Blockchain and FinTech: Basics, Applications, and Limitations
This course id from edX, scroll down & click “Read More” for more informations.
About this course
Blockchain is a core technology in FinTech. The original design of blockchain focused on the cryptocurrency “Bitcoin”. Due to its specific characteristics, many companies and users now find blockchain very useful for applications in many areas, not limited to cybercurrencies, including finance, logistics, insurance, medicine and even music. However, the design of blockchain involves cryptographic technology, which cannot be easily understood by those who are not professionals in the area of IT and security.
In order to better understand what kinds of applications best fit blockchain and other forms of distributed ledger technology and the potentials of these emerging technologies, it is important to understand the design rationale, the basic technology, the underlying cryptographic fundamentals, and its limitations. This 6-week online coursewill walk you through the following:
The design rationale behind blockchain and the issues for such decentralized ledger (transaction) systems.
The underlying technology (e.g. how the fundamental algorithms – the cryptographic primitives – work together) behind and how it makes blockchain works and safe.
The differences of the various existing blockchain platforms and what these platforms can provide (e.g. pros and cons of the major platforms).
What kinds of applications (both traditional and emerging) best fit the blockchain technology and how blockchain technology can benefit these applications.
Blockchain does have its limitations. We will uncover the problems and the limitations of blockchain technology to enable developers and researchers to think about how to enhance the existing blockchain technology and practitioners to better address the issues when using blockchains in their applications.
This course will also briefly discuss the downside of blockchain with respect to the protection of criminal activities (e.g. why ransomware always ask for bitcoins as ransom, and the money laundering problem).
The course aims at targeting a wide audience: This course will provide learners a good understanding of the technological, applicability, limitations and “illegal” usage of the blockchain technology.
Understand the design rationale behind the blockchain technology.
Understand the technological and cryptographic components of a blockchain.
Understand the variations and differences of existing major blockchain platforms.
Understand what types of applications best fit the characteristics of blockchain.
Understand the limitations and outstanding issues of existing blockchain technology.
Understand the negative impacts of, in particular, criminal activities in the context of blockchain.
Welcome and Course Administration
Welcome to Blockchain and FinTech: Basics, Application and Limitations
The upcoming Blockchain and FinTech course
will be launched in August this year.
It will be about blockchain technology,
blockchain platforms, applications and limitations.
This is a course aimed for layman learners.
Learners will be able to understand
the fundamental and industrial jargons,
so that you can interact with
key players of the industry.
I look forward to seeing you
in the blockchain course.
The big rise and crash in Bitcoin market
peaked peoples interest in blockchain technology.
But, is Bitcoin equivalent to blockchain?
Of course not.
Some even think that in the near future,
this new technology can change the way we live
and the way we do business.
In fact, we’ll be expecting
new business models
and new business opportunities.
There’ll even be new ways of
exchanging information online.
But do you know what blockchain actually is?
Take a look at the following questions.
Do you know much about these?
Do you know what underlying technologies
make blockchain secure and powerful?
What kind of applications,
both financial related or non-financial
are best fit for blockchain?
How do these blockchain platforms differ?
For example, Bitcoin, Ethereum,
Is blockchain 100% secure?
Can it protect your privacy?
If not, what kinds of protections are provided?
Why do ransomware
request Bitcoin as payment?
Why do people perceive cyber-currencies
as a means of money laundering?
If you want to get more insights,
join the Blockchain FinTech course.
Course Outline and Syllabus
Introduction to Blockchain and FinTech: Basics, Applications and Limitations – Course Outline
Introduction to Blockchain and FinTech: Basics, Applications and Limitations is a six-week six-module course. Each weekly module compiles 6-12 lesson units (or subsections). In addition to the main units of the lesson, there are also Industry use cases highlighting real world examples and applications from different industry sectors.
The major learning activities within each lesson unit include: video discussions of major aspects with peer learners, instructor and community TA, as well as continuous assessment in the form of Quick Check questions, Polling and Word Cloud activities. In addition to these, there are a range of additional resources provided, including blockchain industry news reports, studies and useful links. There is a Conclusion Quiz at the end of each module to draw out the main messages.
Module 2 Technological and Cryptographic Elements in Blockchain
Welcome to Module 2
Welcome to Module 2 Technological and Cryptographic Elements in Blockchain.
In Module 1, learners had an overview of the advantages and disadvantages of a decentralised system and a centralised trusted party in processing, and storing transaction data and you also had a glimpse of some issues to be resolved in a decentralised system.
In Module 2, you will see how blockchain technology works. Blockchains are designed to be immutable. You will see how the cryptographic elements including public-private key pairs, digital signatures and hash values are at work to achieve the special properties of blockchain. In addition to hearing from chief instructor Dr Siu Ming Yiu, you will also meet our guest speaker Prasanna Mathiannal (Co-Founder of MaGEHold) later in the module.
Happy learning and have a great week.
HKU Blockchain and FinTech Course Team
Module 2 Learning Objectives
After completing Module 2, learners should be able to:
understand the basic usages of three cryptographic elements, public-private key pair, digital signature, and hash value;
understand how the three cryptographic elements are used in blockchain to guarantee the properties of blockchain, such as immutability and privacy;
understand basically how blockchain works such as how a new transaction can be appended, how to achieve consensus of miners, and why a miner would like to help.
Video 2.1.1 Cryptographic Elements: Public Key & Private Key
Welcome to Module 2 of our Blockchain course.
In the last module,
we have discussed two issues.
The first one is why we need to have a blockchain.
In particular, we do not want to have
a centralised authority to handle our transactions.
And then, the second issue is about the technical issues
for having a blockchain, namely, the security,
integrity, and the privacy issues.
Now, so in this module, we start to look deeper
into the technical elements of a blockchain
and how these elements work
together to form the blockchain.
The first elements I want to talk about are the public key,
private key, and digital signature.
In fact, they are mainly used
for encryption and decryptions.
The public key and private key,
they always go in pairs.
So basically, each user will have a pair
of public key and private key.
The public key can be open to the public,
so everybody can know your public key.
But on the other hand,
for the private key,
we need to keep it secret.
If you know one’s public key,
you are not able to deduce his private key.
So in other words,
even if you can see people’s public key,
it’s very, very difficult to deduce what his private key is.
In encryption, how are we going to use this public key
and private key pair?
For example, if Alex wants to send
an email or a document to Bob,
so Bob is the receiver and Alex is the sender.
Alex wants to keep the email confidential,
so one way they can do it is:
Alex tries to encrypt the document
before it’s sent over through the internet.
Now, then we try to use
public key / private key encryption.
Alex will use Bob’s public key to encrypt the document.
So in other words, we are using the recipient
or the receiver’s public key to encrypt the document.
And once the document is encrypted,
even if the hacker over the network can get a hold
of your encrypted version of the document,
he has no idea what will be the content.
When the receiver, Bob, gets the
encrypted message from Alex,
he use his private key, then he’s able to decrypt
the message to see the real content of the documents.
So this is how the public key and private key
can be used together in order
to keep things confidential.
So we try to use the receiver’s public key to encrypt
the document and when the receiver receives
that encrypted version of the document,
he will use his own private key
to decrypt the message
inside the encrypted documents.
And the important property is
if you do not have the right private key,
it’s very, very difficult to decrypt the message.
2.1.2 Cryptographic Elements: Digital Signature
Now, the second concept, also very important
in blockchain is called digital signature.
Now, a digital signature basically is very similar
to the physical signature we want to do on a document.
But, right now, we just put it in the digital world.
So if you’re given a digital document,
what you can do is you can create a digital signature
on that particular document, using your own private key.
So when you sign a document,
you used your own private key,
because private keys and public keys,
they go in pairs,
so the corresponding public key can be used
by others to verify your signature,
see whether this signature is from the owner
of the private key.
Now, if you change even one character or just one bit
in a document, the signature won’t match.
So in other words, if the document has been changed,
I can just verify the signature,
and then the signature will tell you that
this is not correct, it’s invalid.
Then you know that the document has been modified
and the signature is not correct anymore.
So this is the second cryptographic element
that is important for the construction of the blockchain.
But then I want tell you an efficiency problem
for digital signature.
So, basically, for any document,
you can also create a digital signature
using your own private key.
But, the problem is if the document is long,
the signature that we created will be also long.
So in other words, the longer the document is,
the longer time to create the signature,
and also the longer the signature will be.
So this becomes an efficiency problem.
If you want to send a document
together with the signature,
over from one side of the internet to the other side,
then it wastes quite a lot of bandwidth
if the document is large
because the signature will
become much larger in this case.
How do people solve this problem?
So we also have another technique,
which is called the hash value.
So given any digital document,
no matter how long the document is,
we can always generate a fingerprint of fixed length.
For example, some of the
common hash value generation
will produce a 160-bit of a fingerprint for a document,
no matter how long the document is.
And this fingerprint, we give it a name
called hash value, and this hash value
has a very similar property as a digital signature.
So if people try to change one bit, or one letter,
in the document, the hash won’t match.
So in other words, if I give you the document,
together with the hash value and, actually,
you can check whether the
document has been changed or not.
If the document has been
changed the hash won’t match.
Another key point is this hash function
is not something secret.
So, in other words,
everybody knows how to calculate this hash.
Or you can get a hold of a function
to calculate this hash value,
so if I give you the same document,
everybody is going to create the same hash,
using the same function.
Now, so you can see that this hash value can serve
as a fingerprint for the integrity of the document.
Welcome to Module 3 – Blockchain Platforms. In the last Module, you saw how cryptography works in blockchain using public-private key pairs, digital signatures and hash values.
In Module 3, we will continue to look at the technical aspects of blockchain including the characteristics of three major blockchain platforms, Bitcoin, Ethereum and Hyperledger. We will explore and compare these platforms under five perspectives including platform design objectives, public vs. private block chain, whether there’s generation of cryptocurrencies on the platform, consensus algorithms, privacy and confidentiality.
