© Z/Yen Group

2016

Z/Yen Group Limited

Risk Reward Managers

90 Basinghall Street

London EC2V 5AY

United Kingdom

tel: +44 (20) 7562-9562www.zyen.com

Sharing Ledgers

For

Sharing Economies

Professor Michael Mainelli

@mrmainelli

michael_mainelli@zyen.com

Berlin, 6 June 2016

© Z/Yen Group

2016

♦ Special – City of London’s leading commercial think-tank

♦ Services – projects, strategy, expertise on demand,

coaching, research, analytics, modern systems

♦ Sectors – technology, finance, voluntary, professional

services, outsourcing

Independent Publisher Book Awards Finance, Investment &

Economics Gold Prize 2012 for The Price of Fish

British Computer Society IT Director of the Year 2004 for

PropheZy and VizZy

DTI Smart Award 2003 for PropheZy

Sunday Times Book of the Week, Clean Business Cuisine

£1.9M Foresight Challenge Award for Financial £aboratory

visualising financial risk 1997

Z/Yen

© Z/Yen Group

2016

♦ Distributed ledgers (1995-present)

♦ LIBOR and FX surveillance (2007-present)

♦ PropheZy and VizZy – automation &

visualisation of compliance monitoring

(2002-present)

♦ Prediction markets and bubbles (1998-

present) – www.extzy.com

♦ Market intelligence – Ministry of Defence,

e.g. Vision 2020 (1994-present)

♦ Avatars for Big Data (2010-2012)

♦ Financial £aboratory Club visualising risk

(1997-1998)

Z/Yen in Finance Research

© Z/Yen Group

2016

♦ 1976 – Diffie-Hellman, Merkle, RSA

♦ 1990 – Mondex, Digicash, Flooz

♦ 1993 – Encrypted Open Books

♦ 1995 – Z/Yen Stacks & Sleeves

♦ 1996 – Ricardo payment system

♦ 1998 – Wei-Dai b-money, Bitgold

♦ 1999 – LOCKSS & CLOCKSS

♦ 2000 – Gnutella

♦ 2004 – Ripple

♦ 2007 – Estonia

♦ 2009 – Bitcoin

♦ 2013 – Silk Road, FBI, Alderney

coin

♦ 2014 – Regulators – Jersey &

Alderney, Isle of Man, FATF, ECB,

State of New York

Mutual Distributed Ledger Timeline

♦ 2015 – IBM-Samsung, Bank of

England research agenda, UK budget

for cryptocurrency standards,

Barclays, UBS, BNY Mellon, Goldman

Sachs, USAA, NASDAQ, Honduras

land registry, Channel Islands

Standards for MDLs, Fine (sic) Sign of

having arrived – Ripple $700,000, Sign

of the Tines – Bitcoin forking hell,

Economist Special, FT Special

♦ 2016 – UK government, Blythe

Masters DAH, R3, SafeShare

Insurance, XLRAS, …

© Z/Yen Group

2016

Increasing Speed16 May 2016 Reinsurers Turn To Blockchain Technology Financial Times11 May 2016 Four Genuine Blockchain Use Cases CoinDesk10 May 2016 This Firm May Have Just Killed The Hype Surrounding Blockchain CNBC09 May 2016 Blockchain: Noch Nicht In Der Praxis Angekommen finanzen.ch

09 May 2016 SWIFT: Blockchain Won't Remove All Third Parties in Securities Trade CoinDesk

26 April 2016Prof. Michael Mainelli of London's Z/Yen Discusses MetroGnomo Blockchain JV with Alderney

Chain-Finance

21 April 2016 Channel Island Alderney Conducts Blockchain Trial with Z/Yen's ChainZy Tech Chain-Finance

15 April 2016 At Home On The Range - Confidence AccountingFinancial Management Magazine, CIMA (April 2016).

14 April 2016 Alderney Blockchain Trial Delivers Timestamps At Almost Zero Cost States of Alderney

01 April 2016UK Start-Up Pilots Blockchain Powered Trading Platform - First Implementation Of Long Wavelength Trading

MondoVisione

23 March 2016 Z/Yen: Clinical Trial Records Move To Blockchain Blockchain News23 March 2016 Clinical Trial Records Move To Blockchain MondoVisione

