Blockchain Practical Usage Around the

World

Jeff Tennenbaum,
tennenjl@us.ibm.com
Office of the IBM Federal
CTO
© 2016 IBM Corporation
“Quick, think of the most digital-
friendly government in the world”
–
www.nextgov.com
Forbes
 e-Estonia
• Challenges
• Size, Population, Natural Resources

• Digital id Card
• Digital Signature

• Decentralized Distributed System

• Benefits
• i-Voting
• File Taxes in 5 minutes
• Sign a Contract
• Register a Business < 30 mins
• Become an e-citizen! (Passport)
* https://e-estonia.com/component/digital-signature/
 Estonia and Blockchain

• Securing Health Records

• Record written for every update/ every
access
• Tallinn Stock Exchange
• Nasdaq
• Secure voting in Shareholder Meetings

• Public Notary Service

• Business Contracts
• Birth Certificates
• Marriages

**https://e-estonia.com/guardtime-secures-estonian-health-records/
http://bravenewcoin.com/news/bitnation-starts-offering-blockchain-public-
notary-service-to-estonian-e-residents/
 Letter of credit
Republic of A B-land
Sales contract
Letter of credit Company A:
Buyer/
applicant
Company B:
Seller/beneficiary

Use case Buyer applies

for LC
Seller’s bank authenticates
LC and credits Company B
Buyer’s bank issues
A Plus LC and sends to Bank B
Bank seller’s bank

What • Bank handling letters of credit (LOC) wants to offer Benefits

them to a wider range of clients including startups
1. Increase speed of execution
• Currently constrained by costs & the time to execute
(less than 1 day)
• 50% of banks' costs for a Letter of Credit arises from manual
document handling and checking, which creates delays, errors 2. Vastly reduced cost
and expense - Report.
3. Reduced risk,
How • Blockchain provides common ledger for letters of credit
e.g. currency fluctuations
• Allows all counter-parties to have the same validated
record of transaction and fulfillment 4. Value added services,
Bank of America Merrill Lynch, HSBC and the IDA (Infocomm e.g. incremental payment
Development Authority of Singapore)
Letter of Credit Example
https://www.thebalance.com/letter-of-credit-example-how-money-and-
documents-move-315042

Purchase

Republic of A
B- Land
Agreement
Buyer/Applica
nt Seller
Shipment of
Goods
LOC
Request

Docs
$$$
Docs

LOC
$$$
LOC
Bank A Bank B
Docs
$$$
Letter of Credit /Blockchain
https://www.thebalance.com/letter-of-credit-example-how-money-and-
documents-move-315042

Purchase

Republic of A
B- Land
Agreement
Buyer/Applica Shipment of
nt Goods Seller

1. LC Request w/ docs 4. Completes

7. If discrepancy/Review Shipment, invoice
Approve/Reject
Blockchai and required docs to
Blockchain
n
2. Approves LC
3. Approves LC
6. Reviews Docs/Invoice
Marks Completed 5. Approves Invoice/Docs

Bank A Bank B
The 7 Steps to a Blockchain Based LOC
Transaction*
1. The importer creates an LC application for the importer bank to review and stores it on the blockchain.
2. The importer bank receives notification to review the LC and can approve or reject it based on the data
provided. Once checked and approved, access is then provided to the exporter bank automatically for
approval.
3. The exporter bank approves or rejects the LC. If approved, the exporter is able to view the LC
requirements and is prompted to view through the application.
4. The exporter completes the shipment, adds invoice and export application data and attaches a photo
image of any other required documents. Once validated, these documents are stored on the blockchain.
5. The documents are viewed by the exporter bank, which approves or rejects the application.
6. The importer bank reviews the data and images against the LC requirements, marking any discrepancies
for review by the importer. When approved, the LC goes straight to completed status or is sent to the
importer for settlement.
7. If required due to a discrepancy, the importer can review the export documents and approve or reject
them.
*http://www.gtreview.com/news/asia/banks-blockchain-
innovation-letters-of-credit/
URL
Blockchain for IBM Global Financing

 Immutability / Non-repudiability of
blockchain ledger Comprehensive
view of all operational data