In addition to hearing from chief instructor Dr. SM Yiu, later in the module, we will also have Charles d’Haussy (Director Strategic Initiatives ConsenSys) to share his expert opinions on consensus algorithm and trustlessness and immutability of blockchain technology.
Happy learning and have a great week.
HKU Blockchain and FinTech Course Team
Module 3 Learning Objectives
After completing Module 3, learners should be able to:
classify blockchain platforms from five perspectives;
compare three major blockchain platforms, namely Bitcoin, Ethereum and Hyperledger, in terms of five perspectives;
understand more about tokenization and fund raising in blockchain projects.
3.1.1: Classification of Blockchain Platforms (Part 1) – An Overview of the 5 Key Perspectives
In the last module, we talked about
some cryptographic elements, like the digital signature,
public key / private key,
and also the hash function,
that form the basis of a blockchain.
And we also talked about how these elements
work together to form a basic blockchain.
Now, the original idea of blockchain
is to support Bitcoin.
But in fact, Bitcoin is not the only blockchain platform.
There are many available
blockchain platforms right now.
Hyperledger, Ethereum, Ripple, Corda, etc.
In this module, we’re going to talk about the following.
First, we will talk about
the different classifications of these platforms.
And then we will try to compare three major platforms,
namely Bitcoin, Hyperledger and Ethereum.
Now, let’s start with
the classifications of the blockchain platforms.
In fact, we can look at the blockchain platforms
from five perspectives.
The first one is whether the platform
is designed for generic applications or not.
And the second perspective is whether
the blockchain is a public blockchain or not.
And the third perspective is, we want to talk about
what kind of consensus models or algorithms it uses.
I hope you still remember we talked about
the Proof-of-Work in Module 2.
In fact this consensus model and
algorithm has big impact
on the performance of the blockchain platforms.
In particular, depending on
what kind of consensus model or algorithm you use,
it affects the efficiencies.
In other words, we worry about how many transactions
can be handled in a second by the platform,
or how many users can use the
platform at the same time.
And the fourth perspective is, we want to talk about
whether the platform provides smart contracts or not.
We’ll talk about what are smart contracts later.
And finally, we want to know whether
the platform comes with a cyber token.
So we will try to look at
these five perspectives in detail.
Video 3.1.2: Classification of Blockchain Platforms (Part 2) – Perspectives No. 1 and 2
The first perspective is whether the blockchain platform
is designed for generic applications or not.
Sometimes the design of a platform
may only be for some particular industry
or the design of the platform may be generic.
In other words, you can actually use the platform
to develop applications in any industry.
Now let me give you some examples.
For example, Bitcoin actually is a very specific platform
because Bitcoin is only for the transactions,
the processing of the transactions
of this particular cybercurrency only.
So you cannot use Bitcoin to do anything else.
Or you cannot create any
applications in other domain areas.
If you look at Corda, basically the design of Corda
is specially for the financial industry.
And there are many others,
such as Openchain,
is basically created for digital asset management.
If the platform is specially designed
for a particular industry,
they will have specific features
only fit for that industry.
For example, in Corda, basically, they allow you
to write programs that you can incorporate
some of the legal expression,
because the financial industry worries a lot
about whether the transactions follow the law.
So that’s why they have
particular features to allow users
to write programs that you
can embed legal expression
into the transactions.
But on the other hand, for the generic platforms,
then most likely
they will not have these kinds of features,
and then you can use it to design and implement
any applications in any domains.
So we’ll try to look at whether the platform
is a generic one or is specially designed
for a particular industry.
Now, for the second perspective, we want to know
whether the blockchain is designed
for a public blockchain or not.
Now, if you look at the original design,
in Bitcoin, everyone can join Bitcoin
without being verified their identity.
In other words, I don’t care who you are.
As long as you want to join, I will allow you
to join the blockchain easily.
They say that is permissionless,
meaning that you don’t need to get permission
in order to get into the blockchain.
But however, think about it,
if blockchain is used by some big enterprises,
what they want to do is,
they might want to create blockchain for their business.
Now then they may have a concern.
If everybody in the public can join the blockchain,
and they also introduce randomness into this problem.
Even if the miner has more computational power,
they may not be able to get the answer
faster than the other miners.
So that creates a fairness of the system.
In other words, we do not want some of the miners
who have lots of computational power
to take control of the whole blockchain.
And of course, if you still understand
what I talked about Module 2,
you can see in the Bitcoin platform system
it actually allows fake transactions to exist.
And then what we do is, we allow the transaction
to be put in the blockchain and then we can have
multiple blockchains; some with the real transactions
but some with the fake transactions.
But finally, we’ll try to take the majority
to rule out the fake transactions.
And in other words, we depend
on the length of the chain.
We try to believe the longest chain is the correct one.
Because the basic principle behind is
most to the participants are honest.
So that’s why, if most of the participants,
most of the miners are going
to append the transactions
in the longest chain,
then we would believe
that this chain is the correct
chain for all the transactions.
Now if you understand this
principle, this Proof of Work,
then probably you can
see some issues behind.
First, it takes time for the
miners to do the calculation.
In particular, to solve
the mathematical problem.
Then it affects the efficiency
of the whole blockchain
and also it’s a waste of
resources, of computing resources
in order to calculate
meaningless math problems.
Now the second issue is at any time slot,
there can be different
versions of blockchains
existing in a system.
At any time or point, we still have
an issue to talk about when to confirm
if a transaction is really settled.
Now in the real Bitcoin system,
what they do is
they recommend the user to
wait a certain amount of time,
like, say 10 minutes or 20 minutes,
until the transactions get
stable in the longest blockchain.
Then they will confirm that this
transaction is really settled.
Otherwise, we cannot
guarantee the transaction
would be put in the
blockchain at that moment.
So you can see, this waiting also takes time
until the chain gets stable.
So the whole thing will slow down the performance
of the whole blockchain platform.
So in other words, on the blockchain platforms,
if you are using the Proof of Work as
the consensus model or the algorithm,
that means that the performance
of the platform must not be fast enough.
Now you can see that in many applications
this kind of performance is not acceptable.
So in the past few years, there were many, many
consensus models and algorithms
proposed by different people.
In fact, people are trying to use another concept
to work on this consensus algorithm,
which is called the Proof of Stake.
Now the basic idea behind is very simple.
Because you can see in the blockchain,
you know some people are holding
tokens or the cyber coins.
So we want to let the wealthy
people to make the decisions.
Now the rationale behind is very simple.
If I’m the one who holds a lot of cyber coins
in this blockchain platform, I do not want
to do anything illegal, I do not want the
fake transactions to be inputted
in the blockchain platform.
So that’s why these kinds of
people will try to make sure
that the transactions are correct before
they are appended to the blockchain.
Now more precisely, what they are doing is
the one who holds more coins
will have a higher chance
to make the decision to append
a new block into the blockchain.
In this kind of Proof of Stake,
they usually will introduce
randomness into who will be the guy
who makes the next decision.
But then if you more coins
then you have a higher chance
to make the next decision to append
a block into the blockchain.
There are many variations
on this Proof of Stake.
For example, there is one variation that
they want to look at how long you’ve held the coins.
So in other words, in addition to seeing
how many coins you are holding,
they also want to know how long
you’ve held those coins.
They will combine these two factors together
in order to make a choice,
who is the next decision-maker
for appending a new block into the blockchain?
Now if you look at the existing blockchain platform,
there are many others.
For example, Ripple basically has
its own consensus algorithm, which they call
a Ripple Protocol Consensus Algorithm.
And there are some other platforms,
they try to use voting.
In other words, they will let the miners to vote
which transactions to be appended to the blockchain.
But what the main reason behind is, if you pick
a fast enough consensus algorithm,
actually can increase the efficiency of the platform a lot.
We want to make sure that this consensus model
is fair, secure, but at the same time
we want to increase the efficiency.
3.1.4: Classification of Blockchain Platforms (Part 4) – Perspectives No. 4 and 5
The fourth perspective is related to smart contracts.
If you look at the original design of blockchain,
for example, if you still remember
what I talked about in Module 2;
we actually talked about the original design
of blockchain for Bitcoin.
Now in this kind of blockchain platform,
it’s not programmable.
In other words, people cannot write any programs,
any additional applications
on top of these blockchain platforms.
The only purpose of the blockchain
is to process the transactions
of the bitcoins of the users.
Now, but then in 2013,
smart contracts started to be proposed in Ethereum.
People usually mark this as Blockchain 2.0.
So from 2.0 onwards,
then we can actually use smart contracts
to write programs and create new applications.
Now, so you can see that smart contracts
are very important
in the development of blockchain platforms
because they open up the opportunities
for different developers
or different companies to
come up with new ideas,
to create new applications in
Now but then having smart contracts,
of course is good for
then we can have the chance
to develop different types
of applications for different disciplines.
But actually, it also brings
a lot of security problems
into the blockchain platforms.
And lastly, some of
the blockchain platforms
will come with a cyber currency,
and some of the platforms,
they may not have a cyber currency.
Basically, most of the cyber currencies
are created for money raising.
In particular the ICO we talked about.
Cyber currencies are also used as a token
to be spent or paid on a transaction.
Now in other words they have a platform,
they create a new cyber currency.
One of the main purposes is to
attract you to stay in the platform.
So you just get a hold of my
token and then the token
can only be spent on my platform,
so that’s why you will stay in my platform
and try to pay for the
transactions in my platform.
Having this kind of token,
they hope that the price of
the token will be increased
so that the owner can make more money.
So that the people will try to invest
in your applications more
based on this new token.
You can see that this cyber currency
is not a necessary element
in the blockchain platform.
So not all the platforms
will have their own cyber currencies.
