How Blockchain Technology Can Remodel the World of …Prof. Dr. Philipp Sandner Blockchain Center Frankfurt School of Finance & Management E-Mail: [email protected] Internet: How Blockchain

Prof. Dr. Philipp Sandner

Blockchain Center

Frankfurt School of Finance & Management

E-Mail: [email protected]

Internet: www.fs-blockchain.de

How Blockchain Technology Can Remodel the World of

Business

https://campus.frankfurt-school.de/clicnetclm/iFrame.do?kat_id=104873




Which problem does

blockchain technology

solve?

3 © Prof. Dr. Philipp Sandner

Blockchain technology provides a layer for the "Internet of

Value" in addition to the existing "Internet of Information"

Internet

Information

Blockchain

Value

Information

The Internet allows sending information: documents, PDFs, emails. Yet, value cannot

be transferred via the internet.

Blockchain technology now allows the electronic transmission of "value": e.g. money, stocks,

rights on assets. This is much more than displaying the bank account in online banking.


Dear Wolfgang,

Money

Wolfgang


Dear Wolfgang,

please find attached $200.

Best, Philipp

Money

Wolfgang


Attachment

200,00 USD

Click to download

Dear Wolfgang,

please find attached $200.

Best, Philipp

Money

Wolfgang


Attachment

20 gram gold

Click to download

Dear Wolfgang,

please find attached 20 gram of gold.

Best, Philipp

Money

Wolfgang


Sample transaction on Ethereum

1

2

3


Payment process between two parties

Alex Sophie

Bank Bank Correspondent

bank

Correspondent

bank

A payment requires multiple stages:

this costs time and can induce errors

Ledger Ledger Ledger Ledger


The core of blockchain technology

Alex Sophie

The core of blockchain is that

all transactions of a specific asset

are recorded in one common distributed database

Ledger

The ownership for a property will thereby

be transferred from an old owner to a new owner


Blockchain technology has enabled platforms in which

platform control is decentralized

Source: Mattila et al. (2016)










I. Decentralizing Trust

A blockchain can be used to shift “trust” from a

central party hosting shared data to the protocol

orchestrating the information consensus.

II. Validation and Security

A blockchain can be used to share chronologically

ordered data in a way that every party can validate

the full history of shared data without the risk of

being tricked.

III. Privacy / Anonymity

The ability to share information while

cryptographically controlling its visibility and

association to the user.

Characteristics of a Blockchain

Blockchain is a protocol

for distributed ledgers

that enables the

decentralized, secure,

direct, digital transfer

of values and assets.

How can blockchain

technology be applied?


Core of the blockchain technology

Alex Sophie

Direct transfer between participants

without intermediaries



Alex Sophie

Sender can be human being or machine


without intermediaries – not necessarily money



Alex Sophie


Recipient can be human being or machine





Alex Sophie



Value in general can be transferred





Alex Sophie



Value in general can be transferred

Transaction can be direct or based on conditions




• Information imbalance and information symmetry

• Process optimization and smart contracts

• Digital assets: micro payments

• Digital assets: developing countries

• Digital assets: copyright-related use cases

When can blockchain use make sense?


• Information imbalance and information symmetry

• Process optimization and smart contracts

• Digital assets: micro payments

• Digital assets: developing countries

• Digital assets: copyright-related use cases

• Replacement of payment infrastructure

When can blockchain use make sense?


How do organizations adopt blockchain technology?

Use case

development Proof of concepts Live products

Adoption depends on

• Company strategy

• Industry

• Company size

• Regulatory context and infrastructure

Who is innovating?

• Large companies in any industry

• Startups internationally

• Crypto currencies


What are existing companies doing?

Use case

development Proof of concepts Live products


Blockchain technology has been about information synchronization and immediate

transactions. It moves to the direction of platforms and ecosystems.

