Enterprise Blockchain 101

#CLUS Blockchain: What is it and why would I use it? Enterprise Blockchain 101

Ram Jagadeesan, Blockchain CTO BRKNWT-2105

#CLUS Agenda

• Introduction

• Blockchain Origins – Bitcoin

• Blockchain Overview

• Overview of Enterprise Blockchain

• Enterprise Blockchain use cases

• Conclusion

Rise of enterprise blockchains/DLTs Hyperledger project underway 2018 Ethereum went live 2017 The Bitcoin years Enterprises start 2016 production deployments of blockchain Satoshi Nakamoto 2015 Emergence of ICOs published the bitcoin Enterprises launch POCs whitepaper 2009 – 2014

2008

Secure and Immutable Unique key value pairs and cryptography to validate and Genesis of Public permanently record transactions structured into blocks and Blockchain committed as ledger entries Shared Global Ledger All nodes maintain a copy of the ledger that serves as a 2008 single source of truth Satoshi Nakamoto Proof of Work based Consensus Published bitcoin white Nodes compete in hashing computations aka "mining" to drive consensus on a block of valid transactions and earn paper and code rewards (mint bitcoin)

Programmable Support for simple business payments logic

• Alice wants to pay Bob

• Bob has a BTC wallet How does the • Public key (Bitcoin Address) Bitcoin Blockchain • Alice pays Bob 0.25 BTC Work? • Transaction sending payment to Bob is signed with Alice’s private key • Transaction Broadcast to Bitcoin Blockchain network • Once transaction settles, only Bob can spend the coin BRKNWT-2105 © 2019 Cisco and/or its affiliates. All rights reserved. Cisco Public 6 • Fundamental Problem with Cryptocurrencies • How do we prevent Alice from transferring the same coin to Bob and Carol? Double Spend • In a centralized system, a trusted central party (bank) Problem maintains the ledger and prevents double spend

• In Decentralized system all nodes need to agree on order and correctness of transactions

Step 1: Step 2: Step 3: Identify the as-yet Prove I own them Set the challenge for unspent Bitcoin outputs the next owner I want to move

Reference a previous (Usually): (Usually): transaction and an Provide the public key Specify the secrets a unspent transaction and prove you possess “recipient” must prove output the correct private key they know in order to (sign something) spend the funds

• Miners verify transactions and construct block

• Solve computationally hard puzzle

• Hash is a one-way function

Bitcoin Consensus • Easy to compute hash of data and verify

Mining • Near impossible to guess data given hash

Proof-of-Work • Block header hash must be less than threshold

• Iterate nonce value till condition met

• Threshold/difficulty adapts to hash-rate of network

• Rest of network verifies block and if accepted, off to the races again for next block

• Linked via prev-hash in block header

• Incentives Mining • Winning miner rewarded for creating the block – mints BTC via a “coinbase Incentives transaction”

• Current reward is 12.5 BTC – will halve to 6.25 BTC May 2020

• Transaction fee from payer

• Mining/hashing • Compute intensive - brute force attack on Evolution of Mining hash • Embarrassingly parallel – nth gen ASICs • Commodity custom hardware for mining rigs • Opex is driven by power consumption $/KW • PoW “difficulty” is adapted to keep expected block generation time at 10 minutes

55 Exa Hash/s (10^18 H/s)

Source:blockchain.info

63 TWh / year

• Multiple paths instead of linear chain

• Happens naturally in large networks with propagation delay Forking & Finality • Fork with more work wins • Miners choose longer fork and abandon shorter fork

• Transaction finality

• Wait to make sure there is no alternate fork, which excludes transaction

• Selfish Mining

• Value of bitcoin is based on speculation - “digital gold” • Practical limitations due to non real-time validation and probabilistic validation of transactions • Around 10 minutes to mine a block • Forking > longer validation times • Scalability • Each node has a full copy of the entire blockchain • Very low transaction rate (< 7 tps) • Governance • Regulatory risk • All data is public • Maintained by anonymous miners (many in China) • Stable only if no entity controls >51% of network hash power • At > 51% network hash power, miner can attack the ledger • Hash power concentrated in mining pools in China

A shared digital ledger for recording transactions between participants

The history of transactions stored on the ledger cannot be altered

Often, participants maintain their own separate ledgers to keep a record of transactions such as orders, payments, etc.