19 March 2016 SafeShare Insurance over Blockchain for Shared Economy Businesses NewsBTC

18 March 2016 SafeShare Releases First Blockchain Insurance Solution For Sharing Economy EconoTimes

17 March 2016Blockchain Insurance Start-Up SafeShare Launches First Blockchain Insurance Solution with Vrumi

Blockchain News

14 March 2016 Lloyd's Underwrites First Blockchain Solution for Sharing Economy Insurance Post

10 March 2016Blockchain, the Technology Behind Digital Currency Bitcoin, Makes a Splash in Insurance to Offer a Solution to Homeowners Renting out Part of Their Property

City AM

23 February 2016 Building Blocks: A History Lesson In Ledger Technology BlockchainBriefing

18 February 2016 Dubai Museum Of The Future Foundation Launches Global Blockchain Council CryptoCoins News

01 February 2016 BAFT Event Attendees See Future With Billions of Blockchains Coindesk15 January 2016 British Isle Alderney Sponsors Distributed Ledger Project Coindesk14 January 2016 7 Emerging Trends For Bitcoin and the Blockchain Coindesk14 December 2016 Blockchain Believers Seek To Shake Up Financial Services Financial Times

© Z/Yen Group

2016

Some Of Our MDL Research

“…

the potential impact of the

distributed ledger may be

much broader than on

payment systems alone.

The majority of financial

assets — such as loans,

bonds, stocks and

derivatives — now exist

only in electronic form,

meaning that the financial

system itself is already

simply a set of digital

records.”

Bank of England,

Quarterly Bulletin (2014,

Q3)

© Z/Yen Group

2016

Possibly Distributively LedgerableArea Possible ApplicationsFinancial instruments, records, models

Currency, private and public equities, certificates of deposit, bonds, derivatives,insurance policies, voting rights associated with financial instruments, commodities,derivatives, trading records, credit data, collateral management, client moniessegregation, mortgage or loan records, crowd-funding, P2P lending, microfinance,(micro)charity donations, account portability, airmiles & corporate tokens, etc.

Public records Land and property titles, vehicle registries, shipping registries, satellite registries,business license, business ownership/incorporation/dissolution records, regulatoryrecords, criminal records, passport, birth/death certificates, voting ID, health and safetyinspections, tax returns, building and other types of permits, court records,government/listed companies/civil society, accounts and annual reports, etc.

Private records Contracts, ID, signature, will, trust, escrow, any other type of classifiable personal data(e.g. physical details, date of birth, taste) etc.

Semi-private/semi-public records

High school/university degrees and professional qualifications, grades, certifications,human resources records, medical records, accounting records, business transactionrecords, locational data, delivery records, genome and DNA, arbitration, genealogytrees, clinical trials, etc.

Physical keys Key to home, hotel, office, car, locker, deposit box, mail box, Internet of Things, etc.Intellectual property

Copyrights, licenses, patents, digital rights management of music, rights managementof intellectual property such as patents or trademarks, proof of authenticity orauthorship, etc.

Other records Cultural, historical events, documentary (e.g. video, photos, audio), (big) data (weather,temperatures, traffic), SIM cards, archives, geostamping, etc.

© Z/Yen Group

2016

Persistent & Pervasive

MDLs Working Together

© Z/Yen Group

2016

Ledgers Are Boring

“Sharing Ledgers For Sharing Economies:

A Boring Introduction To Mutual Distributed Ledgers”Z/Yen (2015) - https://youtu.be/Hwhigpr4720

© Z/Yen Group

2016

♦ ledger – a record of transactions

♦ distributed – divided among several or many, in multiple

locations

♦ mutual – shared in common, or owned by a community

♦ mutual distributed ledger (MDL) - a record of

transactions shared in common and stored in multiple

locations

♦ mutual distributed ledger technology – a technology that

provides an immutable record of transactions shared in

common and stored in multiple locations

♦ blockchain - “a transaction database shared by all nodes

participating in a system based on the Bitcoin protocol”

Terminology Evolving

© Z/Yen Group

2016

Why Does A Central Registry Exist?

