WHITE PAPER BLOCKCHAIN Global Enterprise And Real-Time Financial .

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W H I T E PA P E R B L O C KC H A I NGlobal Enterprise andReal-Time FinancialComputingLedgerDomain’s blockchain-basedcommunal trust platformDonnelley Financial Solutions (DFIN) partnered with LedgerDomain in June 2018 tobring the power and security of blockchain to clients globally. In this whitepaper,the team behind the blockchain startup explains why blockchain is the missingelement in real-time fiscal calculations.DFINsolutions.com

LedgerDomain was founded two years ago with a simple goal: the application of new blockchain technologies to enterprisesthe world over.Since announcing their partnership in June 2018, DFIN and LedgerDomain are building secure, cloud-based applications forcompanies to collaborate on complex processes with critical regulatory and compliance dynamics. The enterprise blockchainsolution is a multi-user database with cell-level encryption that automates workstreams performed by investment marketteams.“Regulatory disclosures and shareholder communications are manually intensive and complex, and involve multiple internaland external parties,” said Eric Johnson, president of Global Investment Markets at DFIN.“Blockchain-based enterprise solutions address our clients’ pain points by attacking cost, complexity and operational risks toimprove the overall client experience. As the trusted partner for 90 percent of the top 50 fund complexes, DFIN will be able tooffer clients a next generation technology solution to streamline their most complex transactions.”“We’re excited to combine LedgerDomain’s expertise in blockchain technology with DFIN’s digital regulatory and shareholdersolutions,” said Ben Taylor, CEO of LedgerDomain. “We knew we needed a partner that could deliver actionable solutions. Whenwe sat down with Eric and his team, we realized immediately that we shared a vision on technology and trust.”The blockchain has garnered much praise, yet manwy implementation details remain vague. In this whitepaper, we providesome context for the history of financial computing. We also explain why blockchain is the missing element in real-time fiscalcalculations.Communal transactional computing is not new, of course: We all use a global network of ATM machines every day. We’recertainly accustomed to using a Chase ATM card in a Citibank ATM machine. This paper, however, proposes superior andstructured choices for a community’s optimal level of network sharing.We then review the infrastructure needed to attain those levels. Componentized, open-source platforms provide especiallygood value and flexibility. Consequently, LedgerDomain is standardized on Hyperledger Fabric, a Linux Foundation venture. Italso makes substantial use of other open-source components.Next, we explain some related facets of the project: Our code base, extending the Hyperledger infrastructure. Our Selvedge blockchain application server. Our smart contracts. Client applications purpose-built for our customers.In essence, LedgerDomain delivers a highly robust and customized system, with capabilities at any scale.Thanks in advance for your time and interest!From all of us at DFIN and LedgerDomainW H I T E PA P E R B LO C KC H A I N2

ESSENTIAL TERMS.4CRYPTOCURRENCY.4BLOCKCHAIN.4SMART CONTRACTS.5UNIQUE IDENTIFIERS.5COMMUNAL APPLICATIONS, PERMISSIONEDBLOCKCHAINS AND HYPERLEDGER.7HYPERLEDGER.8MEMBERSHIP AND CERTIFICATES.9APPLICATION SERVICES & DEV OPS.9NOTARIZATION.9THE LEDGERDOMAIN SELVEDGEBLOCKCHAIN APP SERVER.10LEDGERDOMAIN TIERED CLIENTS.11LEDGERDOMAIN SMART CONTRACTS.12THE LEDGERDOMAIN STACK.13W H I T E PA P E R B LO C KC H A I N3