Therefore, each participant has their own version of the truth – leading to errors, fraud, inefficiencies and dependence on intermediaries

Shared ledger provides a single version of the truth for all participants

Transactions cannot be altered once recorded in the ledger

All participants must agree (reach consensus) before a new transaction is recorded in the ledger

Eliminates errors, fraud, the need for intermediaries and enables trustless transactions

Centralized client/server architecture De-centralized blockchain architecture

Decentralized network

Distributed data

Centralized database

Decentralized Application An app that has it's backend code and data running on a decentralized network of collaborating entities

How is it different?

• Can be executed on any node in a blockchain network • All data accessed by DApp is stored on the ledger • Not controlled by any one entity • Cannot be manipulated and doesn't have a single point of failure

#CLUS BRKNWT-2105 © 20192018 Cisco and/or its affiliates. All rights reserved. Cisco Public 22 What is a Smart Contract? Code that is programmed to automatically execute on a blockchain network when a triggering event occurs

• Guaranteed to execute exactly as written and cannot be overridden by any entity on the network

• Used to automate shared business logic among participating entities

• Executed on multiple on nodes in the network

• Used along with consensus to validate triggering transaction request and associated changes to state

• Lottery

• Proof of Work (PoW), Proof of Stake What is (PoS), Proof of Elapsed Time (PoET) Consensus? • Voting • Paxos, RAFT, PBFT

• Fault Tolerance

• Crash Fault Tolerance (CFT)

• Byzantine Fault Tolerance (BFT)

Number of Permission Finality Speed Comments Nodes High Energy Cost, PoW Permissionless Probabilistic High Low BFT Control by large PoS Permissionless Probabilistic High Moderate stakeholders, BFT

PBFT Permissioned Immediate Moderate High No Anonymity, BFT

No Anonymity, RAFT Permissioned Immediate Moderate High CFT

#CLUS BRKNWT-2105 © 2019 Cisco and/or its affiliates. All rights reserved. Cisco Public 25 Overview of Enterprise Blockchain Permissioned Peer to Peer Network Transactions are broadcast to all authenticated nodes on a private network

Secure and Immutable Enterprise Blockchain Strong cryptographic credentials and identity used to validate and permanently record blocks of by authorized entities

Shared Ledger All nodes maintain a copy of the ledger that serves as a single source of truth

Protocol based Consensus Nodes use an algorithm and a protocol to achieve consensus on a block of valid transactions

Programmable Full smart contract(s) support enabling complex business logic BRKNWT-2105 © 2019 Cisco and/or its affiliates. All rights reserved. Cisco Public 27 Enterprise Blockchain – Convergence of Mature Distributed Systems & Cryptography, Technologies Networking security, & Identity

Enterprise Blockchain is at Convergence of Distributed Systems, Crypto/Security and Database/Cloud

Database & Cloud

Database silos and highly complex, Cryptographically-secure shared data expensive reconciliation fabric as a single source of truth

Network Immutability provides trust through Lack of transparency increases risk transparency. Risk mitigation via real-time audit and compliance

Lack of ability to automate and Smart Contracts provide automation of enforce shared business logic and shared business processes and assurance contracts of execution

Emerging technology. Early days with potential as large as Cloud, TCP/IP

Shared Workflow automation & assurance business logic

Transparency & single source of Shared data truth

Shared data hashes Proven data integrity

V V V M V M V V V V M M V

M V V V

V M M M

M V

Discrete use case specific, often silo’d, and small scale blockchain deployments

V V V M M V V M V V V V M V M M V V M V M M V V V

V M M M

M V

A multi-provider blockchain network with open standards and global interoperability

Increased demands on global New Business Models Technology is powering supply chains emerging hacking efficiencies

1586% increase in Amazon Market Place sells Spear-phishing results in 460% Global shipments since more that 350M Products increased attack effectiveness 80’s

Transparency Complexity Security

Lack of Product Provenance Higher transaction costs Increased attack surfaces

Counterfeiting is estimated to An average bank transfer takes 20 Billion cost U.S.-based semiconductor 3 days to be reconciled IoT devices will be online by 2020 companies more than across a complicated set representing a significant number $7.5 billion per year of intermediaries of attack surfaces

Enterprises need a better way to facilitate trust across their business value chain #CLUS © 2019 Cisco and/or its affiliates. All rights reserved. Cisco Public What’s required to improve trust in the enterprise?