 Less disputes, faster settlement

Free flow of capital between parties

 Distributed & Replicated Less

Outages, Highly extensible
Blockchain Data for Dispute Resolution

Data recorded in the Blockchain can improve resolution time for common
disputes
Data Recorded in Blockchain
Dispute Reason Proof of
PO Shipment Invoice
Delivery
Shortshipped Order Line item and Shipment line items
by Part Quantity or by Box quantity info and quantities

Proof of Delivery Proof of Delivery

Pricing/Discount Incorrect Pricing and discount Invoice amount

Tax status and

Tax Status Tax status
amounts

PO Number
PO details PO number
Missing/Expired/Cancelled
Blockchain for IBM Global Financing
An immutable, non-repudiable record of events, shared between Partners, Suppliers
and IGF…

…enabling a
comprehensive view
across the entire
transaction lifecycle….

…with enhanced visibility to prevent or speed the resolution

of disputes...

Demo Video: https://youtu.be/F0P7NM7d-ps

Results

• Reduction in Disputes and Dispute Resolution Cycle

• Reduction in dispute resolution time: 40+ days to
under 10 days
• Better customer satisfaction
• Differentiation from Competition
• Reduced costs associated with dispute resolution
• Free up Capital
14
Blockchain for IBM Global Financing

External
Transaction UI
Data
Existing Approvals
IBM Global Invoices OBC
Validating Application
Financing Peer
Remittances
Systems Application

OBC OBC
Validating Validating
Application REST APIs Peer Peer

Invoice Remittance External Application

TA Data
Data Data Data OBC
Services
Services Services Services Application Validating
Peer
Indexing

Milestone #1: Milestone #2: Milestone #3: Milestone #4:

Transaction Approvals Invoices & Remittances External Data Ready for Onboarding
Current Timeline
March April May June July August September
Know Your Customer KYC (Financial)

KYC - is the process of a business identifying and verifying
the identity of its clients.
– Anti-money laundering
– Anti-bribery
– Anti-corruption
– Terrorism Financing

Mandated by Gov Regulations

– USA - Patriot Act
– Canada – FINTRAC
– Others – UK, India, Italy and more

https://fin.plaid.com/articles/kyc-basics
KYC- The Cost of Compliance

$4.3 billion in fines were levied against financial institutions in 2013 and
2014*

JP Morgan and HSBC were each fined $2 million for a failure to report
suspicious activity*

UBS Spent nearly $1 billion in 2014 meeting regulatory requirements**

2013 JP Morgan spent $1 billion on controls**

*https://fin.plaid.com/articles/kyc-basics
**https://www.trulioo.com/blog/are-compliance-costs-
hurting-banks-bottom-lines/
Know Your Customer (KYC):
IBM + Credit Mutuel Arkea Pilot
Bank currently serves 3.6 million customers and operates multiple systems to manage
customer identity for different part of the business.

Goal: Improve the bank’s ability to verify customer identity

“Improve satisfaction for customers applying for new products by removing the need
for lengthy application processes.”

Solution: Single but cross-business Retail Banking

KYC platform providing employees with Insurance
a consolidated view of all documentary
evidences collected by any entity of
Credit Mutuel Arkea Group

Benefits:
• Simplify administrative processes
• Improve customer satisfaction
• Incremental growth into production, Consumer Credit
with risk reduction throughout.
Customer Documentation Provenance Use Case
KYC (Know Your Customer)
Customer Financial
A business network
creates public Services Provider of financial services
identity on the A verifies identity providers cooperate
blockchain, then and signs the to cut down KYC
puts certain costs in the long run.
documents to person’s identity Customers are saved
on the from having to enter
prove identity on thousands of forms
the blockchain. blockchain. in their life.