Essential termsCryptocurrencyIn short, cryptocurrency platforms have created bothWhen you think of blockchain, you probably think ofThey have generated a unique asset class from thina new type of computing and a new type of trust.its cryptocurrency applications. There are three mainair. Whether any of these coins will have value in thefamilies of cryptocurrency:future, only time will tell. Thus far, we can declare1.Those associated with the Bitcoin platform.tested — and preserves genuine worth.2.Those tied to the Ethereum platform.3.Independent forms.Blockchainthat the underlying technology has been stress-Blockchain is not a database, but rather sits atop aIn essence, anyone may purchase a “wallet” and thendatabase. It is a time-stamped data organization,procure “coins” — which may then be transferred tooften implemented with cell-level encryption. Thatothers. These dealings occur in open networks whereencryption allows many participants to access theirstrangers trade incognito. This ecosystem has beenown cells — and not the cells of other users.1running for nearly a decade and remains surprisinglyrobust. 2Each event within the blockchain occurs when partiesagree to e-sign a transaction. The agreement, in turn,Two points of immediate note:follows an associated “smart contract.” A contractmakes each transaction both binding and irrevocable.1.2.Bitcoin is not a double-entry bookkeepingIf a transaction is struck between two parties, eachsystem (endeavoring to capture bitcoinwill have keyed access — as might a regulator, auditormovements with an attached memo field).or lender.Bitcoin is a living system, with gradualimprovements or changes occurringcontinuously.Blockchains need not include a cryptocurrency.By way of example, Hyperledger, an open-sourceblockchain platform sponsored by the LinuxEthereum, as an alternative to bitcoin, is popularfor hosting its own currency, known as “ether.” It isFoundation, is designed to support deals withouta cryptocurrency component. 3also home to other currencies, CryptoKitties trading,and various proofs-of-concept. Ethereum has grandaspirations and — accordingly — has experiencedgrowing pains.1The original bitcoin white paper, written by Satoshi Nakamoto, has never been bettered.2To our knowledge, neither wallet owners nor traders on the platform have encountered problems.3IBM recently published a path-breaking paper which detailed its many features.W H I T E PA P E R B LO C KC H A I N4

Smart contractsSmart contracts, whose history actually pre-datesbitcoin, were brought to fruition by Nick Szabo. Theyare pieces of code dictating the contractual termsof a transaction upon the blockchain. As they havegrown in syntactical power, smart contracts can nowmediate the kinds of basic financial relationships weencounter every day.Non-monetary transactionson blockchainMany of life’s transactions are perceived to bevaluable, yet remain unquantifiable in any monetarysense. They range from marriage contracts to “trackand trace” in a supply chain — one might eveninclude the sharing of personal medical information.Smart contracts model all those dealings; theFinancial computingFinancial computing consists of three elements:1.Financial planning and analysis.2.Price discovery, contracting, and binding.3.Settlement and netting.blockchain both captures and stores them.Personal medical information is highly regulated(HIPAA in the US, GDPR in the EU, etc.). Blockchainmakes possible the sharing of anonymized compliantdatasets.While the immutability of blockchain data is difficultto reconcile with the GDPR “right to be forgotten,”LedgerDomain is on the forefront of GDPR-compliantAt LedgerDomain, our mission is to help enterprisesuse blockchain. We strive for frictionless commerce– in monetary transactions and elsewhere. Furtherdetails on how blockchain is key to the history offinancial computing are detailed below.blockchain development.Unique identifiersOver time, most blockchain applications and systemswill interface with real-world objects. For blockchainto perform properly, these objects must have uniqueidentifiers: 2D barcodes, RFID tags, machine-readablelabels, etc. Such systems are affordable; generalpurpose input devices like iPhones can read them.W H I T E PA P E R B LO C KC H A I N5

Why blockchain unlocks the fourthwave of financial computingAs noted, blockchain’s cryptographic safeguardsIn a structurally comparable way, financial computinghave enabled cryptocurrencies like bitcoin to beconsists of three disciplines:transferred by strangers — globally. These sametechniques will allow global enterprises to transactwith zero friction across firewalls and borders.Moreover, blockchain’s structure lets users analyzetheir own granular, historical data confidentially.This so-called “one and done” approach equates to a Accounting (concerned with the past) Contractual matching and binding (present) Financial modeling (focused on the future)contract:The first wave of this financial computing paradigm A day journal entry for the first party.ancient Babylon. It was perfected in 1500 with the A day journal entry for the second party.with the cost accounting and tabulating machinesemerged with writing, numbers and money indawn of modern accounting. It then scaled in 1900 An audit-confirm for each of their auditors.that enabled truly global enterprises. A fourth wave And potential proof to any third-party authority.practices. Blockchain is required to drive both real-(for regulatory compliance or taxation.)A perfect day journal is by no means a completeaccounting system, but it’s an amazing start.To understand the implications of all this, we needto appreciate how financial computing has evolvedwithin human economies. Financial computing is theart and science of recording events with a common(1958-2028?) is currently moving towards real-timetime and closed-loop financial computing.The rise of artificial intelligence (AI) and the Internetof Things (IoT) could nudge that final stage towards“financial singularity.” It might realize a dream thatstarted with the earliest of settled societies. En routeto that desired goal, both a communal trust platformand advanced algorithmic workflows are essential.Enter LedgerDomain.unit of account (bitcoins, dollars, gold); a commonunit of time; and more than one financial agent. Inturn, these events can be integrated into “stocks”(like your bank balance) and differentiated into“flows” (like your annual W-2 earnings).W H I T E PA P E R B LO C KC H A I N6