For example Hyperledger and Corda,
they do not have their
own cyber currencies.
And some of them may not
even have the capability
for you to create a new token.
But on the other hand,
it doesn’t mean in this platform,
you cannot use any of the cyber currency
in the applications.
Actually, they can still
use Bitcoin, Ethereum,
to be embedded in their applications.
3.1.5: Highlights of Major Blockchain Platforms
Now, what I’m going to do next is try to talk about
the comparison between these three major platforms.
The first one of course, Bitcoin,
which is the original proposal
for using blockchain technology.
The second one I want to talk about
will be Ethereum.
We have an Ethereum enterprise alliance
formed by more than
250 members, including
Microsoft, JP Morgan, Intel, etc.
And then, another major platform
for blockchain is called Hyperledger.
In fact, Hyperledger is formed
by the Linux foundation,
one of the open-source foundations,
and the aim of Hyperledger is to design
and develop enterprise blockchain.
So in other words,
they want to open up a framework,
so that different enterprises can actually create
their own versions of blockchain.
So let’s try to compare these three
major blockchain platforms right now.
Recall that, we are going to evaluate
and compare this platforms from five perspectives.
The first one is whether this platform is generic or not.
The second is whether the blockchain produced
by this platform is a public blockchain,
namely, the permissionless blockchain
or if it is a permissioned blockchain.
And third dimension, is we want to know
what kind of consensus algorithm is being used
in the blockchain platform.
Next, then we’ll see whether it supports
smart-contract programming or not.
And finally, we want to see whether there is a cyber currency
attached to the blockchain platform or not.
Now, if you look at the first dimension,
whether the platform is for
generic applications or not,
then everybody knows that
Bitcoin is not generic
because in the Bitcoin platform,
it is only tailor-made for the processing
of the Bitcoin transactions.
But on the other hand, Ethereum and Hyperledger,
they both can be considered as generic blockchains
because they are designed
for people who want to create
new applications, new projects
on the blockchain platform.
If you look at whether
the blockchain produced
by the platform is a permissionless
or permissioned blockchain,
both Bitcoin and Ethereum
are basically public
because they can allow users
to join the blockchain
without any verifications.
But on the other hand, if you
look at the design principle
for Hyperledger because you
want to help the enterprises
to create their own blockchain
for their applications,
so that’s why they
put a criteria there,
only the trusted parties that can go through
a verification process can be allowed
to join the blockchain, so
that’s why we will consider
Hyperledger is a permissioned blockchain.
Now in that case, then you can see that Hyperledger,
sometimes, people will consider that
it’s not a fully decentralised blockchain.
If you look at the consensus algorithms or models,
then you can see that Bitcoin will,
of course, use the original design, proof of work,
and Ethereum, at the beginning, they also adopted
the proof of work as the consensus algorithm
for their system.
But however, they find it, right now,
the performance, that the efficiency is not good enough.
So right now, what they are doing is they try to move
from proof of work to proof of stake right now.
Hyperledger, the design principle is that they hoped to have
a framework so that different enterprises
can create their own blockchain systems.
So that’s why, in this particular area,
in Hyperledger, it’s very flexible.
You can pump your own consensus algorithms
into the blockchain design.
So basically, you can use proof of work, proof of stock,
and also, even other consensus algorithms
you can come up with that are applicable.
If you’re looking at smart contract,
now Bitcoin is not designed
for people to write new applications.
They only process the Bitcoin transactions.
So that’s why, in Bitcoin,
they will not support smart contracts.
But on the other hand, both Ethereum and Hyperledger,
they both support smart contracts.
And finally, if you look at the last criterium,
then, of course, Bitcoin has the cyber currency
as Bitcoin attached to the platform
and Ethereum also has its own
cyber currency called Ether.
But now, on the other hand,
Hyperledger does not want to stick
to any cyber currency or cyber tokens,
so that’s why they don’t have any
cyber currency attached to it.
Before we end the module,
I want to talk about a trilemma.
Now, you know that, actually,
what blockchain wants to do is
to achieve three properties:
the decentralisation, the security,
or people usually mentioned it
as consistency integrity issue,
and finally, if you want to put
it in real applications,
we want it to be scalable, scalability.
If you look at these three platforms,
then obviously, none of the platforms can achieve all
these three properties simultaneously at the same time.
Of course, the security or the integrity must be satisfied
by any blockchain platform,
otherwise it’s not usable for any applications.
This is the original design principle for blockchain,
so that’s why we want to make sure
that everyone there is consistent and secure.
If you look at Bitcoin, Ethereum, Hyperledger,
basically, all three can achieve this property.
If you look at the decentralisation, as I mentioned,
only Bitcoin and Ethereum are
So in other words, they are fully decentralised.
But on the other hand, if you look at Hyperledger,
they try to make a verification process there in order
to check whether the party can
join the blockchain or not,
so it’s not fully decentralised.
But then, on the other hand, if you look at Bitcoin
and Ethereum, because they
use this proof of work to do
the consensus algorithm, so they slow down
the efficiency of the platform.
Hyperledger allows you to use
all kinds of consensus algorithms.
I hope you start to understand the trade-off between
a permissionless blockchain and the efficiency.
Now, if in a permissioned blockchain,
the parties that can join the blockchain
are actually trusted parties, so that’s why you can see,
in the Hyperledger platform,
we actually can achieve a more scalable platform
than the Bitcoin and Ethereum.
3.2.1: What is Ethereum? (with Charles d’Haussy from ConsenSys)
Ethereum is the second generation of blockchain.
It really helps to programme and use smart contracts
and gets much more complex
in value adding propositions on a shared network.
You might have interacted on the Ethereum
which helps to raise money
and support and fund different projects.
Some of you may have played with CryptoKitties,
for example. some other people
are using Ethereum blockchain without knowing.
Ethereum blockchain is used to take browser
by the United Nations
or the World Bank to help refugees.
The Ethereum blockchain is used for
creating digital identity
for people which don’t have identity.
The Ethereum blockchain is used in financial services
to coordinate and
disintermediate financial services as well.
The Ethereum blockchain is used in the gaming industry
to play and work with different digital assets
which are created from the the digital games.
The Ethereum blockchain is
the second biggest blockchain in the world
which brings together
more than 300,000 developers today.
Ethereum is a shared platform, totally trustless,
with more than 10,000 different nodes.
More than 300,000 developers in the world
are developing open source software
on the open source platform, that is Ethereum.
Being open source, the Ethereum blockchain
allows anyone to benefit from the progress
of the world community.
The recipe of software on the Ethereum blockchain
is open source.
You can bring on your own ideas,
you can build on the ideas of someone else,
in a very affordable way.
The innovation on the Ethereum blockchain
is not only coming from one country or one city,
It’s distributed all over the world.
Everyone benefits from the platform
and it’s really the benefits of the open source software.
The Ethereum blockchain builds the Web 3.0.
It’s an innovation for everyone, from everywhere.
It’s not only Silicon Valley innovation
dominating the world,
it’s everyone from Asia, Europe, US and Africa…
building a joint platform, a common platform
for innovation and entrepreneurs.
3.3.1: What is Ethereum’s Place in Today’s FinTech Ecosystem? (with Charles d’Haussy from ConsenSys)
So what is Ethereum and what is Ethereum’s place
in today’s blockchain and FinTech ecosystems?
The history of blockchain started more or less in 2009
with the Bitcoin blockchain,
which was the first experimentation
on distributed ledgers.
As this blockchain, Bitcoin, still exists.
It has demonstrated good value.
It has demonstrated long lasting performance
and securities and a lot of value has been created
around this Bitcoin blockchain.
But this blockchain is also so early and so old,
its technologies can only deliver so much.
So back in 2013-14, there were a lot of thought leaders
and technologies which thought
how they could improve
and basically go to the next step
building on the fundamentals
and building on the idea behind the Bitcoin blockchain
to build something which gets smarter in a way.
And that’s where the Ethereum blockchain
started to arise
from different technologies working together,
among them, Vitalik Buterin, as well as Joseph Lubin,
the founder of ConsenSys later on,
and they work with different groups of people
to basically create a distributed computer.
And they created the first concept of “smart contracts”,
where really, you get this technology
of coordination getting much smarter,
not only registering transactions.
You gave me something,
I put something in my wallet,
and the money is out of your wallet and in my wallet,
but getting something which
gets much more capacities,
with having some kind of a virtual machine
within the network
where you can really start to get “smart money”.
You can get “smart contracts”
and you can start to have conditions
on all the distributions
and all the coordination works you want to do.
So to speak, to Ethereum’s smart contracts,
what are some useful Ethereum smart contracts
and actually what is a smart contract?
So a smart contract is basically a contract,
so it’s something which will work with
input and output.
If you want to have an online voting system
and you want this voting system to be decentralised,
you will design a contract which will
basically identify everyone around us,
all the people involved in this vote,
register their vote, and depending on the votes
which have been recorded by the smart contract
in a trustless manner,
the smart contract will issue the results of this vote.
You can also decide, for example,
that the smart contract will be
some kind of virtual entity
existing only on the network in a trustless manner,
or distributed manner.
And if we agree that I’m going to work for you
for a couple of days and you’re going to pay me
a couple of hundred dollars for that,
the smart contract will be basically doing the arbitration
and making sure that I did the work,
so I will document to the smart contract
I was working for you and I delivered the job.
And then, the smart contract
will order the money from you
and after you receive the proof that I was working,
the contract will give me the money,
for example, for some work.
It’s a kind of an escrow system, which is distributed.
But, from this escrow use case,
you can go with much more complex
kind of transactions
and much more complex kind of works.
So today, you see people building stock exchange,
for example, on the blockchains.
You see people building a full set of
contractual relationships between companies
and individuals on the blockchain also.
And what it brings, it’s a very low cost
and very inclusive technology,
and very inclusive way
to design interactions between people and companies
and/or companies to companies.
