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Sri Krishnamurty Blockchain for Business R ecently I was invited by a finance company to brief them about Blockchain I went through ten slides from my introductory slide deck on Blockchain and observed that the room was very quiet I paused to check if there were any questions After a bit of silence someone asked So how do we buy some of these Blockchains for our portfolio It s not surprising that many people equate Blockchain with Bitcoin With the irrational exuberance in the media about Bitcoin and the pundits forecasting where Bitcoin prices are headed in the next few years interest in Bitcoin has peaked First Blockchain is not Bitcoin Bitcoin is powered by Blockchain the underlying technology that has made Bitcoin possible But Blockchain is turning out to be something that could revolutionize businesses in ways unimaginable Talking about Blockchain today is like talking about the Internet in the 1990s Many people knew something tectonic was happening but couldn t articulate the value of it On one hand evangelists entrepreneurs and venture capitalists shared visions of things no one had seen yet which led to the dot com boom On the other hand in most schools and conferences the topic of discussion was HTTP TCP IP and protocol stacks which very few people outside of computer science understood Similar things are happening with Blockchain technologies today Billions of dollars have been poured into them by venture capitalists and financial institutions On the one hand we hear utopian visions of how Blockchain would revolutionize transactions identity management and the role of intermediaries On the other hand in most conferences you get a basic introduction to cryptography hashing and distributed computing concepts that have been known for decades in the computer science community 18 By Kippelboy CC BY SA 3 0 https creativecommons org licenses by sa 3 0 from Wikimedia Commons So how do we buy some of these Blockchains for our portfolio So what is Blockchain To give a simplistic analogy let s think of how transactions are recorded today Say I want to sell my house and enter into a contract with you for say US 1 000 000 Now what prevents me from entering a contract with multiple people What if I renege on the offer Well to formalize the contract we trust the registry of deeds and record the deal there But what if my cousin comes a year later and claims the house I sold was his Many financial institutions insist you do a title search and buy title insurance to protect them and you The world today deals with the problem of trust through rules and regulations and through intermediaries who facilitate these transactions which adds overheads and causes friction in transactions How many databases are there in the US to store deeds Probably thousands How are they backed up What if the registry of deeds database is down Can these systems be hacked Altered lost All of these are challenges we face today So how can Blockchain technology change this Real estate transactions are notorious for having many touch points and various middlemen and entities increasing the cost of transaction for the participants Blockchain technology promises to address some of these problems by creating a distributed ledger where transactions are immutable The contracts are stored as blocks and as the transactions grow the blocks are chained to form a blockchain The whole Blockchain is stored on multiple distributed computers and it is computationally extremely hard possible but not feasible to alter transactions or introduce false transactions because it is secured cryptographically The reliance on a distributed network of computers avoids a single point of failure Distributed trust in the Blockchain enables participants to all be in sync on valid transactions Imagine a blockchain of the United states registry of deeds that stores all real estate transactions A Blockchain enabled system would eliminate frictions and enable a robust platform for real estate transactions This is exactly the problem that Bitbay Snow 2017 is trying to solve using smart contracts As I thought more about the use cases Blockchain could help solve I looked back at my career and thought what if Blockchain technology had been around 20 years ago How would things be different I picked four examples where I think Blockchain could have majorly impacted businesses I have worked for Predictive maintenance and tracking parts My first job ever was in 1997 when I joined L TKomatsu as a design engineer L T Komatsu manufactured hydraulic excavators huge earth moving machines that are typically used in formidable conditions like mines and quarries Each excavator has thousands of parts many customized to the needs of the buyer A breakdown of a machine in the field would mean work stoppage and expensive repairs To make things worse service engineers had to make a trip to the site of repair at short notice and call back the headquarters to requisition replacement parts At times part shortages and inventory issues meant that machines would be out of service for weeks Such problems are well known in other industries such as aerospace and defense Companies like SAP and GE are working on addressing this problem with Blockchain and the notion of a Digital twin Rueckert 2017 to enable predictive maintenance and faster identification and dispatch of parts that could reduce the breakdown time in machines wilmott magazine