Communal applications, permissionedblockchains and HyperledgerThe sponsors or system owners of blockchain-style2.In the permissioned blockchain’s vanilla form,communal applications might share the followingonly permissioned members can see/decryptmodels among peer organizations and/or theironly their own data.members:1.3.each member may use private channels toa data model in which everyone agrees to use thetransact with trading partners. Likewise, otherssame data fields and formats, yet has their ownmay possess their own channels.clients and blockchain backends;2.client sharing in which all sites use the same client,In the Hyperledger architecture, this partitioning iswhile blockchain backends differ;3.4.called a (private) channel. While provisioning them isfully-shared open blockchain systems witha chore, organizations will appreciate the additionalencrypted data (e.g. Bitcoin or Ethereum);privacy and security.fully-shared and permissioned blockchain systemsAll five strategies have merit — and all will probablywith encrypted data; or5.find their devotees. Even modest standardization,such as the shared data model, can directfully-shared and permissioned blockchain systemsconsiderable benefits towards traders. That said,with encrypted data and partitioning.LedgerDomain is focused on certain variants ofshared-permission blockchain-based systems. WeAnd that gives us the following scenarios:1.In permissioned and partitioned blockchains,use Hyperledger Fabric components as a scaffoldingfor our client sponsors.In the open blockchain’s vanilla form, members cansee/decrypt only their own data.Blockchain typesStrengthsWeaknessesOpportunities1. Shared data modelKey partnershipHard to changeFuture-proof2. Shared client and data modelSite efficiencyMaintainability3. Shared open systemTCOPlatform controlLightning?4. Shared permissioned systemIndustry controlLess flexibleUpgradability5. Shared permissioned and partitionedsystemGold standardExpensiveUpgradabilityThreatsViral infectionSecurity model4 See the documentation on Hyperledger channels.W H I T E PA P E R B LO C KC H A I N7

HyperledgerHyperledger is an umbrella organization under theIt should be emphasized, though, that Hyperledgeraegis of the Linux Foundation. It currently has overFabric is an empty vessel. The sponsor supplies the150 members. Hyperledger products are licensedchaincode instructions, commonly termed “Smartunder the Apache License Version 2.0 Software.Contracts,” as well as the associated client software.LedgerDomain has been a proud member ofHyperledger since 2016.Hyperledger Fabric is componentized: Any of itseighteen or more elements may be substituted andHyperledger Fabric is the organization’s mostreplaced with other open-source or third-partycomprehensive and mature project. It is the platformequivalents.upon which LedgerDomain remains focused. Currentlyin production mode, Hyperledger Fabric 1.3 is theOur whitepaper now turns to three additionalstable release as of October 2018.foci of enduring significance: (1) membership andcertificates; (2) application services and dev ops; and(3) notarization.OBC APIS, SDKS, CLIMEMBERSHIPMEMBERSHIP SERVICESRegistrationIdentityManagementB L O C KC H A I NTR ANSACTIONSBLOCKCHAIN SERVICESCHAINCODECHAINCODE bilityEVENT STREAMOBC SERVICESW H I T E PA P E R B LO C KC H A I N8