Customer gives Customer applies. Instead

Company A of filling out all of the
permission to forms required, the
view the customer simply
permissions the bank to
documents – the access the verified
permission is identity. The bank trusts
recorded on the Financial Services
blockchain. Provider A and therefore
accepts the identity
attestation and saves on
KYC verification cost.
 Recalls and Provenance
If you own a non-hybrid Camry. Camrys sold in the U.S. are built on four different assembly
lines: One in Japan, one in Indiana, and two at Toyota’s plant in Georgetown, Kentucky.
Camrys built in Japan all have VINs that start with J, and are not affected. Camrys built in
Indiana (at a factory that also makes Subarus), all have the suspect pedal and are involved
in the recall. Their VINs start with “4.”
The bulk of the Camrys sold in North America are produced in Kentucky, and also have VINs
that start with “4.” However, not all of these cars have the problematic pedal. Toyota Safety
and Quality Communications Manager Brian Lyons tells us there are two assembly lines that
built Camrys at Georgetown. Line 1 used the North American pedals involved in the recall.
Line 2 used Denso pedals imported from Japan. He says Toyota has no way of telling by
VIN whether a car was built on Line 1 or Line 2, so he says owners should take their
vehicles to a Toyota dealer to have it inspected to see which pedal it has. That’s also
our advice.
http://www.consumerreports.org/cro/news/2010/01/how-to-tell-if-your-
toyota-is-affected-by-the-recent-recalls/index.htm
 Provenance use –
Vehicle maintenance

What • Provenance of each component part in complex Benefits

system hard to track
1. Trust increased, no authority
• Manufacturer, production date, batch and even "owns” provenance
the manufacturing machine program
2. Improvement in
How • Blockchain holds complete provenance details system utilization
of each component part
3. Recalls "specific"
• Accessible by each manufacturer in the production rather than cross fleet
process, the aircraft owners, maintainers and
government regulators
© 2016 IBM Corporation Page 21
Everledger: Legitimize Diamonds and Reduce Fraud
Problem
• Protect against the occurrence of fraud, theft, trafficking and
black markets (65% of fraudulent claims go undetected
annually)
What?
• Identify and track diamonds across the supply chain from mine
to retail via digital certification and smart contracts on the
blockchain
• Provide an audit trail of an asset to be used by various
stakeholders including insurance companies, financiers, traders,
law enforcement and claimants
How?
• Shared ledger for storing digital certification and supporting
material
• Smart contract to model the workflows associated with the
shared documents and data across participants
Everledger: Legitimize Diamonds and Reduce Fraud

Benefits
1. Identity and reduce conflict stones
2. Assist in the identification and reduction of synthetic stones
being labelled as authentic (via pipeline and open
marketplace retailers)
3. Increase speed of transparency for cross border
transactions for insurance companies, banks and claimants
4. Address massive problems with double financing in the
supply chain
5. Increase satisfaction on authenticity for end consumers
 Everledger Process
Everledger – a digital, global ledger that tracks and protects items of value

Everledger develops and deploys innovative technological solutions to markets where evidence is critical, by creating
an immutable digital footprint of an item. Once items are registered on the blockchain, the records are permanent and
can’t be changed, which provides a clear audit trail to be used by multiple parties throughout the supply chain, to
prove authenticity and to reduce the risk of fraud.
Process of registering a diamond onto the blockchain

1 2 3
Create a digital DNA for each Register the diamond on
Diamond Certification Houses Blockchain
diamond

USA Israel Dubai India Antwerp

Relationships with 5 major
diamond certification houses to
grade and certify the diamonds
Create a digital DNA for these Add the unique GIA number and
diamonds… the diamond’s measurements
- 4 C’s of diamonds onto the blockchain
- 14 meta-data points
- GIA number lasor inscribed on
diamond
Food Safety

• Chipotle – E.coli outbreak

• As was stated by CDC earlier today, we’ve examined the evidence and
have not been able to identify a source for these outbreaks”*
• 2015, 64 sick people, source was tomatoes but it is not known at what
point in the field-to-fork chain the pathogen was introduced
• Nine states — E. coli O26, Oct 2015 thru Feb. 1, 55 sick people,
source unknown, states involved are CA, DE, Il, KY, MD, MN, NY, OH,
OR, PA and WA
• The chain’s stock was trading at $754 in August 2015 and hit a low
of $404 in January 2016.
• China
• Contaminated Meat
• Rice containing excess cadium
• Baby Formula containing Mercury/Melamine
http://www.foodsafetynews.com/2016/02/cdc-declares-chipotle-e-coli-outbreaks-over-cause-unknown/#.WG5MGLYrKu4
https://rendezvous.blogs.nytimes.com/2012/06/21/from-milk-to-peas-a-chinese-food-safety-mess
Walmart, IBM and Tsinghua University

USA – Packaged Produce

China – Pork

Time - “If there’s an issue with an outbreak of E. coli, this gives them an ability
to immediately find where it came from. That’s the difference between days
and minutes.”

