@2018 theloop
Commercial Blockchain Application & Scalability
@2018 theloop
JH Kim
@2018 theloop
Table of Contents
01. Considerations for blockchainapplication
02. Case study: KOFIA consortium blockchain
03. Expansion in blockchainapplication
3
Goal of BlockchainTo enable direct transaction from one party to another without a TTP (Trusted Third Party)
What is needed is an electronic
payment system based on
cryptographic proof instead of trust,
allowing any two willing parties to
transact directly with each other
without the need for a trusted
third party.
4
Common Errors and Things to Consider When Implementing Blockchain
Claim that blockchain technology makes certain service available
Claim that an intermediary is untrustworthy
5
Blockchain Technology Test and Use CasesAccording to the analysis of well-known cases, blockchain technology has been tested for about 50 categories and most tests were conducted in the capital market and general financial services area
Source: KPMG(2017)
6
Blockchain Consortium in the Press Release
7
Japan Bank Consortium
61Bank members and counting…
Establishment
Established in October 2016 with 42 founding bank members in Japan
Objective
To establish a unified platform for domestic and cross-border payments by utilizing Ripple’s distributed ledger technology
Organizer
SBI Group, a Japan-based financial service holding company, and SBI Ripple Asia, a joint venture between SBI and Ripple
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Current State of Global Blockchain ConsortiaThere are more than 40 blockchain consortia worldwide and financial services industry is leading blockchain consortium trend
1
1
1
3
10
26
Public Sector
Technology, Media &Telecommunications
Energy & Resources
Life Sciences & Health Care
Cross-Sector
Financial Services
Number of Consortia by Sector
Source: Deloitte(2017)
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Success Factors of the Blockchain ConsortiumAccording to an analysis result of more than 40 consortia, Funding, Membership, Leadership, Governance Structure are key factors for success of a consortium
A consortium can be further promoted when a consortium leader plays an active role in
business and technology development
The optimal governance structure is needed to coordinate the various issues that arise as the consortium proceeds
Motivating the involvement of key institutions in the industry strengthens the
influence of the consortium
Securing enough funds is crucial as it takes a long time and huge amount of capital to test and commercialize blockchain technology for consortium
Funding Membership
LeadershipGovernance
Source: Deloitte(2017)
@2018 theloop
Table of Contents
01. Considerations for blockchainapplication
02. Case study: KOFIA consortium blockchain
03. Expansion in blockchainapplication
11
Korea Financial Investment Blockchain Consortium
• The Korea Financial Investment Association(KOFIA) is the sole self-regulatory organization of Korean financial industry
• KOFIA acts as a think-tank for the financial investment industry, dedicating its efforts to take a leading role in promoting the development and globalization of the Korean capital market
• 25 firms have participated in the consortium, numbers will be steadily growing
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RoadmapApply blockchain technology to authentication, post-trading and trading business of broker/dealers
Expected business
Universal authentication & information sharing based on blockchain
Clearing & SettlementOTC bond, OTC stock,
trading in capital markets
'17 - '18
'18 ~ '19
'20 ~
Authenticationand information
sharing
Post-Trading
Trading
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Process of Government Authentication: As-IsA separate trusted third party (accredited certification body) is required with a high operating cost and a complicated registration process
One year validity
FinancialInstitutionA
FinancialInstitution B
FinancialInstitution C
user
Accredited certification body
Financial Institution(Bank/ Securities)
④ Issue certificate
user
① Request digital signature
② Enter Password
③ Digital signature
④ Confirmcertificate
status
⑤ Send confirmation
results
user
① Apply for certificate &undergo personal verification
② Register
③ Request certificate
Third party required
Need to register in each institution
Our of service when system fails
⑥ Transaction complete
Issue Certificate Use CertificateRegister Certificate
Accredited certification body
Financial Institution(Bank/ Securities)
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Process of Universal Authentication: To-BeIssuance / registration / usage of certificate based on blockchain eliminates unnecessary process and reduces costs
user
Certificate issued through consensus
of consortium members
user
Register once for all institutions
Certificate issued
user
ConstructFault Tolerance
System
Synchronize Certificate
FinancialInstitution
B
Validate Certificate
FinancialInstitution
C
FinancialInstitution
A
FinancialInstitution
B
FinancialInstitution
C
FinancialInstitution
A
FinancialInstitution
C
FinancialInstitution
B
FinancialInstitution
A
Issue Certificate Use CertificateRegister Certificate
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Blockchain Authentication: Shared Data vs. Smart Contract
1. Financial institution confirms user identity2. Certificate is generated based on the certificates that each financial
institution holds3. Upload and share the generated certificate on the blockchain4. Each node authenticates user based on the certificate registered on
blockchain
• The logic of authentication data generation is not verified by blockchain
• If the data registered by each node is reliable enough, Data Replication service can be used instead of blockchain
Blockchain-based Authentication Data Sharing
1. Financial institution confirms user identity2. Each financial institution registers its request to issue certificate on
the blockchain3. Executes smart contract after request is verified4. Users are verified based on the certificate generated by smart
contract on each node
• The contract is executed by the code in accordance to the consensus among consortium members for certificate issuance and usage
• Blockchain ensures the immutability and reliability of issuance/management code generating the certificate
Smart Contract Based Authentication Service
User
Financial Institution A
Financial Institution C
Financial Institution B
Financial Institution D
Smart ContractCertificateAuthority
User
Financial Institution A
Financial Institution B
Financial Institution D
Shared Authentication
Information
Financial Institution E
Financial Institution F
Financial Institution E
Financial Institution F
Financial Institution C
Smart Contract Authentication ServiceCertificate issuance and verification service without a centralized certificate authority based on Smart Contract on blockchain
• Certificate issuance and verification is not delegated to a separate entity
• Instead, Smart Contract executes the service by registering the certificate on blockchain and make it a certification entity that is trusted by all participating nodes
Contents of Contract
• The certificate and its status information are shared by the contract• Information for certificate issuance includes DN, expiration date,
public key, etc• If the node's digital signature in the transaction history is verified,
the certificate is issued based on the issuance request information included in the transaction history and is added to the contract data.