Memberships andcertificatesWe liken this process to visiting an auto parts store,The topic of membership may well be the mostchallenges that sponsors face, which include:challenging. In an open blockchain such as bitcoin,every wallet is held by the wallet holder. The walletholder is typically anonymous and the systemmaintains none of his/her attributes. If a walletholder is presumed to owe taxes on a transaction, anhonor system prevails; if another feels that they havebeen mistreated, remedies are pursued out of band.With a permissioned blockchain system such asHyperledger Fabric, a sponsor could of coursebuying all the parts, going to the parking lot — andputting them all together before driving away.Our Dev Ops tools handle a range of non-trivial defining the organizations in the network-to-be communicating crypto/configuration materials fornetwork bootstrapping configuring, deploying, running and monitoring allservices in the Fabric network creating the channel(s) and having orgs’ peers jointhe desired channelsreplicate the open blockchain experience. He orshe could simply invite a large number of randomparticipants, yet the presumption is that sponsorswill invite responsible organizations. They will havevetted one another and, in turn, will manage theirmembers’ participation.At LedgerDomain, we have also built a blockchainapplication server to both manage the originalconfiguration and dynamically respond toenvironmental challenges. We call this Selvedge,appropriating another textile term. It’s a self-finishedAs such, Hyperledger Fabric provides fine-grainedcontrols emanating from a root server — throughan organization to a defined and organizationallybacked participant. Mapping and configuring thesemember relationships is far from trivial; care must betaken to set up members with appropriate privileges.Communities with many members joining and leavingneed to resource their dev ops team appropriately.Application services anddev opsedge of fabric that cannot unravel.NotarizationMany students of blockchain are aware that in openplatforms (like Bitcoin and Ethereum) the so-called“mining” is a critical security layer. The miners’ roleis to safeguard against double-spending and othermalfeasance.In permissioned blockchain systems, the securityenvelope is a little different: The permissioningallows for access control, while the MembershipHyperledger Fabric today is ready to supportService Provider (MSP) coordinates the certificateclients and server pairs — once components havecascade. The administrator then works with thebeen configured and the chain code launched.sponsor/organization to grant member-appropriateHowever, in order to perform adequately underprivileges. Notarization is also an importantload, the administrator must first provide a serverconsideration for the sponsor. Hyperledger Fabricenvironment supporting any and all clients. He or shecan be run with a variety of different notarizationmust then provision appropriate system resources,schemes, each with their own costs and benefits.all in a secure manner.Hyperledger Fabric is designed to be plug-compatiblewith newer schemes as/when they emerge.W H I T E PA P E R B LO C KC H A I N9

The LedgerDomain Selvedgeblockchain app serverHyperledger Fabric is a rich, highly-configurableUsing the Hyperledger Fabric Peer Event Hub,suite of software components from which blockchainSelvedge coordinates messaging to both memberssystems can be built. A vanilla Fabric project isand peripheral enterprise systems. As such, itadequate for both pilots and live implementationshandles exception reporting and failed transactionstargeted at workgroups. Nevertheless, largerwith ease. Selvedge is comprised of multipleblockchain implementations are undeniablycomponents. The backend is 100 percent Golang (acompute-intensive. That brings us to Selvedge.fast, statically compiled language). The configuration,deployment and administration tools are written inSelvedge is the world’s first enterprise-classPython for the sake of flexibility.blockchain app platform. The brainchild ofLedgerDomain chief software architect Dr. VictorSelvedge is also capable of auto-deployment seededDods, it was handmade to meet the expectations ofvia SSH. Similar to a cloud-based machine image,Web 2.0 enterprise companies and their Global 2000complete with chaincode and versioning, this is thepeers around the world.most secure and scalable solution for blockchaindeployment on bare metal without the need forSelvedge mediates between client organizationsspecialized local personnel.and members. In other words, it is positionedbetween their private channels, respective public/private smart contracts and correlated chain code.Critically, Selvedge may be configured to operate in“lights-out” environments, wherein an administratorcan orchestrate and provision without access tomembers’ sensitive data.W H I T E PA P E R B LO C KC H A I N10

