Deputy City Treasurer - City of Torrance March 19, …...Chanticleer Holdings “Mobivity Merit” to its royalty program NASDAQ: BURG 50% ↑ Kodak launching KodakCoin! Image rights

Blockchain Technology – The Wave of the Future

William Yu, CPA, MBA

Deputy City Treasurer - City of Torrance

March 19, 2018


“Coca-Cola, U.S. State Dept. to use blockchain to combat forced labor” 20 million forced labor worldwide

(Reuters, 3/16/18)

“How blockchain could save federal agencies billions” DLA: $800 million 302 programs: $619 billion (CNBC, 3/16/18)






Chanticleer Holdings “Mobivity Merit” to its royalty

program

NASDAQ: BURG 50% ↑

Kodak launching KodakCoin! Image rights of photographers “Photo-centric cryptocurrency” to be

used as payment for photographs NYSE: KODK 90% ↑


$2.89/shareFri. 3/16/18

Source: TD Ameritrade


WHAT IS BLOCKCHAIN?

A chain of BLOCKS (records) A cryptographic hash of the previous

block A timestamp Transaction data

By design, a blockchain is inherently resistant to modification of the data.

It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way".


WHO INVENTED BLOCKCHAIN?

Invented by Satoshi Nakamoto in 2008 for use in the cryptocurrency bitcoin

As bitcoin's public transaction ledger".


STATE OF CRYPTOCURRENCY

Types: 1564

Market Cap: $300 billion

(3/17/18 18:25PST, coinmarketcap.com)


$19,783.21 on 12/17/17

$7,752.84 on 3/17/18


4 KEY CONCEPTS OF BLOCKCHAIN

Blockchain Technology – 4 Key Concepts of Blockchain

1. Distributed shared ledgers

Group of replicated logs/databases (nodes)

Transactions distributed in blocks All nodes hold all transactions Parties identified with public key

(=anonymized) Accessibility of transactions depending

on blockchain implementation Resilient for failure of one or more

nodes Group of nodes operate tamper proof


Source: BITNODES


2. Cryptography-Hashing

Creation of a bit string representing integrity of content.

Changing one character in the original string results in complete different hash. This is the so-called avalanche effect.


2. Cryptography–Public & Private Keys

Public key: a public identifier that can be freely shared with others; this is your identity on the blockchain

Private key: a key that must never be shared with anyone

Authentication, Encryption, Digital signature


3. Consensus

Majority of nodes agree on validity of transactions

Validation on double-spending without the need of a trusted authority or central server


4. Smart Contracts

Digitally facilitate, verify, or enforce the negotiation or performance of a contract

Transactions are trackable and irreversible

No 3rd parties involved


Sample case of blockchain for smart contracts(Source: IBM.com)


VALUE OF BLOCKCHAIN TECHNOLOGY


APPLICATION POTENTIALS OF BLOCKCHAIN






GAME-CHANGER IN AUDITING?

Benefits: Integrity of blockchain stored data: a source of verification

Automation of transaction verification process can drive cost efficiencies

Blockchain technology can be used to test the whole population of transactions, which can drastically improve the level of assurance

Fully-automated audit: assessment of financial statement assertions such as existence, occurrence, accuracy and completeness of information

Challenges: A different professional audit mind-set and additional expertise will be

required

$32 million Ethereum hacking - assessment of operating effectiveness of the internal IT controls

Risks through implementation of IT controls


Thank You!

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Deputy City Treasurer - City of Torrance March 19, …...Chanticleer Holdings “Mobivity Merit” to its royalty program NASDAQ: BURG 50% ↑ Kodak launching KodakCoin! Image rights