Features
• Blockchain itself becomes the certification authority, therefore does not require a separate certification authority to issue the certificate
• Certificate issuance key is issued every block based on Smart Contract and is used to issue X.509 certificates without managing of a certificate issuance key
• Financial institutes performs the role of RA like accredited certification systems
RA Service RA Service
RA Service RA Service
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Certificate Issuance Based on BlockchainAfter requesting certificate issuance through each securities company, it creates a transaction based on the information required for issuing the certificate and executes the Smart Contract to generate the certificate
Company A Node
Company D Node
[Leader Peer]
⑦ New Block
Generation
⑪ Certificate Registration/Discard List
[LIST]
⑪ Certificate Registration/Discard List
[LIST]
⑪ Certificate Registration/Discard List
[LIST]
⑪ Certificate Registration/Discard List
[LIST]
Blockchain Execution
Blockchain Record
Company B Node
Company C Node
⑩ Certificate Issuance through Smart Contract
⑧ Request Verification and Send Result(Consensus Algorithm)
⑨ New Block Added
Company ALegacy
(MTS/HTS)
① User Authentication
③ Request Issuance of Certificate
⑤ Request Certificate Issuance (BlockchainTransaction Generated)
⑫ Send Issuance Result (Certificate)
④ Create Transaction on Certificate Issuance (Public Key)⑬ Certificate
Certificate Management SCORE
⑥ Create transaction of certificate issuance to leader peer
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Certificate Verification Based on BlockchainVerify certificate validity with the authentication information stored in the Smart Contract of each participant: Provides the same functionality as existing OCSP
Company A Node
Certificate Registration/Discard List
Certificate Registration/Discard List
Certificate Registration/Discard List
Blockchain Execution
Blockchain Record
Company B Node
Company C Node
Certificate Registration/Discard List
Company D Node
[LIST] [LIST] [LIST] [LIST]
Company ALegacy
(MTS/HTS)
② Request Certification(Submit Certificate)
⑤ Check Certificate Status
⑥ Authentication Result④ Extract Certificate Information
③ Verify Certificate Request (Verify Digital Signature)
Certificate Management SCORE
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@2018 theloop
Table of Contents
01. Considerations for blockchainapplication
02. Case study: KOFIA consortium blockchain
03. Expansion in blockchainapplication
Polkadot• A platform for inter-blockchain connection that does not provide its own application function
• Led by Ethereum co-founder and CTO Gavin wood, scheduled to open in Q3 2019
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MS Coco Framework• Provides its own framework for blockchain application in enterprise environments
• Scheduled to open in 2018
21
MS Coco Framework• Constructs nodes based on State Replication Machine
• Supports integration to various blockchains in TEE
22
ICON Project
• The ICON Project was launched to address the problem with interoperability
• Through the C-Rep of each independent community of blockchain, different blockchains can be connected to one another on Nexus
• Multiple Nexus can co-exist and connect with each other as well
• Constructs nodes based on State Replication Machine
• Supports integration to various blockchains in TEE
23
Blockchain Transmission Protocol (BTP)
BTP Comments
• BTP is a protocol to connect transactions between blockchains
• Transmitter blockchain transfers transaction to the receiver blockchain via Notary Channel in Nexus
• Nexus nodes with voting rights to the Notary channels (validator nodes) possess multiple channels, where the Light Client of each blockchain connected to Nexus is counted as one channel
• A Notary channel is implemented based on Multi-Channel feature of Nexus
• Transactions confirmed by respective blockchains can be identified through the blockchain’s Light Client connected to Nexus
Blockchain A Blockchain B
Blockchain B
ICON Nexus Node
Node
Node
Node
Blockchain A Light Client Channel Alight client A
light client A
light client A
light client A
Light Client Channel Blight client B
light client B
light client B
light client B
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25
Blockchain Transmission Protocol (BTP) – (continued)
Notary Channel Transaction Flow
ICON Nexus
Destination BlockchainPortalNotary
Channel
ICON Nexus
ICON Nexus
• Multiple signatures of nodes with voting rights to request Notary
registration are included in the blocks to form blockchains of the
Notary Channel
• The block data with the transactions registered to Notary
channel will be transmitted to the Receiver blockchain via Portal
• When the Receiver blockchain verifies the relevant block data, it
validates the signature of each node based on the certificates of
nodes from Notary channel
• If two-thirds or more of the signatures are confirmed according
to the Notary channel standards which follows the LFT
consensus algorithm, the consensus will be confirmed and the
requested transaction will be executed
Notary Channels Comments
BTP Example – Certification Transfer
Blockchain A Blockchain BICON Nexus NodeNode
Node Node
① Request certificate
Client Client
② Consensus on issuing certificate
③ Issue certificate ④ Submit certificate
⑤ Request validation of certificate
⑥ Transfer validation result using BTP
⑦ Check validation result
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@2018 theloop
Thank you!
@2018 theloop
JH Kim