Blockchain Business Applications
Professor Hubert Pun
hpun@ivey.ca / phubert@ceibs.edu
Cases
• Chow Tai Fook: Blockchain for the Diamond
Industry
– Blood diamond / Sustainability
– Supply chain traceability
• A Note on the Application of Blockchain in
China’s Games Industry Coco Game Currency
– Digital currency / Electronic payment
– Platform for online game, vendor, bank
Cases
• BYD: Blockchain-enabled Green Ecosystem
– New energy vehicle
– Encouraging carbon reduction behavior
– Business Ecosystem
• JD: E-invoice with blockchain
– Electronic invoice
– B2B market / Value-added tax
Evaluation
• Class contribution – 50%
• Group analysis / presentation – 50%
Group Work – 50%
• Come up with a blockchain business idea
– What are the industry challenges?
– What advantages will Blockchain provide over
competing technologies?
– What are the challenges will you would face
implementing your idea?
• Some times in class for discussion
• 10 minutes presentation second day afternoon
• Business proposal (May 15; Fri)
Blockchain Basic
Meaning of the Buzzwords
• Acquiring data
– Through sensors, e.g., Internet of Things (IoT)
• Storing data
– Blockchain
• Understanding data
– Artificial intelligence (AI)
Blockchain Basic
• Blockchain is a distributed, decentralized, public
ledger
– Distributed: Data is stored on network of nodes. All
participated parties maintain and construct the ledger.
– Decentralized: Data is not controlled or governed by any
single entity.
– Public: Transactions can be audited by the public
– Ledger: Transactions are recorded in a verifiable and
permanent way. A complete record of transaction over
lifetime.
Blockchain Basic
• Smart Contracts
– Event triggered executable code, e.g., ship the product
when payment is received, or distribute divided upon
their declaration
– Purpose is to facilitate, verify or enforce the negotiation
or performance of a contract
• Tokens
– Rights to an asset
– Digital token on blockchain (e.g., Bitcoins)
Blockchain Basic
Advantage:
• Immutability
– Do no need a central authority to check integrity.
– Trust in one another without needing a third party (e.g.,
appraiser) or conduct further due diligence
• Distributed consensus
– Each node independently verify transaction before adding to
the record; makes transaction robust and reliable.
– No need to have coordination among nodes; hence, faster
transaction at lower costs.
Blockchain Basic
Challenges:
• No regulatory framework, and not sure how
government can be involved.
• Not compatible among many flavor of blockchain.
• Scalability - database always need to be duplicated.
• Quantum computers
– Blockchain security relies on one way computation
– May be available in a decade
Public Blockchain
• Permissionless, open to anyone
• Each use their own native currencies (for claiming an
underlying asset; also the compensation to miners for
verifying transaction; give the pseudonymous nature
of member)
• e.g., bitcoin and Ethereum
Private Blockchain
• Enterprise or permissioned; access to network is
permissioned, not everyone can join
• An alliance of companies (ecosystem)
– IBM’s blockchain platform, used by Walmart (food tracing)
and Anglo-Australian multinational Rio Tinto Diamonds
Private Blockchain Applications
Adopting Blockchain in Business
Technology adoption depends on:
• Novelty: the degree which is new to the world
• Complexity: level of ecosystem coordination
involved
Adopting Blockchain in Business
Using TCP/IP as an example
• Stage 1 - Single use
– Basic peer-to-peer email on ARPAnet (around 1970s)
• Stage 2 - Localized use
– Private network within organization
• Stage 3 - Substitutive for existing business
– CNET for news, Amazon for bookstore
• Stage 4 - Transformative - new way to do business
– Skype, eBay
Adopting Blockchain in Business
• TCP/IP lower cost of connection
• Blockchain lower cost of transaction
• Currently, records of transaction is huge and very
costly. Everyone has its own record and private
– Stock: settlement (ownership transfer of stock) takes
several days
Adopting Blockchain in Business
• How blockchain will reduce cost
– The cost of verifying a transaction
– The cost of exchanging value without relying on
intermediary
• Ask where resource is being wasted in auditing
transaction or reconciling database and secure
integrity within organization.
– Minimizing verification cost
Adopting Blockchain in Business
• Stage 1 - Single use
– Bitcoin for “bilateral financial transaction”
– Similar to ARPAnet email is for bilateral messaging.
• Stage 2 - Localization
– High novelty but only limited users, so easier to promote
adoption
– Nasdaq, JPMorgan, NY Stock Exchange are all testing
blockchain to replace paper based transaction
Adopting Blockchain in Business
• Stage 3 - Substitution
– Low novelty but high needs of coordination because new
way of doing business
• Stage 4 - Transformation
– Require major social, legal, political change
– Smart contract: Firms have lots of contract (e.g., buyer
supplier, employee relations).
• Would have impact to lawyer, accountants
Private Blockchain Applications
Strength
• Visibility
– e.g., Walmart ships mangoes from Mexico
• Aggregation of information from various places
– e.g., Everledger diamond
• Validation - Digital claims on assets
• Automation - Smart contract
• Resiliency - Byzantine fault tolerance
Private Blockchain Applications
Weakness
• Lack of standardization
• Garbage-In-Garbage-Out (GIGO) problem
– State-zero problem
• Black box effect
– Meta-trust in blockchain
• Inefficiency
– e.g., Proof-of-Work
• Privacy concern