Financial services are based

on ‘mistrust’ & leverage

♦ Validate - Sin of

Commission – forgery of a

transaction

♦ Safeguard - Sin of Deletion

– reversal of a transaction

♦ Preserve - Sin of Omission

– censorship of a

transaction

© Z/Yen Group

2016

? Validate – “a trust model for timestamping”

Safeguard – “a set of rules for updating

state via blocks”

Preserve – “a shared state”

Reducing Natural Monopolies

© Z/Yen Group

2016

No

Trusted

Third

Parties

Single

Trusted

Third

Party

Efficient

Inefficient

Master Node

Supervisor Nodes

Majority Nodes

Collective Nodes

Free for All Nodes

BitcoinEthereum

Ripple

Central Database

‘Woven’ Broadcasting

Mistrust Costs Coins

Paper

© Z/Yen Group

2016

♦ Sensitive case management systems

♦ Timestamping – MetroGnomo for States

of Alderney

♦ 60,000 clinical trial recordings per day

♦ Sharing economy insurance

♦ Excess-of-loss reinsurance

MDL Applications In Use

© Z/Yen Group

2016

MetroGnomo

© Z/Yen Group

2016

Clinical Trials

© Z/Yen Group

2016

INSERT OTHER

Host details Property detailsPeroid of cover Policy

cancelled

Reason for cancellation

Premium

IPT From To

First Name

Surname

Unique Refere

nce Address Poscode AddressPostcod

e Date Time Date Time 9.50%

John SmithVR000

1123 Bank

Street EC2V 5AY54 Woodhill

Lane W17 RQ No £2.00 £0.19

Select £-

Sharing Ledgers For Sharing Economies

© Z/Yen Group

2016

Identity, Identity, Everywhere

© Z/Yen Group

2016

♦ Mobile gaming

♦ Gaming reinsurance

♦ Prediction markets

♦ KYC/AML IDchainZ

♦ Wholesale insurance

♦ Shipping

Applications Ahead

© Z/Yen Group

2016

Economic Matters

Factor Bitcoin Ethereum Custom

Speed –transactions per second

7 tps 20 to 30 tps 2,000 to 10,000 tpsper single transmitter;unlimited transmitters

Storage Fixed Fixed Fixed or Variable

$/transaction $0.10 to $2.50 $0.20 to $5.00 <$0.000001

Validation time circa 10 minutes circa 15 seconds <0.0001 second

© Z/Yen Group

2016

Process Change Difficulty

Technology

Change

Difficulty

Asset Transfer

Archiving

Contract Execution

Shared DataTimestamping

Market

Wholesale Payments

Asset Maintenance

Regulatory Reporting

Identity

Deal Rooms

Smart versus Shrewd

© Z/Yen Group

2016

♦ Usable

visualisation, apps, key structures

reporting, e.g. ‘receivers’, data location

♦ Immutable - preserve

partial data holding

long-term data storage

♦ Distributed - safeguard

transmitting & receiving, high volumes, multiple transmitters

‘genetic splicing’ and integrity

support vector machine surveillance

♦ Mutual - validate

validation methods

standards

Ongoing Research

© Z/Yen Group

2016

♦ Mutual distributed ledgers help communities

share information across time and space, less

vulnerable to natural monopolies

♦ Mutual distributed ledgers provide persistent

and permanent ‘contract’ utilities:

safeguarding transactions

preserving transactions & data

♦ Mutual distributed ledger technology will

displace much messaging and shared data

functions

… try one out … www.MetroGnomo.com

Closing Thoughts

© Z/Yen Group

2016

Thank you!

When Would We Know Our Commerce Is Working?

“Get a big picture grip on the details.”

Chao Kli Ning