Single source of truth

Massively scalable and secure peer-to-peer transactions

Tamper-proof

Automated business contracts at scale

Simple Secure Scalable Easy to deploy, manage, Best-in-class security High-availability and integrate with and privacy capabilities distributed systems and existing systems to manage permissioned architecture for Internet- blockchains scale throughput

Performance Management Ease of Adoption Provide control and visibility Integrate with existing backend systems Ease of Development Middleware and 3rd Increase ease and Platform Interface Party Integrations dev speed Information Confidentiality Orchestration Manage data with fine grained access controls Identity and Policy Composable

Adapter Framework

Smart Contracts Language Engine Optimize solution End End Security

End End Analytics for use case

- - Distributed Ledger Adapter

Consensus Enterprise Scalability

End End Hardened Scale with high Security Scalable Communications Layer throughput and speed Protect business and customers Hardware Security Module Infrastructure and Network

Blockchain Network Powerful Object Scalability Oriented DLT

Fully decentralized Fine grained Predictive threat permissioned information analytics and network confidentiality No collusion control SQL

Asset Supply Chain Logistics Trade finance Payments Identity trading • Track and trace • Real-time view • Provide visibility • Eliminate • Enable secure • Secure across supply of assets & transparency intermediaries peer to peer validated chain • Shared single to reduce fraud to reduce trading of identities • Traceability into version of truth and risk transaction assets such as • Mitigate identity costs energy, etc. product • Digitization of • Reduce cost of theft genealogy paperwork & capital for • Increase speed • Tamper-proof • Meet KYC • Trusted contracts suppliers and efficiency auditable requirements provenance to records • Eliminate errors verify & process authenticity inefficiencies

Track the provenance of components across a large distributed supply chain and reduce loss of revenue from counterfeit products in the market.

Entire product lifecycle tracked on the blockchain to eliminate counterfeiting

Shipping Distribution Supplier Manufacturer Customers company channel partner

Easily audit history Secure sharing of Tracks chain of Unique Result and genealogy genealogy data across custody and transfer digital signature of products the supply/distribution of ownership for products

Manage IoT devices through Perimeter less peer- a decentralized authority to to-peer attestation eliminate single points of failure of devices and create a more secure platform for devices to run on.

Device manufacturers registers new devices and operational Registration and data forensics on the 2 forensics follows every blockchain device across its lifecycle

Decentralized and Eliminates opportunities for Secure and resilient Result autonomous single points of attack platform for devices

Make cities more efficient by using blockchain-based platforms to optimize the use of utilities, transportation, and streamline how cities interface with their citizens .

Common ledger for Transaction Share public data with energy transactions validation without Result authorized third parties across the grid intermediaries

Track the origin and execution of network intent, configurations and policies. Assurance with site or regulatory requirements

Configurations tracked on the blockchain to trace origin and intent

Device DNA Center IT Auditors Insurance

Easier audit history Secure and Real time sharing of Unique Result and provenance of intent across the state with interested digital signature changes interested parties parties for changes

BRKNWT-2105 WoS Innovation Theatre BRKGEN-1005 BRKIOT-1528 Blockchain: What is it and why DLT Enabled IOS-XE would I use it? Time : 4:30pm-4:45pm Deploying Enterprise Deploying Trust-Based Time : 8am-10am Location : WoS Innovation Blockchains Business Networks using Location : SDCC – Upper Level Both Room 11B Blockchain & IoT Time : 8:30am-10am PSOGEN-1055 Location : SDCC – Upper 8am-10am SDCC – Upper Level What is Enterprise Blockchain Level Time : 1pm-2pm Room 24A Room 33A Location : SDCC – Upper Level Room 28D BRKGEN-1006 Enterprise Blockchain Smart Contracts. Do’s, don’ts, and gotcha’s Time : 4pm-5:30pm Location : SDCC – Upper Level Room 25A

• Enterprise blockchain is real, has proven value and strong potential

• Long term vision: internet scale blockchain network of networks

• Broad range of use cases being piloted and starting to go into production

• Enterprise Blockchain enables businesses to build trust based networks for digital transformation

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Webex Teams will be moderated cs.co/ciscolivebot#BRKNWT-2105 by the speaker until June 16, 2019.

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