Data reconciliation and settlements After grad school I joined Citigroup building advanced trading systems for fixed income products In the early 2000s implementing distributed systems was still hard and the plethora of legacy systems that needed to be integrated to make things work was excruciatingly painful One thing I realized when working there was that there was no universal design to store data Reconciliation of data was a painstakingly common norm I had to build systems to reconcile our data to Bloomberg and Yield book Transaction settlement in the financial industry is still T 2 days for many transactions The back office reconciliation process is cumbersome and every financial institution invests millions of dollars to home grow their systems to store data and their version of truth While Bitcoin is gaining all the limelight in the financial industry the financial industry is still way behind in terms of efficiency and Blockchain technologies promise to transform financial transactions enabling transactions and settlements to happen literally at the speed of light Fund raising Being an entrepreneur was a dream and in 2006 I wanted to explore what it would be to work for a startup I joined Endeca now a part of Oracle to help scale their analytics footprint in the enterprise The technology was cool and the people I worked with great In addition to learning revolutionary technology that helped power billions of searches in the enterprise I learnt about the struggles that startups go through when raising money Steve Papa the founder of the company took Endeca from his dorm room at HBS to a billion dollar exit in 2000 I have had the pleasure of listening to his story Hardymon 2002 first hand when he gave a guest talk in my class Endeca had to raise multiple rounds of funds www startupranking com startup endeca funding rounds and saw ups and downs in the recession of 2008 I personally saw the range of discussions on initial public offerings additional series rounds and buyouts in company circles Startup companies and founders make a huge investment of time and effort for fund raising Uber took five years to raise a billion dollars Facebook took seven Now Blockchain is changing this With an initial coin offering Telegram is planning to raise a billion dol wilmott magazine lars in four months even before the product is built Popper 2018 The future of raising money for startups how shares are distributed and the valuation of the private shares you hold would all change with Blockchain technology Tackling software piracy Finally I want to share my experience at MathWorks Before I left MathWorks to start QuantUniversity I spent over five years scaling financial services and analytics products in various and food being tracked from origin to destination using Blockchain technology Drug recalls and food poisoning related instances would be minimized significantly Imagine educational records stored on a Blockchain Fraud and traceability would be significantly minimized Imagine the possibilities of new products and services on the Internet that would make interaction much richer and cheaper without the need for intermediaries As a model risk advisory we at QuantUniversity are innovating on possibilities of using Blockchain to track prove Talking about Blockchain today is like talking about the Internet in the 1990s Many people knew something tectonic was happening but couldn t articulate the value of it enterprises with MathWorks products I saw the rise in open source products and how enterprise companies had to deal with this challenge Enterprises face huge challenges of retaining maintenance paying customers with the abundance of choices in the open source world While business models in enterprise software are evolving the problem of software piracy has still not been solved Billions of dollars of software revenues are lost due to software piracy This is a problem that is not restricted to just software but anything digital As books music videos and so forth go digital piracy could not only mean lost revenues but could also reshape the products that would be available in the market place With Blockchain based technologies piracy and IP infringement could be mitigated and many initiatives are being launched in this space European Commission 2017 In summary we are just scratching the surface on what s possible with Blockchain technology Although cryptocurrencies are getting all the limelight the real power of Blockchain technology is yet to be harnessed Perhaps in the next decade we will see yet another technological revolution like we saw with the Internet in the 1990s and the ramifications are going to be huge Imagine drugs nance of quantitative models through our platform QuSandbox The possibilities are endless We must understand that what matters most is not the technology but the value generated from it Businesses would see changes that would force them to innovate or perish It s high time that we take Blockchain technology seriously and embrace the revolution References European Commission 2017 Intellectual property rights enforcement Fact sheet Available at www europa eu rapid press release_MEMO 17 4943_en htm Hardymon G F 2002 Endeca Negotiation The Steve Papa Harvard Business School Exercise 802 212 Available at www hbs edu faculty Pages item aspx num 29077 Popper N 2018 Virtual currency offerings may hit a new peak with Telegram coin sale The New York Times March 4 Rueckert T 2017 Digital twin Blockchain Available at www news sap com sapphire now digital twin blockchain Snow M 2017 How I sold 5 acres of land using BitBay s blockchain based smart contracts Available at www medium com tradersnow how i sold 5 acres of land using bitbays trustless smart contracts 28f18b83125 19