So what you will see in the coming years,
and it’s already starting,
it’s really like a lot of the non-digitalized
kind of relationships we have
and a lot of non-digitalized transactions we have,
moving in a digital world
and a lot of these interactions
will happen on the blockchain because it brings
a very low cost and trustless platform
for all these people to interact together.
So think of a working contract,
think of maybe the proof of you owning your apartment
or your piece of land, thinking of your identity.
Instead of having the data kind of owned and managed
by some big corporations,
you will very soon be able to own
all the data about your identity,
your behaviours online,
your different habits on the new internet,
and being able to share them with the people you want
and possibly, also monetize them.
So the blockchain in the context of the internet,
the blockchain technology and the Ethereum technology
is bringing what we call the Web 3.0.
So it’s really an evolution
and a new layer of technology
on our internet experience.
So in the future, you will see in terms of blockchain
will not come to you in a very complex manner.
Most probably it’s a blockchain
and we hope very soon will be totally invisible for you.
And the same way you send email today,
you don’t really realise that there is so many encryptions
being done, there is so many different
stack of technology being used.
The Web 3.0 will bring you more value
and will appear to you as fairly similar
to what you’re doing today,
but with a very new experience.
3.4.1: Trustlessness and Immutability of Blockchain Technology (with Charles d’Haussy from ConsenSys)
What we mean trustless technology is that,
if a rural bank away from Manila,
is confirming that they gave to you,
for example, a loan,
or they give to you a bit of cash
because you came to visit them,
we can basically document that
and this transaction is written in a trustless way
on the ledgers, which at the end of the day or every hour
can be basically rebalancing the ledgers.
So every transaction is documented and immutable.
So what do you mean by immutable?
So immutable means when you build
a blockchain infrastructure,
you build a coordination platform
between different parties.
And if one of the players, one of the bank for example
or one of the rural bank or one of the ATM, for example,
is claiming that $100 was given to someone,
so there is $100 less in this office,
the data will be recorded one time and shared
between all the different actors so everyone will know
that there is for example, in your branch $100 less,
and this cannot be changed anymore.
So there is no way for anyone to fake the information.
There is no way for anyone to play the system,
because the system is distributed
and the system is trustless.
So we share the same infrastructure.
If there is something happening in my branch,
If there is something happening in your branch,
it’s also recorded and I cannot change the records.
The records are immutable.
So I know exactly what has been happening
and I will trust what you will declare to me
because I will be able to cross check that
with the transactions from the blockchain.
So it’s not only about building the trust,
but it’s all about automating all the kind of book records
and audits and declarations between different parties.
All of this is automated on the blockchain
and also reports come to you automatically.
So are there any disadvantages to trustlessness,
to immutability on the blockchain?
There is no disadvantage to trustless in my opinion.
I think this is a very strong value proposition.
If we can work and collaborate at scale,
between so many people and entities,
it brings value, it brings access.
Now when they are immutable, there is always
a question mark, do you want to have always
on the blockchain a record of every transaction?
In this case, you will use encryption technologies
where we will be able to document each other
and trust each other about
some transactions being made
but without having all the transparency
about these transactions.
Maybe you don’t want the world to know
that you’ve been taking $100 from your bank account.
So there is encryptions capabilities nowadays
in the blockchain solutions we deploy,
to allow you to still record a transaction,
so we know there is $100 less in your bank accounts,
but the world blockchain does not know about that.
This is where we are coming into the game
what we call the different layers in the blockchain.
So you might have a backbone
which is the Ethereum blockchain
and you build some applications on certain layers
on the top of this base layer
where you’re going to run transactions.
And in case of any problem, you’re going to come back
to the main net, is what we call the main net,
the backbone of the blockchain
to basically do the arbitration and realise,
was there transactions happening?
Yes or no?
But all of these transactions can happen
on what we call sidechain or layer two chains,
where you don’t have to document to the world
about everything in your life.
So is everything on the main net public,
All the data is publicly accessible,
but you can treat this data also.
So you can possibly, for example, we can share
on the main net a hash about one transaction.
So we know the transaction is there,
but only you and me
we’ll be able to understand
what is this transaction about.
For the rest of the network, people will just see a series
of encrypted numbers which are meaningless to them.
3.4.2: Proof of Work and Proof Stake (with Charles d’Haussy from ConsenSys)
When we talk about the Ethereum blockchain,
what is meant by it runs on a “proof of work” protocol?
So that’s a very good question.
So Ethereum blockchain was launched in 2015, right?
And the way as a security of the network was designed
was by using some miners, which were basically
scanning all the transactions
and bringing them in blocks after blocks,
so this is why we call them a blockchain.
And this activity of scanning
and proving all of those different transactions
and putting them into blocks is called mining today,
and it’s called a proof of work.
The Ethereum, what we call the Ethereum 2.0,
is around the corner.
This is being delivered right now.
And there will be a transition from proof of work,
where you’re gonna use machine
and computers to look at all as the transactions
and validate these transactions on the network.
We got to move from machines doing it
to purely software
using a bonding system where people will be basically
using software to validate and
build validated transactions
and build the blocks,
and using a bond or so to make sure
that these don’t validate the right transactions
or start to play with the system.
They might be losing their bond.
So we are moving from a proof of work system
to a proof of stake system, staking being a bond
and you put a little bit of Ether as a poof,
as a kind of a bond,
to guarantee that you will do a proper job.
So what happens when you don’t do a proper job?
You lose your bond.
So you’re incentivized to do a proper job.
And there is also a system that the job is being made
by different people at the same time
and the people are checking the job of each other,
so I cannot claim you’re not doing a good job alone.
Different people need to basically, look at your work
and say, okay, he has been
basically faking the transactions
and a certain number of people all agree
that you are faking your transaction.
So the system will basically grab your bond
and you’re losing your bond.
So who makes that distinction?
Who says user X is making bad transactions?
There will be thousands of miners
and thousands of validator in the new system,
so we will not call them miners anymore, but validators.
And these thousands of validators
have a system in place
where they’re cross-checking each other
and it’s purely mathematical
and purely organized by the network itself.
So everyone checks the work of everyone
and when there is certain number of people flagging
misbehaviors from someone, then there will be
an automated system where the bond
of this person will be just burned.
So instead of using thousands of computers,
you’re using thousands of validators
which are much less impacting the environment.
So yes, it’s beneficial.
3.5.1: Tokenizing (with Charles d’Haussy from ConsenSys)
So tokenizing is one of the
value propositions of blockchain.
And today, many people are looking at this way
to basically create digital shares
of many illiquid assets.
That’s what tokenization is.
So if you think of a building,
today if you want to buy a building, you buy a building.
And you buy the full building.
And this can be very costly, and the building is a building
and there is one proof of ownership of this building.
If you want to digitalize this building,
how are you going to create shares?
And how will these digital shares
of the building be issued?
And what is the most efficient way to do it?
Some people are doing this for many, many years
by creating a very expensive fund,
using a lot of lawyers to create a fund,
which he presents a building, and then selling shares
of the fund which owns the building.
And this process is actually very paper-intensive
and extremely costly,
and not really affordable for many people,
and not easy to distribute after that.
So this movement of tokenization is thinking
all these illiquid assets which we are surrounded by,
should it be a real estate,
should it be company shares of non-listed companies.
So before an IPO company shares exist.
Maybe, your bakery is a company down the street,
and you can be a shareholder of this bakery.
Or you can be a shareholder of a project
which will be happening for a few weeks
and then fade out.
So when you go through the process of tokenization,
you create digital shares of something
which is not liquid,
or something which is not adding avenues to be exchanged.
3.5.2: What is a Token? (with Charles d’Haussy from ConsenSys)
What is a token?
So a token is a vehicle built on the blockchain
to create values
or to have some kind of specifications, right?
So the first token you’ve seen
on the Ethereum blockchain was the ERC-20.
So the ERC-20 was able to hold values,
to move value from one place to another,
from one contract to another,
from one user to another,
and just bring the whole value in it.
Since then, the technology keeps making progress,
so you’ve seen many different type of ERCs.
So you can think of many different kind of vehicle
and wrap you can put on this Ethereum blockchain.
So you have, nowadays, ERC-721, you’ve got ERC-1400,
you’ve got ERC, you’ve got plenty of ERCs,
which will all have very specific features
towards very specific properties.
So some ERCs, for example, as the 721,
is a type of ERC which cannot be cut.
So they exist in a very limited numbers of units
and you cannot cut an ERC-2071.
So if you think of an ERC-20, for example,
they are called fungible.
So fungible tokens means if I give you one token
and you want to share half of it with someone,
you can basically cut it in two and send 0.1 Ether,
for example, to someone and send 0.3 to someone else.
So they have the same, I will say, specificities as money.
Some of the tokens will be called non-fungible tokens.
So if I give you one non-fungible token,
it’s one token only and this is the only one.
And then, it creates many different properties
and it brings many different use case for this one token.
Some other tokens will have properties that they will be
only exchangeable between accredited people.
So for example, if I want to sell company shares,
for example, you and me can exchange company shares
because we are adults
and because we qualify to buy and sell shares.
But maybe these shares should not be
in the hands of kids
or should not be in the hands of people
which are living in another country
with other regulations.
So we can start to really create some kind
of programmable money and programmable vehicles.
A token is a vehicle which moves in the blockchain
between the smart contracts
and lives in the blockchain.
You can own it, you can share it, and all of these vehicle
will have different specifications,
and these specifications gives them different properties
for different type of use.
So the most popular is the ERC-20,
but since the birth of the ERC-20,
there is probably hundreds of different type of tokens,
which comes with all different specifications.
So think of a token of a car, like a car.
Some cars are designed to transport families,
some cars are designed to be extremely fast,
some cars are designed to deliver mails and parcels.
