidam, Sebas van den Brink, Patrick Loonstra and Lykle de Vries is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Based on work on See more at:

5 History

6 Distributed Networks history In 1959, Paul Baran, researcher at RAND, took on the task of designing a survivable command and control network. network of unmanned nodes routing information from one node to another to their final destinations using scheme called "hot-potato routing or distributed communications

7 Distributed Networks history Around December 1966, Baran presented a paper at the American Marketing Association called 'Marketing in the Year 2000.' I described push-and-pull communications and how we're going to do our shopping via a television set and a virtual department store.

8 Challenges Today The Internet optimized existing processes history

9 Challenges Today Complexity of Post Trade Settlement Process and How Blockchain Connects It All history

10 Challenges Today - Centralization history

11 Revolution of Business history The Internet optimized existing processes The Blockchain presents a new medium for assets eliminates processes provides a new paradigm for shared facts

12 Bitcoin

13 Introduced October 2009 bitcoin

14 New Digital Asset bitcoin Peer to Peer version of electronic cash transfer No central banking authority Relies on cryptographic proof rather than trust Nodes agree/verify the history of the chain Winners of computational race earn Bitcoin $6.9b market cap / nodes Solves the doublespend problem

15 Key Characteristics and Ecosystem

16 Bitcoin Blockchain key characteristics and ecosystem Decentralized Distributed Immutable Permissionless Cryptography Consensus Protocol Trustless Network Effect

17 Blockchain Defined key characteristics and ecosystem a database (aka ledger) that is publicly distributed where data is stored by consensus and can't be changed secure by modern cryptography more than encryption "computational hardness"

18 Why Bitcoin is Important key characteristics and ecosystem alt coins Create digital money by creating new assets Bitcoin solves shared facts problem digital assets Create digital money by digitizing existing assets Blockchain / Distribution Ledgers

19 Blockchain Ecosystem key characteristics and ecosystem Business Distributed Ledgers Smart contracts Payment systems Frameworks/toolkits Consortiums Other bank initiatives Other Ecosystem Concepts Bitcoin blockchain Colored coins Sidechains Anchored chains Specialized chains Other cryptocurrencies

20 Bitcoin Blockchain key characteristics and ecosystem Decentralized Distributed Immutable Permissionless Cryptography Consensus Protocol Trustless Network Effect

21 Bitcoin Blockchain key characteristics and ecosystem Decentralized Distributed Immutable Permissionless Public Private Cryptography Consensus Protocol Permissionless Permissioned Trustless Network Consortium Effect blockchains Fully private blockchains

22 Smart Contracts

23 smart contracts Pure Blockchains (e.g., Bitcoin) provide the transfer and storage of value Smart contracts enable execution based on conditions (same blockchain building blocks)

24 History smart contracts Coined by Nick Szabo, a computer scientist in Smart Contracts: Building Blocks for Digital Markets (1996) self-executing self-authenticating immutable reduces human factor breach is expensive

25 Key Characteristics and Ecosystem smart contracts reduce the human factor / processes multiple steps and multiple parties no central counterparty transparent enable embedding of contracts interact with external data feeds selfexecuting

26 Legal Agreements? smart contracts Smart contracts allow for logic or rules to be coded on top of the blockchain

27 Real-World Applications

28 real-world applications we need to forget about 'how the technology works', and focus on 'what the technology does'. We may all love the tech, but if we really want to attract the masses focus on the use cases for those masses. Martin Hagelstrom IBM Project Executive

29 Simplification of Processes real-world applications Credit: Music Reports, Inc.

30 Platforms and Services real-world applications

31 Corporate Governance real-world applications BoardRoom provides a complete governance platform that empowers organizations with the power of the blockchain. BitCongress is a decentralized, peer to peer, open source voting system protocol.

32 Notary Services real-world applications BlockNotary is a software which allows a business to offer clients an efficient and quick way to prove his identity in order for a business to take further actions.

33 Supply Chain Management real-world applications Provenance is a real-time data platform that empowers brands to take steps toward greater transparency by tracing the origins and histories of products. UbiMS is developing an IT portal that executes an order fulfillment utilizing a patented [3D] supply chain process system to distribute products from the manufacturer to the consumer in the most efficient way possible.

34 Records Management real-world applications Factom is an irreversible publishing engine (write once, never erase), removing the need for blind trust by providing precise, verifiable, and immutable audit trail. Factom partnered with HealthNautica to imprint documents on the blockchain, helping add security and guarantee authenticity of sequence of events.

35 Internet of Things real-world applications By leveraging its blockchain-based technology stack, Filament helps companies better manage physical mining operations or water flows over agricultural fields without relying on centralized cloud alternatives or pen-and-paper methods that result in human inefficiencies. Slock.it is a company that blends blockchain with the Internet of things (IoT) creating a secure, decentralized way for renters and owners to pay for and gain access to whatever is being rented."

36 Energy real-world applications RWE is one of the leading power generation companies in Europe and partnered with Slock.it to develop an autonomous electric charging station, integrating a smart contract for users to rent the station, put up deposits, charge their car, then get deposits back. Based on the open source, cryptographically secure decentralized application platform of Ethereum, TransActive Grid s business logic layer delivers real-time metering of local energy generation and usage and other related data.

37 Media and Entertainment real-world applications BitTunes platform will allow music makers to automatically receive royalties in Bitcoin or other digital currency, whenever and wherever a music sale takes place. Ujo is a new shared infrastructure for the creative industries that allows creators and their customers to achieve greater levels of transparency, fairness and profitability.

38 Peer-to-Peer real-world applications Circle App moving money over the open internet, like the way we share music, texts, photos and information now. OB1 is a company formed to further the development of OpenBazaar, an open source project that is refining a protocol that will enable anyone, anywhere to sell products and services to anyone, anywhere in a fully decentralized marketplace.

39 Other Important Initiatives real-world applications NASDAQ Linq first use of blockchain ledger technology to complete and record a private securities transaction for Chain.com. Overstock.com issues public shares of its stock on its tø blockchain platform - traded, settled and recorded entirely on a decentralized ledger.

40 Other Important Initiatives real-world applications

41 Business and Legal Challenges

42 business and legal challenges Much like the Internet regulation of [distributed ledger technology] must indeed be coordinated on a multilateral level based on the principle of do no harm. Special Address of Commodities Futures Trading Commission (CFTC) Commissioner J. Christopher Giancarlo

43 Challenges business and legal challenges Skeptics Ideological Motives Regulatory Privacy / New Sharing Economy Interoperability / Fragmentation Scalability Need for Standards Technology-Driven v Solutions-Driven

44 Tips for Navigating Expand your knowledge. Consider a partnership. Understand the limitations. Mind legal issues.

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46 What can you imagine?

47 Investor Perspective / Q&A Joe Guagliardo Partner and Vice Chair, Technology Practice Group David Luk Principal, Technology guagliardoj@pepperlaw.com dluk@safeguard.com

48 The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. This publication is not an endorsement of any particular company, organization, product or service.