Effort – “It’s also the difference between pulling a few tainted packages and
yanking all the spinach from hundreds of stores”

Customer Sat – “Consumers today want more transparency about where and
how a product came to be”
 Food traceability through Blockchain Provenance – I
Breeder Manufacturer Distribution Retail Store Consumer Auditor
(Farm) Center

R • secure documentation of key information on raw

E • validation of packages to ensure no fraudulent
Q materials, machinery (Public Health and Safety Org), replacements or introduction of counterfeit
U processing (HACCP), and Logistics(Fumigation ones
I Cert.) • disaggregation of product packages and re-
R • create product packages with electronic bar/QR
E packaging for retail stores
M code informational labeling for regulators and • visibility of product packages across the
E consumers transport lines
N • aggregate products into packages
T
S
UNDERLYING
association of product data end-to-end
BLOCKCHAIN basic
labeling with aggregation and permissioned
PROVENANCE analytics
data on Blockchain disaggregation visibility
CAPABILITIES
© 2016 International Business Machines Corporation IBM Blockchain 27
 Food traceability through Blockchain Provenance – II
Breeder Manufacturer Distribution Retail Store Consumer Auditor
(Farm) Center

R
E
• retrieval of traceability information during • end-to-end visibility of each product path
Q
U checkout: easy to use mobile apps, From the across the supply chain
I consumer to the farmer to leverage. • check compliance w.r.t. machinery, expiry
R • checkout transactions disabled for expired dates, product quantities, etc.
E products (or alarm raised)
M
• certify the supply-chain; creation of audit
E • customer ratings and preferences with regard records
N to the source of the product
T
S
UNDERLYING authentic information audit capabilities:
BLOCKCHAIN traceability retrieval handle changing
PROVENANCE through in a simple regulations through
CAPABILITIES immutability manner smart contracts

© 2016 International Business Machines Corporation IBM Blockchain 28

Explore Watson IoT with Blockchain
Other potential
use cases

– Securities – Retail Banking

• Derivative contracts • Cross border remittances
• Securities issuance • Mortgage verification & contracts
– Trade Finance
• Bill of Lading – Public Records
• Cross-currency payment • Real estate records
• Land Registry
– Industrial
• Vehicle registrations
• Manufacturing Process
• Citizen Identity
– Government • Birth/death records, inheritance
• Government Tender Process • Business license and ownership records
• Voting
– Media & Gaming
– IOT • Micro-payments, Content licensing, Virtual goods exchange
• Decentralized device registration, management, • Digital Rights Management
and communication
• Auto insurance -- e.g., driver habits tracking – Cross Industry
• Manufacturing provenance • Identity Management
• Device-to-device transactions • Trusting Industry
• Capital Asset Management
Thank you!

© 2016 IBM Corporation

Publicly Available IBM Blockchain Demos

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Banking & Finance Use Cases

Assets that
Federal Foreign
The Stock Trade Pay Structured
Reserve Exchange
Exchange Finance Dividends or Finance
Stress Test Payments
Interest
Automotive Industry Use Cases

Buying &
Navigating Minimizing
Supply Chain Auto Repair & Selling on The
Regulatory Vehicle
Markets Services Secondary
Boundaries Recalls
Market
Healthcare Industry Use Cases

Historical Data
Validation & Prescription &
Patient Data – Outcome-
Patient Profile Payment of Drug
Security Based
Claims Information
Payments
Insurance Industry Use Cases

Claims Assessment of
Sales and Processing Possible Regulatory Underwriting
Underwriting and Settlement Compliance Expense
Settlement Costs