Some cars are designed to move food all around the city.
So think of a blockchain of a big infrastructure
and you need to have different tokens for different uses.
And that’s what a token is.
3.5.3 [Industry Guest Speaker] Tokenizing Shares and Fund Raising (with Charles d’Haussy from ConsenSys)
What do you think about the state of the ICO?
Is the ICO dead or is it still a valid way
to raise money for a blockchain project?
So when the ERC-20 and the Ethereum was launched,
many people realized that there were many ways
to use this technology.
And one use of this technology
was raising funds for projects,
what we call an ICO.
So a project would at the time create a token
which will be sold to investors
to basically fund them and help them
to start to bring people together
and build the product.
So this ICO phenomena has been very popular back
in 2017 and 2018, and then now has kind of faded out
because many of these projects
have not always been delivering
what they were promising.
Some of them have been doing fantastic,
some them have been doing poorly
and I think the market has been kind of maturing.
So you will probably not see as many ICOs as before.
You will see them much more structured,
maybe they will not be named ICOs,
but the mechanism of funding projects
using the blockchain will remain,
but will come in different ways now using
more complex types of tokens or complex types
of relationships or mechanism of raising funds,
which will give more guarantee to the investors
and also more guarantees to the people raising money.
But there is always a need to raise money,
there is always a need to digitalize things around us.
So the new mechanism are coming up.
Maybe not they will not be called ICO anymore,
maybe STOs there are many different ways to use
and benefit from the technology to fund projects.
3.6 What is Hyperledger?
Before we start, let’s talk about one important point
about the differences between
Ethereum and Hyperledger.
Basically, Ethereum and Bitcoin are very similar.
They are designed as a single platform,
but on the other hand,
Hyperledger basically is a family
of multiple platforms developed for different types
of applications for enterprises.
In fact, these platforms are very flexible
and they have different characteristics,
they can fit into different types
of applications for the enterprises.
So therefore it is more flexible for the developer
to develop appropriate applications
using different platforms.
The audience, if you are interested in Hyperledger,
can try to learn more on the
differences of these platforms,
so that you can always pick the right platform
to develop your own applications.
Now let’s start to compare Hyperledger and Ethereum.
Now basically all these five categories,
or five perspectives, are interrelated.
So we need to first look at their design objectives first.
For Hyperledger, it’s mainly designed for enterprise,
so mainly for B2B applications,
but on the other hand,
for Ethereum, they aim at B2C applications.
Now in this case, then you can see that Ethereum
will allow users to join the chain on their own.
So therefore, Ethereum will provide a public chain
for the applications.
But on the other hand,
because Hyperledger aims at enterprises applications,
though they are supposed to
be a permissioned blockchain
so only registered or permitted users are allowed
to join the chain, the blockchain.
Now if you understand this,
I hope you still remember the differences
between a public chain and a permissioned chain.
Now for public chain,
we actually require some incentives
for miners to work on the chain.
in Ethereum, we need to give
the miners incentive rewards
in order for the miners to work on it.
But on the other hand,
a permissioned chain of the Hyperledger
is basically for the consortium.
So basically they are willing to contribute
to the blockchain and they are registered users.
So in other words, we do not really need
to give them incentives for the miners to work on it.
Now this also explains why,
if you look at the built-in cryptocurrency,
then Ethereum has its own Ether.
But on the other hand, actually,
Hyperledger does not require such a cryptocurrency,
for the reward of the miners.
Now, if you look at it carefully
and you understand everything I just talked about,
then you can see that Ethereum will allow users
to join the chain freely.
But on the other hand,
Hyperledger has more restrictions
on who can join the chain.
Basically all the users, alone users or registered users.
So in other words, the behaviour
of the users in Hyperledger
are in a controlled manner.
But on the other hand for Ethereum,
because the platform may not know
the real identity of the user,
so the behaviour of the users
is more difficult to control.
Now this also explains why,
when we look at the consensus algorithm,
then Ethereum basically is using the proof of work
in order to guarantee the security of the whole system
and therefore you will take a longer time
in order to process each transaction.
But on the other hand for Hyperledger,
then the user or the developer can have a choice,
more flexible to choose an
appropriate consensus algorithm
for their applications.
In other words,
the consensus algorithm
used by the Hyperledger,
can run faster and require
less resources, less storage
and can be more flexible.
And in fact Hyperledger
even has an option for you
to pick that you do not
require a consensus algorithm
to work on the chain.
And so if you really understand this,
then you can quickly imply
that Hyperledger is more scalable.
And if you look at the number
of transactions per second,
actually Hyperledger can go up
to thousands while Ethereum,
at most is like 15 to 20
transactions per second.
So you can see the differences.
Basically it’s because of
the consensus algorithm
and also Hyperledger is under
a controlled envoronment,
but on the other hand, Ethereum is not.
Then we come to the final perspective.
How about privacy and confidentiality?
For Ethereum, it’s similar to Bitcoin.
For the identity,
we basically use the public key
as the address of the of your account.
So, in other words, we
are using the pseudonyms
and therefore, the identity
off the sender or the receiver
may be hidden.
But on the other hand, as
we talked about before,
the transaction may still be traceable.
And in the basic design, of course,
for the transaction content,
everybody can see the actual content,
so it’s publicly viewable.
Now if you look at Hyperledger,
for example, one of the platforms is called Fabric,
the identity is basically
anonymous and only the authority,
when they do the registration,
can reveal the real identity of the sender
and the receiver.
Otherwise, you know the identity is protected.
And for the transaction content,
in Hyperledger, they have better access control.
so that transaction content can be encrypted.
And the access control can be applied
to allow some of the users to look at it,
while the others may not be able
to access the transaction details.
Now this is actually one of the characteristics
decided in Hyperledger.
The main reason is that,
they enable the company to do business
with different partners.
Even for the same product,
they can have different discounts or different prices.
So only some of the users can see these transactions,
while the others may only see their own transactions.
So let me summarise.
One thing I talked about,
Hyperledger is not for the public.
It’s mainly for consortium.
And Hyperledger has well controlled users
and fly-granted access control for transactions.
So therefore there’s no need
to have a very secure consensus protocol
and the trade-off is we can have a faster
and lighter consensus algorithm.
So that’s why Hyperledger can actually run faster
and can be more scalable.
3.7.1 Hyperledger Blockchain Technologies (An Interview with Brian Behlendorf from The Linux Foundation)
How about we start with, “What is Hyperledger?”
To talk about Hyperledger,
first I want to talk about the Linux Foundation
and the Linux Foundation is a non-profit consortium
of over a thousand different companies
started about 17 years ago to help figure out
how do we make open source projects sustainable.
And how do you build
a vibrant, healthy commercial
technology ecosystem around things
like the Linux operating system, initially.
And the trick there was to figure out
the right balancing act between organizing
and supporting all of the open-source developers
who want to contribute code to a common platform,
but also, giving their employers
and other companies in that space enough room
and enough support to build commercial activities
on top of the common code.
So having both that developer hat and a company hat,
and organizing the companies to help support
kind of a small team of funded staff
at the Linux Foundation
to coordinate those efforts,
kind of like an air traffic control tower.
They figured out how to make that work
for the Linux operating system.
And then, it quickly became
clear that you could apply
that model to other technology domains,
things that are immediately adjacent
to the operating system, such as using Linux
inside of telco hardware or inside of automobiles,
things like security libraries, like OpenSSO,
and then, two-cloud computing,
like the Cloud Native Computing Foundation,
which is the home for Kubernetes,
and all of these additional projects the model was,
companies that are members
of the Linux Foundation also
become members of these
projects and contribute funds
and help those kinds of projects take off.
And so, in December 2015, the Hyperledger project
was announced with 30 initial members.
And some of those were the
names that you would expect,
like IBM and Intel.
Others were unusual, like J.P. Morgan
and a company called Digital Asset,
who you’d not heard of in an
open-source context before,
but it was really a coming together of companies
who realised there was something interesting about
distributed ledgers, about blockchain technology,
that was distinct from all the
that really deserved a place
to be able to be explored,
to develop some underlying technology,
explore those use cases,
and figure out, can we grow these technologies
to be production-ready and enterprise-ready?
So I joined in June of 2016 as Executive Director.
I used the term “nerd diplomat”
to, kind of, better describe what I do.
I am a Linux Foundation employee,
as are 10 of my staff report, as well as four people
based here in Hong Kong, actually.
We do two different things.
We help organize the open-source developers.
We don’t write the code ourselves.
We just try to make sure that there is enough process,
enough structure, enough common elements,
like the same open source licence
is used across all the code,
which is the Apache Licence, but really,
helping them figure out how
do they focus their efforts
on what is a portfolio of technology projects.
Some that you’ve heard, like Fabric, Hyperledger Fabric,
which is very widely used,
and some of them brand-new projects,
like Hyperledger Transact or Besu,
which I can talk about in a bit.
But really, the idea is that there’s this conveyor belt
that we put software projects on
to get them to the point where
enterprises can use them.
And then, the second thing we do at Hyperledger
is help encourage companies
to build on top of this code
and help them understand how to build
support models around it or incorporate it
into their products or services,
or simply be more effective end users of the technology.
And that’s really the main benefit we give to companies
that pay money to support it,
is helping them with marketing, doing events.
But there are things we do that really will help
even the broader ecosystem,
even people who aren’t members of ours,
so that’s kind of, in a nutshell, what Hyperledger does.
What Are the Differences Between Hyperledger and Other Blockchain Technologies? (Brian Behlendorf from The Linux Foundation)
So, what do you think are
the differences between Hyperledger
and other platforms,
other blockchain platforms?
What the major difference is?
So, we have a number of platforms, actually,
within the Hyperledger greenhouse,
as we call it.
