Blockchain 101 – An Executive Introduction to Distributed Ledger Technology Abstract This report is a starting point for enterprise executives and IT leaders to better understand the basics as to what blockchain is, how it works, how it compares and integrates with existing technologies, why it is of value to the enterprise, and potential enterprise use cases. We also describe some of the significant roadblocks that must be overcome to achieve the lofty potential of this industry movement. Blockchain is a simple concept that can be game changing as adoption increases and a supporting ecosystem is built. That said, it has the potential of disrupting many long-standing processes. Blockchain tends to be either over- hyped or totally dismissed by analysts and vendors because of their a vested self-interest. In contrast, we seek to provide a balanced, independent perspective for our enterprise clients. Throughout this report we address many aspects of blockchain technology. We start with some of the basics on the technology itself, provide five business reasons to at least evaluate blockchain, and we’ll share five roadblocks you may need to address. We’ll also share blockchain patterns that may help you discover opportunities in the context of your business needs and provide educational guidance. Finally, we’ll recommend an enterprise blockchain action plan for your consideration. Authors: Gary Zimmerman Gary Rowe CMO / Principal Consulting Analyst CEO / Principal Consulting Analyst [email protected] [email protected] Blockchain 101 Zimmerman & Rowe Table of Contents Abstract .................................................................................................................................................................................. 1 Table of Contents ............................................................................................................................................................... 2 Introduction ......................................................................................................................................................................... 4 The Basics .............................................................................................................................................................................. 5 We live in a world of transactions. It’s the basis for everything we do in IT. ................................. 5 Blockchains ...................................................................................................................................................................... 7 Blocks in a chain are like pages in a book .................................................................................................... 7 Block ordering in a blockchain ............................................................................................................................... 8 Managing Blockchain Files ....................................................................................................................................... 9 Bitcoin and Ethereum .............................................................................................................................................. 10 Five reasons business leaders should evaluate blockchain ....................................................................... 11 Increase business velocity ..................................................................................................................................... 11 Increase process efficiency ................................................................................................................................... 11 Ensure information availability and resiliency ........................................................................................... 12 Increase security and privacy .............................................................................................................................. 13 Reduce risk (truth, compliance, interoperability) ..................................................................................... 13 The five biggest blockchain roadblocks ............................................................................................................... 14 Interoperability .......................................................................................................................................................... 14 Scalability....................................................................................................................................................................... 15 Security ........................................................................................................................................................................... 15 Smart Contracts ..................................................................................................................................................... 15 Data Quality ............................................................................................................................................................. 16 Integrity .......................................................................................................................................................................... 17 Forks ........................................................................................................................................................................... 17 Collusion .................................................................................................................................................................... 17 Complexity .................................................................................................................................................................... 18 Possible Early Enterprise Use Cases ...................................................................................................................... 18 Where can I learn more? ............................................................................................................................................. 20 Enterprise Ethereum Alliance ............................................................................................................................. 20 Corda R3 ......................................................................................................................................................................... 21 Hyperledger .................................................................................................................................................................. 21 Microsoft Blockchain on Azure ........................................................................................................................... 21 Blockchain action plan ................................................................................................................................................. 21 2 © 2017 TechVision Research, all rights reserved www.techvisionresearch.com Blockchain 101 Zimmerman & Rowe Conclusions ........................................................................................................................................................................ 23 Appendix - Key concepts necessary to understand the technology ....................................................... 25 Consensus ...................................................................................................................................................................... 25 Proof of work .......................................................................................................................................................... 25 Proof of stake .......................................................................................................................................................... 25 Byzantine fault tolerance .................................................................................................................................. 25 Gossip ......................................................................................................................................................................... 25 Concurrence ............................................................................................................................................................ 25 Multi Sig (Multi-signature concurrence) ................................................................................................... 26 Governance ................................................................................................................................................................... 26 Network members, operators ........................................................................................................................ 26 Developers, miners, users................................................................................................................................. 26 Regulators ................................................................................................................................................................ 26 Incentives....................................................................................................................................................................... 27 Intrinsic tokens and cryptocurrencies ......................................................................................................