LedgerDomain tiered clientsSystem-integrity risks are inherently unequal; thecertificate from a regulator to manufacture/distributesame can be said of clients.a hypothetical medicine. The company then transferscustody to a hypothetical drugstore company.A key initiative at LedgerDomain concerns our tieredclients. We grant a range of certificate authoritiesIn this same model, a physician — Dr. Dods —to organizational members, who in turn deputizeprescribes for a patient, whom we shall call Mr.individual members. We term this “role-basedGumby. Both invocations of and responses from themembership,” leading to purpose-built role-basedattendant smart contracts are seen to the right;clients.unique identifiers for pill bottles are shown at thebottom of the image. Real-life blockchains at work!Here we show clearly how these clients are stackedin administrative “G*d Mode.” Below is a screenshotof the US pharmaceutical supply chain, in which ahypothetical pharmaceutical company receives aRunning smart contractsRole-based clientsBlockchain building upW H I T E PA P E R B LO C KC H A I N11

LedgerDomain smart contractsSmart contracts, or chaincodes, run on theMost modern enterprise ecosystems, however,blockchain network peers. They govern theare far from simple. The key to successful systemcommunity’s transactions. Many basic dealings —performance is to engage key stakeholders insuch as chain of custody in the supply chain or valueworkshops. Design studios can correctly modeltransfer in cryptocurrencies — require nothing moredesired roles and transactions. Everything is thenthan compact sets of instructions.translated to (1) tiered clients, (2) membershipprivileges and (3) smart contracts in an integratedfashion, using the appropriate data science model.The overall process is visualized below.CLIENT SIDETIMES TA K E H O L D E R SREQUIREMENTSDESIGN STUDIOMEMBERSCONTR AC TS Role identification User Stories Transactions Authorization Language User Stories Barcode/Access Wireframes Certificates Generic Tiers & Privacy Transactions Animations Privileges Private Events & Callouts Focus & Pilot AccessSERVER SIDED ATA S C I E N C E (Fields, formats, privacy)O N C H A I N/O F F (Barcode, private, encrypted)B L O C K C H A I N (Permission, partitioning)I N F R A S T R U C T U R E (Host, container, QOS)S E R V E R (App, CA. DevOps, Identity, A&A)B I (Reporting, data sharing)The smart contracts dictate all transactions on the system, either at the global level or within channelsmaintained by a subset of member organizations. 55The LedgerDomain chain code (smart contract) library is implemented in Golang. This enhances readability, reduces ambiguity, and provides either memory orcomputational efficiency. Selvedge’s run-time components and the Sponsor’s smart contracts are compiled, maintained, and QA’d together.W H I T E PA P E R B LO C KC H A I N12

The LedgerDomain stackNow that we’ve seen all the individual pieces, LedgerDomain’s stack looks like this:Sponsor Admin Team 3rd Party SELVEDGEAPP SERVERGOL ANGDATASTOREHYPERLEDGER FABRIC CLIENT SDKTIERED CLIENTSMEMBERMEMBERSHIPBLOCKCHA INTR ANSACTIONSBLOCKCHAIN SERVICESMEMBERSHIP INCODE bilityEVENT STREAMREPLICATED NODES ON SECURE CLOUDW H I T E PA P E R B LO C KC H A I N13

Our system typically runs on hosts such as AmazonWeb Services, although certain clients opt to runtheir own nodes independently, either for complianceRole-basedstakeholderaccessor policy reasons. IBM and Oracle provide hostingservices as Hyperledger members.The instances are configured with a variety ofspecialized replicated nodes, customized basedon factors such as (1) the number of clients, (2)the peak load of transactions per second, (3) eraccessgeographic spread, (4) the average transactionfile size, (5) regulatory stipulations and (6) thenotarization scheme. Our Dev Ops team tunes eachnetwork so your Selvedge server can optimize systemperformance on the fly.Thus we reach the leading edge of blockchaintechnology. Everything is secure and crossorganizational, and works in real time. You’reready to bring a truly disruptive technologyto your own ecosystem with a fellow blockchainthought-leader at LedgerDomain.Learn about DFIN’s end-to-end risk and compliance solutions.Visit DFINsolutions.com Call us 1 800 823 5304W H I T E PA P E R B LO C KC H A I N 2018 Donnelley Financial Solutions (DFIN)14

Hyperledger since 2016. Hyperledger Fabric is the organization's most comprehensive and mature project. It is the platform upon which LedgerDomain remains focused. Currently in production mode, Hyperledger Fabric 1.3 is the stable release as of October 2018. It should be emphasized, though, that Hyperledger Fabric is an empty vessel.

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