And we use the greenhouse metaphor to try
to help people understand we have some technologies
that are very mature, some technologies
that are still starting out,
but they share the same oxygen,
the same airspace.
They sometimes will cross pollinate each other.
And so, to talk specifically about
some of the frameworks that
we have, Hyperledger Fabric
was designed to be a high-performance
distributed ledger system that is highly programmable.
So you can use it for digital assets.
You can use it for tracing of supply chain processes.
You can use it for all sorts
of complex business orchestration purposes.
It was certainly built for enterprise use cases,
which means it has a lot of power.
It also has a lot of complexity to it at times,
but it’s now running on every
major cloud provider in the world.
It offers Fabric as a service and lots
and lots of companies are providing products
that incorporate it and provide support for it.
One of the differences between it
and say, some of the public ledger technologies,
one of those is performance.
In the lab, it can do 3,000 transactions a second,
kind of under ideal conditions, admittedly,
but that’s a much better number
than you’ll see in most others
and there’s work underway
to get that up to 20,000 transactions per second.
There are lots of parameters that you can tune
when different things are important to you,
like supporting a larger
network might be more important
than a higher transaction rate,
so you can adjust certain things about it.
And really, it’s the standard now out there
in the financial services space
in supply chain traceability.
Its deployment is pretty widespread at this point.
Hyperledger Sawtooth was kind of our second project
and it’s a little bit more of an experimental platform.
It in some ways is more true to Nakamoto Consensus
of kinda probabilistic finality.
And it has some novel consensus mechanisms,
like proof of elapsed time,
and it has better abstraction layer between
the smart contract layer
and the ledger layer that has made it easier
to bring in other smart contract languages,
like Ethereum or Solidity or DAML,
which is the Digital Assets Markup Language,
and support those kind of on top of Sawtooth.
And what we find actually is the nature of competition
in an open-source space isn’t
the same as Beta versus VHS.
The nature of competition in open-source,
especially when they’re under the same roof,
like they are at Hyperledger,
is people want to learn from each other.
They wanna understand what have you built
that is cooler than what I’ve got.
And we can bring down a bit of the ego
and certainly, bring down kind of the financial incentives
for parties to split.
And in fact, there’s one part of Sawtooth
that has been broken out
and is being put over to Fabric,
which is that ability to run
different smart contract systems.
The Rapid Growth of Blockchain in Meeting Industry Demand in Asia Pacific Region (Julian Gordon from The Linux Foundation)
Hyperledger is the blockchain project
of the Linux Foundation.
We are open-source with over
270 companies around the world
as our members and a thriving open-source community
of developers working together
on blockchain applications for business.
So, we are very well placed to see
and to nurture the rapid growth of blockchain
in meeting industry demand in Asia Pacific
and around the world.
It is exciting times
in the world of blockchain for business.
Blockchain applications are evolving from pilots
to real world platforms,
and we see a lot of interest and development
in Asia Pacific markets,
from Australia to India, Japan,
Singapore, Thailand, all across the region
and most especially I would say in China.
Projects are going into production in many industries
and bringing benefits including
substantial cost reductions,
dramatic increases in efficiency, transparency,
and security, and the development
of new business models and opportunities.
At Hyperledger, we host a greenhouse
for blockchain projects.
We provide expertise, infrastructure,
and support so that developers and companies
can collaborate in an open-source environment
on blockchain technologies for business.
Our projects have
a broad collaborative software community around them.
Everyone is welcome to participate.
Some are in incubation,
and others are active being used in hundreds of POCs
and implementations globally.
Six of the projects are distributed ledgers.
They are in different stages of development.
Hyperledger Fabric, Hyperledger Sawtooth,
Hyperledger Row and Indy,
which is for self-sovereign identity,
are already active being used
in live business applications globally today.
Hyperledger Besu is an Ethereum client
that runs on both private networks
and the Ethereum public network.
We have four software libraries
including Hyperledger Quilt
for blockchain interoperability and Ursa,
which is a cryptography library.
We have tools such as Hyperledger Calliper,
which is a benchmarking tool for blockchains.
We have also domain specific projects
such as Hyperledger Grid,
which is for supply chain applications.
So, what are the main industries
where we see blockchain having a real business impact
in Asia Pacific?
Hyperledger technologies are being developed
for business solutions across virtually all industries,
including energy, manufacturing, telecom, education,
transport, and in the public sector.
But in Asia Pacific and globally,
we see the most activity
in financial services, supply chain, and healthcare.
In these industries, we already
see Hyperledger platforms
being used in live real world solutions.
In financial services, in areas such as capital markets,
equity trading, mortgage underwriting,
KYC, and anti-money laundering, corporate banking,
insurance, and particularly in trade finance.
For supply chain, we have areas
such as provenance tracking,
cutting bureaucracy at ports and customs,
IoT devices to detect poor shipping conditions
and title tracking for high value goods.
For healthcare, we have areas
including provider directories
and certification, patient-driven healthcare records,
insurance claims processes,
and the whole pharmaceutical supply chain.
Module 3 Reference Reading
References and Suggestions for Further Reading in Module 3
NOTE: We may come across information about comparisons of different blockchain platforms (note that those may not be based on the same 5 perspectives discussed in Module 3. Quite often we’ll consider the comparisons from the domain of applications.
Furthermore, our guest speaker Charles d’Haussy (Director Strategic Initiatives ConsenSys) will talk about how to deploy an application on Ethereum and some interesting use cases of ConsenSys on Ethereum.
HKU Blockchain and FinTech Course Team
Module 4 Learning Objectives
After completing Module 4, learners should be able to:
understand the selection criteria for using blockchain for an application;
list some use cases in real applications that use blockchain and why these use cases are good fits for the blockchain platform.
Module 5 The Limitations, Opportunities and Challenges of Blockchain
Welcome to Module 5
Welcome to Module 5 – The Limitations, Opportunities and Challenges of Blockchain. In the last Module, we looked at the key selection criteria for blockchain applications and some best fit use cases in public and enterprise blockchains from guest speakers from different industry sectors.
5.4.5 Institutional Investment Opportunities in the Digital Asset Space (Henri Arslanian from PwC)
Very excited to be here.
As most of you know, my name is Henri Arslanian.
My passion and my focus in life
is the future of the financial service industry.
I’m very excited to share with you all
over the next couple minutes some of the trends
that we’re seeing with institutional investors
and digital assets.
I want you to take home
six big trends that we’re seeing.
One is the entry of institutional players, stable coins,
large technology firms coming into digital assets,
central banks, crypto funds, security tokens,
and I’ll finish with blockchain,
so a lot of space to cover.
Hang on tight, and let’s kick it off.
First of all is the entry of institutional players.
Make no mistake, a couple of years ago,
Bitcoin and blockchain
developments were happening a lot
by real, two guys and a T-shirt in San Francisco
or in a basement in Moscow
or in a café in Sydney.
But now, over the last one or two years,
we’re seeing a lot of the developments take place
in the broader digital asset space
being driven by institutional players.
That has been very, very interesting
because many of you have been saying
that as banks and large financial institutions
are getting into the digital assets space,
it could be a game changer.
But that’s not easy.
Trust me, for someone who’s worked with banks
and with fintech for many years, it’s very difficult
to plug in fintech inside a bank.
Imagine trying to plug in crypto or digital assets.
It’s even more complicated.
There’s a lot of issue, like a lack of expertise,
the reputational risk, the uncertainty.
I always tell everybody that if you want to get involved,
if you want to go on Friday
afternoon and enjoy your weekend
and have a good time, you should not get involved
in digital assets because
the space moves so fast,
it’s 24/7, and crypto markets never, never sleep.
But really, we’ve been seeing
globally three big approaches
when it comes to traditional financial institutions
approaching digital assets.
The first one has been firms
purely investing in companies.
Firms like Goldman Sachs, for example,
have invested in firms like Circle or BitGo,
investing as a way to learn about the ecosystem.
Another type of company have been those
who have been trying to do partnership
with digital assets companies.
One example is Nomura
that has done a partnership with Ledger.
Again, Nomura has traditional clients.
Ledger is a French digital crypto custody solution,
a security company.
Actually they partnered towards a service to market.
So that’s second category.
Third category are companies
that are setting up new entities
purely focused on digital assets.
A great example of that is Fidelity in the U.S.
where they set up a complete new entity
to entirely deal with digital assets.
And it’s been very interesting what’s been happening
right now when it comes to traditional
financial institutions, but watch this space
it’s increasingly likely that we’re going to see
even more financial institutions enter the space.
Second big development are stable coins.
I mean think about this: if today I send you a Bitcoin,
first you’ll be very happy, but the problem
is you actually don’t know what the value
is gonna be one day, one week, one month from now.
It’s not a very stable store of value so far.
This is why we’ve been seeing a lot of interest
increasingly on stable coins.
What is a stable coin?
It’s a crypto asset that is backed one to one
by U.S. dollar or other fiat currencies.
This ensures that if I send you a stable coin equivalent
of $1 you’re going to have $1 one week, one month,
or one year from now as well.
This has been very interesting for institutional players
because for let’s say who people are trading crypto
at the institutional level,
whenever the markets are choppy
or it becomes very volatile instead of selling
all their Bitcoin and moving
to cash, they can simply
go and keep it into a stable
coins which they remain
in the digital assets space,
but they can have something
that is stable until they want to come back
and actually trade actively.
But also, the other big development
has been financial institutions
looking at using stable coins.
For example think about all the different
inter-bank transfers that we have.
From transfers the bank is doing with the central bank,
or actually all the different transactions
that happen between banks on daily basis.
This is actually quite not only cumbersome,
but they also operate in the
same way for many decades.
And this is the interesting thing is now
enough financial institutions are looking how they can
potentially leverage this technology themselves.
For example JP Morgan recently
announced the JPM coin,
which says basically that if a customer
gives them a dollar they can issue them one JPM coin.