Four steps of innovation

Safe information

Transfer of assets

Smart contracts

DAOs

DAO: Decentralized Autonomous Organizations


Currently, around 700 crypto currencies exist

Source: www.coinmarketcap.com


In June 2017, three crypto currencies have a market

capitalization that would let them rank in DAX30

Projects


Our projects: IoT Summer Camp

Connect Ethereum to real IoT products! Summer camp in Frankfurt; from August 28 to September 1, 2017

Example: Ethereum Charging Station

Example: Ethereum Light Bulb

Ethereum System-on-Chip with Onboard-Crypto Functions

Example: RFID Toll Station


Blockchain applications in developing countries

Application Evaluation

Barriers Problems

Property registries support

investments in housing,

reduce household sizes and

improve education

- First time

registration

- Infrastructure

- Housing

- Investments

- Education

Secure legal identity

documents reduce deception

and is prerequisite for an

inclusion of all people

- Promotion

- Identity

verification

- Trust

- Inclusion

- Data

Budget tracking fights

corruption, improves

governance and serves as an

information system

- Conflict of

interest

- Corruption

- Governance

- Information

Shared microcredit ledger of

banks reduces financial

friction and information

asymmetries

- Cooperation

- Legal

uncertainties

- Friction

- Asymmetries

Peer-to-peer bank services

create independence of

foreign capital, intermediaries

and hence stability

- Education

level

- Usability

- Dependence

- Speculation

Crypto currencies can be

used as local and international

payment solutions and

inflation protection

- Illiquid

exchanges

- Infrastructure

- Economic

exchange

- Inflation

Potential impact Implementation feasibility Expected adoption

We

ak in

sti

tuti

on

s

Fin

an

cia

l in

clu

sio

n

Source: Schmidt (2017), Solving Development Challenges in Underdeveloped Countries: An Analysis of Blockchain-Based Applications


Blockchain architecture


Solar power in developing countries

Investor (e.g. from Europe)

Solar panel operator (e.g. in Africa)

Consumers

Delivery of

electricity

Investment

Payment

Return

Currently, only large investments are possible

Current investment model


Solar power in developing countries



Consumers

Delivery of

electricity

Investment

Payment

Return



Consumers

Delivery of

electricity

Investment

Blockchain:

smart

contract

for distribution

of revenues;

„real-time“

return

Currently, only large investments are possible

Current investment model

Transparence and micro payments

allow less risk and smaller scale

Blockchain-based model

Which future

developments can be

expected?


Blockchain technology is often expected to follow the

Gartner hype cycle


But: It might be that application in industries follow the

Gartner hype cycle, not “the blockchain technology”

Financial services are by far the most advanced industry

in terms of Blockchain exploration

Source: Leadvise (2017)


Technology to improve specific applications and processes

Examples: register for property, register for art, carsharing system, supply chains

Technology to replace infrastructure

Examples: payment system, clearing and settlement

Blockchain technology as institutional technology

Enabling technology for a decentralized world

Assumption: with increasing complexity the costs of centralized organizations increase

Levels of applying blockchain technology

1

2

3


Blockchain technology can drive „convergence“ such that

finance meets everything


• Intermediaries need to adjust their business model

• Blockchain technology is about efficiency (processes, automation) and new business

models (integration, micro payments, developing countries)

• Organizations should learn how to understand, apply and implement this technology

• Innovation is happening with large companies, startups and virtual currencies

• Cross-sector approaches required

Key learnings

1

2

3

4

5


What do we do?

Workshops, trainings, research projects,

Ethereum prototypes, startups

For whom?

Banking, insurance, energy, mobility, Industrie

4.0, internet of things

Upcoming

Workshop: Insurance and Blockchain (July 2017)

Workshop: Connecting IoT Hardware to

Ethereum (August 2017)

Ethereum Developer Course (September 2017)

Hyperledger Developer Course (September 2017)

Workshop: Energy and Blockchain (October 2017)

Contact

Prof. Dr. Philipp Sandner

[email protected] [email protected]

www.fs-blockchain.de

Supported by:

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drin lassen!

Documents

How Blockchain Technology Can Remodel the World of …Prof. Dr. Philipp Sandner Blockchain Center Frankfurt School of Finance & Management E-Mail: [email protected] Internet: How Blockchain