And then between clients of JP Morgan
they can transfer those JPM coins,
basically completely bypassing this existing
traditional rails that exist that are cumbersome
and a bit slow and costly in many regards.
But the other big development,
the third big development,
you need to know about is what’s happening
with large technology firms.
Because while a lot of startups
in the last couple months have been pushing innovation,
have been bringing forward new innovation
to the broader blockchain space,
the big game changer could be large technology firms.
Companies that people trust, people are familiar with,
and also companies that people generally believe
that will be here for next couple years.
Think about a firm like Amazon, that has over dozens
of millions of Amazon Prime members in the U.S.
You know if you buy all your
daily necessities on Amazon,
wouldn’t you maybe use them
as a digital currency as well?
What if Amazon gave you Amazon coin
that gets you for example
discount on your next purchase?
But also if everybody trusted that
Amazon will be here in couple
years, maybe we can use an
Amazon coin on a daily basis.
Well, the best example of this
happened literally recently
last week in early June when
Facebook announced the creation
of something called Libra, their
own global crypto currency.
Which is very very interesting.
Just think about it.
Facebook has over two billion users.
Think about how many times
you use your WhatsApp,
your Facebook messenger,
or your Facebook app on a daily basis.
You trust Facebook.
I mean often you put pictures of your kids
or your parties on Facebook or on Instagram.
Now imagine now if Facebook brings together
a lot of these organisations and there’s a currency,
in their case Libra, which is backed by a basket
of different global assets held at tier one custodians.
And if people can send each
other these Facebook Libra coins
think about your domestic helper in Hong Kong
that wants to send money back to the Philippines
who can do it now instantaneously at no cost
and the person receiving it will get it on its app,
on a WhatsApp instantaneously.
Or think about the Bangladeshi worker working in Dubai
who wants to send money
back home who now can do it
without avoiding those intermediaries who previously
have been in business a long time and can do it directly.
And this opens a whole new
world of opportunities as well.
From micro payments to actually getting other
more peer to peer emergent solutions
very very exciting development to watch out.
This is very relevant to central bank crypto currencies.
Because the big question is,
while for a lot of central banks
what is happening with Bitcoin is still quite marginal.
There may be a hundred million
or so Bitcoin trading a day,
but that’s peanuts compared
to the volume of transactions
happening in existing financial systems today.
But actually, also a lot of startups
do not challenge the authority of a central bank today.
But what if, with Facebook for
example, and their new coin?
Technically with two billion users
Facebook could be the biggest
central bank in the world.
And this is why it is gonna be very interesting
how central banks are going to
react over the coming months,
so watch out for some potential developments
from that perspective.
For example one big debate is whether a central bank
is going to issue its own central bank digital currency.
Well, there’s been some tries on that.
Many countries from the
Marshall Islands to others
have been trying to promote this idea.
Why don’t they issue their own digital currency?
But actually there’s a bit of reticence as well
from many of the central banks as well.
For example the European Central Bank recently said
that while that could be a good idea, it may not be ideal
because the risk for population is that people
take their money away from banks and actually come
and buy digital currencies issued by the central bank.
And this may create financial stability,
a rise of interest rates, and potentially
some issues with the traditional banks.
This is definitely an area to watch,
especially with some of the recent developments
happening with large technology firms.
Another big development is the rise of crypto funds.
This is really interesting when you look at how
institutional players are entering the crypto space.
If you go back in time to the 1990s, in the early 1990s
venture capital firms, hedge funds, private equity firms
were really becoming more mainstream.
What has happened though, at a time,
a lot of the institutional investors they start investing
in these VC funds, hedge funds, P funds,
and they started to learn about the sector.
And then over the next 10, 15, 20 years
they started bringing these skills in house.
For example today, some of the big pension funds they
operate like their own private equity funds internally.
And the same may happen with crypto hedge funds.
Today the industry is really at its early days
when it comes to crypto hedge funds, but really expect
that a lot of the first moves that institutional investors
may do in digital assets may happen via crypto funds
where they could put some money, watch,
learn how the industry operates,
and gradually, gradually, gradually they can actually
learn it and be more active in the space.
Another big development going
on has been security tokens
and this is very exciting.
Because imagine today maybe if I live in a big building
I can not afford to buy the big building myself.
In many cities these big buildings
cost couple hundred millions or a couple billion dollars.
But now, imagine, if I could buy
a little tranche of this building.
I could buy lets say for a thousand dollars
or even a hundred dollars of this big building.
What that enables me is that
I’m able to get some liquidity,
because today a big building
only couple people can buy it.
But if I’m able to separate into little, little pieces
that enables actually more people
to actually be able to afford this asset.
But what’s even more interesting now we’re able
with security tokens to completely streamline
what we call corporate actions.
Today the way we pay a dividend for example
it happens every quarter or
every six months or every year,
and it’s a very cumbersome process.
And also it’s hard to even
know who your shareholders are.
It’s still a challenge for many public large companies.
With security tokens I can know at all times
who my shareholders are, and if I want to make
a corporate action, a dividend payment for example,
I can make it instantaneously in a matter of seconds.
So this is an area where a lot of institutional players
are also taking a look at.
A lot of them are exploring the space
and thinking and wondering can this generally change
financial services as we know today?
We’re still at the very early days and there’s still a lot
of work to be done but we’ve seen in the recent months
people actually tokenize buildings in New York,
some projects in Latin America, so really a lot
of interesting things coming ahead in this space as well.
5.5.1 Facebook’s Libra – Development in Blockchain, DLT and Cryptocurrency (Part 1) (Brian Tang from Asia Capital Markets Institute (ACMI))
When Facebook announced its Libra initiative
in June 18, 2019, it reflected a dramatic new stage
in the evolution of the use of blockchain
and distributed ledger, or DLT, its governance,
and potential regulation.
My name is Brian Tang.
I’m the founder and managing director of ACMI,
which fosters capital markets professionalism,
including with respect to online capital marketplaces.
I’m also the founding executive director
of LITE Lab@HKU, that promotes
law, innovation, technology,
and entrepreneurship at Hong Kong University’s
Faculty of Law in conjunction
with the Department of Computer Science.
To better understand Libra, one would benefit
from a greater appreciation of three influences
that appear significant to its creation
and design, namely Tencent’s WeChat, Bitcoin,
and Hedera’s Hashgraph.
Most of the Silicon Valley internet companies that arose
in the aftermath of the dot-com
boom were primarily driven
by advertising or eyeballs business models.
With venture capitalist funding often forcing focus
on rapid growth over short-term revenue or profit,
many of these business models that were built around
personal data being mined, used,
and sold have led to the privacy issues witnessed today.
In China, unlike the West, credit
and debit card penetration remains relatively low,
and pioneering internet companies often incorporated
transactions, even small ones,
into their business models
that led them to become fintechs much earlier.
For example, online payment
and escrow system, Alipay, was launched
by e-commerce platform Alibaba in 2004
and started with providing prepaid payment services
by Alibaba’s consumer-to-consumer,
or C2C, platform, Taobao,
and business-to-consumer, or B2C, platform, Tmall,
and then, to more than 460,000 online
and local Chinese businesses.
In 2013, Alipay overtook PayPal,
then owned by C2C platform,
eBay, as the world’s largest mobile payment platform.
To incentivize customers
and suppliers to keep or add more renminbi
into its mobile ecosystem,
Alipay offered to pay them
interest through Yuebao, or leftover treasures,
that same year, which within a few years,
became the world’s largest money market fund.
In January 2011, messaging service, WeChat, or Weixin,
was launched by Hong Kong-listed
and Shenzhen-based company, Tencent.
In what Alibaba’s founder Jack Ma called
a Pearl Harbour attack, WeChat introduced
its Red Packets, or Hongbao feature,
during the 2014 CCTV Spring Festival Gala,
the most watched television event show in the country,
with a promotion where users were incentivized
to shake their phones to receive prizes
of digitally transmitted traditional gift money.
Wall Street Journal reported that 16 million transfers
were made in 24 hours
and within a month, WeChat Pay’s user base
expanded from 30 million to 100 million.
WeChat was also prescient in popularising the use
of phone-scannable QR codes that allowed offline
transactions to be made without
physical wallets or cash.
According to Statistica, WeChat has 1.112 billion
monthly active users in Q1 2019.
This user base is more than
the population of Europe and Russia combined
and is only behind Facebook, WhatsApp,
Facebook Messenger, and Google’s YouTube.
According to CAICT WeChat
Economic and Impact Report 2018,
WeChat drove 333.9 billion renminbi
or approximately 48.5 billion
U.S. dollars in home services,
entertainment, and travel services in 2017.
TechNode reports that WeChat
can now handle transactions
in 13 different currencies in 25 countries and regions.
And in 2018, 688 million people
used WeChat Red Packet during Chinese New Year Eve.
Unlike at banks, all of these transfers
are free to customers, other
than a 0.1% withdrawal fee
when funds are transferred from
the customer’s WeChat wallet
to his or her bank account.
At Berkshire Hathaway’s celebrated
annual shareholders meeting in 2018,
Charlie Munger specifically called out WeChat
as a competitor to watch for against
credit card company giants
American Express, Visa, and Mastercard.
5.5.2 Facebook’s Libra – Development in Blockchain, DLT and Cryptocurrency (Part 2) (Brian Tang from Asia Capital Markets Institute (ACMI))
In 2009, the famous white paper on bitcoin,
A Peer-to-Peer Electronic Cash System
by Satoshi Nakamoto, was released.
To solve the double-spending problem
to create a digital currency, the white paper proposed
an open-source blockchain of distributed ledgers
where transactions are verified
by proof of work or mining by peer-to-peer nodes.
The Ethereum protocol that went live in 2015
added smart contract elements to the blockchain
that enabled fundraising for
projects through token sales
and the launch of initial coin offerings, or ICOs.
In addition to anti-money laundering, or AML,
and counter-terrorist financing, or CFT, concerns
about illicit transfer of funds,
ICOs have resulted in fraud, misselling and
and unauthorised offerings of securities
and currency outflows.
Globally, regulators worldwide
have had a mixed reception
regarding cryptocurrencies, with some countries,
such as China and India, effectively banning them.
However, global convergence of views
of some regulatory aspects are emerging.
In June 2019, the Financial Action Task Force, or FATF,
adopted and released an interpretative note
and guidance for the regulation
of virtual asset service providers, or VASPs,
for AML and CFT purposes, and these apply worldwide.
In the meantime, many public blockchain
and DLT use cases are being piloted,
ranging from sovereign self-identity, or SSI frameworks,
to the creation of non-fungible tokens, or NFTs,
as well as security tokens to represent
different traditional illiquid asset classes,
such as real estate and art.
However, to date, adoption of blockchain-distributed
applications, or dapps, has not fully lived up
to expectations, with the most used dapps
relating to gambling.
At the same time, non-public or permissioned
blockchain projects for enterprises,
which do not involve cryptocurrencies,
such as from R3’s Corda
and IBM’s Hyperledger consortiums,
are being piloted across multiple jurisdictions.
These include at least five
trade finance blockchain consortia.
To address concerns regarding trading volatility
and the lack of asset-backing of cryptocurrencies,
stable coins have recently
been developed that are backed
by a collateral of certain main currencies,
such as the U.S. dollar.
However, the adequacy of
and custody arrangements regarding
many of the stable coins have been the subject
to inquiry and in some cases, litigation.
In October 2018, the Financial Stability Board, or FSB,
concluded, “Based on the available information,
crypto-assets do not pose a material risk
to global financial stability at this time.
However, vigilant monitoring is needed
in light of the speed of market developments.”
5.5.3 Facebook’s Libra – Development in Blockchain, DLT and Cryptocurrency (Part 3) (Brian Tang from Asia Capital Markets Institute (ACMI))
As previously mentioned, many other DLTs
have also emerged, with an
increasing number seeking
to provide enterprise-grade solutions.
Announced in March 2018,
Hedera’s Hashgraph is a proof-of-stake directed
acrylic graph, or DAG, based on gossip protocol
and a virtual voting mechanism,
with impressive claims
that is able to be thousands of times faster
than existing blockchain protocols
and has high security based
on Asynchronous Byzantine Fault Tolerance or ABFT.
Users who own HBAR tokens
but do not run a node proxystake their account
to a node and share the HBAR transaction fees.
In community testing on the mainnet at the time
of this recording, Hashgraph’s high speed
and low cost promises fascinating
and Internet of Things applications.
To prevent the contentious forking
that has occurred for open-source protocols
like Bitcoin and Ethereum that divided the community
of developers and token holders,
the Hashgraph consensus
algorithm is patented by Swirlds,
which is controlled by
Hedera’s founders Leemon Baird
and Mance Harmon, and then licenced to Hedera.
Most relevantly, to enable
and demonstrate a world-class enterprise ecosystem,
Hedera created a global governing council
and announced on February 2019
that its initial members comprised
Deutsche Telekon and Swisscom,
financial institution Nomura Holdings,
media company Magazine Luiza, law firm DLA Piper,
together with Swirlds as initial network nodes.
Hedera is seeking 39 global blue chip organisations
in 18 sectors to form its council.
5.5.4 Facebook’s Libra – Development in Blockchain, DLT and Cryptocurrency (Part 4) (Brian Tang from Asia Capital Markets Institute (ACMI))
In February 2014, Facebook acquired WhatsApp
for 19.3 billion U.S. dollars
in its largest acquisition to date,
and in the same year, it hired David Marcus,
PayPal’s president who oversaw
that company’s acquisition
of digital wallet, Venmo, parent company, Braintree,
to run Messenger.
In 2017, Marcus was also appointed
to the board of directors
of cryptocurrency exchange, Coinbase,
and resigned after five months
to become Facebook’s new blockchain research head.
In 1Q 2019, Facebook reported an incredible
2.38 billion monthly active users,
with the largest user base being in India.
In the same period,
WhatsApp has 500 million daily active users worldwide.
In March 2019, its Mandarin-speaking founder,
Mark Zuckerberg, posted a blog
on a privacy-focused vision
for social networking, describing Facebook’s new focus
on private messaging for interaction,
including businesses, payment, commerce,
and ultimately, a platform for many other
kinds of private services.
Although not specifically named,
this has been widely interpreted as his intent
for Facebook to emulate the
approach and success of WeChat.
With the announcement of Libra in June,
The Economist declared that,
“Facebook wants to create
“a global currency” with the stated aim
of financial inclusion to provide free transactions
to serve the 1.7 billion unbanked across world.
Libra will be an opensource
and at least initially, permissioned stablecoin
backed by a basket of different
currencies that will enable
free payment transactions, where the transaction costs
will be covered by the up to 100 members
of the Libra Foundation,
of which Facebook is but one member.
And each of whom will invest 10 million U.S. dollars
in Libra Investment Tokens, or LITs,
and benefit from the interest earned
from the fiat funds in the Libra Reserve.
The founding council members of the Libra Foundation
consist of 28 world-class leaders
from across different industries, including,
in payments, Mastercard, PayPal, and Visa,
in technology and marketplaces, eBay,
Facebook, Lyft, Spotify, and Uber,
in telecommunications, Vodafone,
in blockchain, Coinbase,
in venture capital, Andreessen Horowitz,
and finally, for nonprofits
and multilateral organisations who do not need to pay
the $10 million, Kiva and Women’s World Banking.
Facebook plans to create its own digital wallet, Calibra,
that will need to comply with AML requirements
for users on-ramping and off-ramping fiat currency.
While an incredibly innovative initiative
that has brought together many major global players,
Libra’s sheer potential size
and ambition has already caused some concerns.
Legislators in the U.S.
and EU have called for greater scrutiny
before Libra proceeds further.
Bank of England Governor
and former FSB chairman, Mark Carney, has said
“We will look at it very closely
and in coordinated fashion at the level of the G7,
the BIS, the FSB and the IMF.
So open mind, but not open door.”
Given Facebook’s 2.38 billion monthly active users,
plus the user base of the other
significant council members,
this attitude is not surprising.
If it were a country,
Facebook alone would be the
largest country in the world.
And its proposed introduction of a global currency,
not only makes it a potential systemic risk,
but also purports to allow mainly for-profit
private sector multinational companies to impact
monetary policy, especially over smaller nation states.
It also should be recalled that cryptocurrency is banned
in India, which is Facebook’s largest user base.
Many proponents aim for blockchain
and DLT to be the new decentralised Web 3.0 payment
and identity layer in the internet technology stack.
Accordingly, public blockchain proponents,
such as Consensys’ Joe Lubin, have called Libra,
“a centralised wolf in a decentralised sheep’s clothing.”
Currently, global banking
and finance relies on the financial messaging network
created by the cooperative
Society for Worldwide Interbank
or SWIFT, in 1974, which enables its 11,000-member
institutions in 200 countries to quickly, accurately,
and securely send money transfer messages
to confirm transactions
and handles U.S. $5 trillion worth of transactions a day.
Yet, settlement and payment
of those transactions can take days.
With DLT technologies for enterprises,
like Ripple, seeking to compete in this space,
and JP Morgan’s recently
announced USD-backed stablecoin,
JPM Coin, to enable instant settlement
and payment between the bank’s
global institutional clients,
SWIFT introduced Global Payments
Innovation, or GPI, in 2017
to speed up the processing
time of cross-border payments.
The week after Facebook’s Libra announcement,
SWIFT announced that pending the success
of its current proof of concept trial with R3,
it would soon be enabling payments on DLT-based
trade platforms on SWIFT gpi,
thereby automatically passing them
onto the banking system.
It’ll be fascinating to see how the Libra saga,
together with the overall interaction
and tension between distributed
and centralised approaches to global finance
and payments, unfolds.
Module 5 Reference Reading
References and Suggestions for Further Reading in Module 5
Nicola Atzei, Massimo Bartoletti, Tiziana Cimoli, “A survey of attacks on Ethereum smart contracts”, 2016.
Xiaoqi Li, Peng Jiang, Ting Chen, Xiapu Luo, Qiaoyan Wen, “A survey on the security of blockchain systems”, 2017.
Hai Wang, Yong Wang, Zigang Cao, Zhen Li, Gang Xiong, “An overview of blockchain security analysis”, 2018.
Module 6 The “Evil Sides” of Blockchain and Legal Regulations for Blockchain
Welcome to Module 6
Welcome to Module 6 – The “Evil” Sides of Blockchain and Legal Regulations for Blockchain. In the last Module, we looked at security and privacy concerns of a blockchain platform and learnt about some of the risks with blockchain solutions, as well as, the benefits and opportunities in using blockchain for different industrial applications.
In Module 6, we are happy to introduce five guest speakers to you, among others, Bowie Lau (Founder & MD of MaGESpire) will talk about the “dark” side of blockchain. Then, Malcolm Wright (Chief Compliance Officer at Diginex) will speak about criminal use of payment blockchains. Furthermore, we will hear from Charles d’Haussy (Director of Strategic Initiatives at ConsenSys) who will share his views on whether blockchains need regulations.
K. Krombbolz et al., “The other side of the coin: User experiences with bitcoin security and privacy”, In Proceedings of Financial Cryptography and Data Security, 20th International Conference (FC 2016), p.555-580, 2017.
A.F. Neil Gandal et al., “The impact of DDOS and other security shocks on Bitcoin currency exchanges: Evidence from Mt. Gox”, Proceedings of the 15th Annual Workshop on the Economics of Information Security, abs/1411.7099, 2016.