 I'm going to Turn this over to Chris Betz who has been working with the EDM council and giving us some Guidance and consultation on blockchain, which is an area of expertise for Chris for the last several years and Chris and I are going to partner on this presentation. So Chris take it away. Thank you very much. I'm sorry I couldn't be there. I'm actually in South Carolina with terrible Ben with at the moment. So Forgive me for any latency Generally when I start off these talks and presentations, I ask the audience how many have been involved or Tracking blockchain and you know since I can't be there with you unfortunately Maybe a quick show of hands just to show my my colleagues How many of you out there have been involved or are currently involved or planning on being involved in a blockchain initiative at your firms a couple of people Couple of people. Okay. Very good. The reason I ask that question is it's It's level-setting as we as somebody at this in the blockchain world for a little while You know, sometimes we we are wrapped up in all the hype and forget That there are still there's still a lot of ground to cover as far as educating familiarizing And introducing folks to blockchain and what it's all about So today David if you could march to the next slide Okay, so You know basically what I'll do is I'll review who's involved with a focus on financial services Why is this important? What are the benefits of blockchain and why is everybody? beginning to spend an Extraordinary amount of money in the domain a little bit about how it works from a very high level It's a technically complex set of technologies. It's not just one technology although a lot of people like to like to describe it as such and Then the thing that is really going to be interesting is watching David explain exactly How this is going to be used? using FIBO with blockchain construct and the importance of building FIBO into actual financial contracts Next slide David So let's talk about who's involved You can go to the next slide Virtually everybody in financial services these days particularly the banks and broker dealers are very much invested from a From a you know an exploration and investment point of view within blockchain within the EDM council just as an indicative data point Somewhere on the order of 90% of the council board of directors in the organization are involved and About 60% of the 200 firms are Involved in some way shape or form So most of these initiatives now are in the exploration phase We're going to with that a little bit more detail But in a matter of I would say 12 to 14 months The narrative has completely swapped out of Bitcoin There's a bunch of lunatic people out there trying to take over the world with With a cryptographic chaotic currency to Blockchain being the foundation of the next generation of financial infrastructure With organizations like DTCC very very actively involved. We can go to the next slide So first let's talk about the platforms There are many platforms out there some focusing on specific industries Some are more open than others some are better funded than others But you can see from the diversity Several of them are well past their series a fundings have very high level blue chip partnerships Digital asset holdings for instance has an investment from DTCC chain has an investment from Nasdaq Ripple is all over the place block stream has folks like read Read Hoffman of LinkedIn as key investors So a lot of interest from a very broad diversity of of organizations and investors From an investment point of view. We also see Wall Street very well represented Well over a billion dollars worth of venture capital has gone into these companies in the last couple of years The switch is occurring right now out of Bitcoin-oriented investments into blockchain data fabric investments many of these organizations many Wall Street organizations are using partnerships and consortia-driven initiatives to orient themselves Dial up proofs of concept and figure and have a forum to work together In order to be able to build these platforms out now blockchain by definition is a network Which we're going to in a little bit But no blockchain can exist with one node you have to have nodes in cooperation amongst industry partners, which Is driving not only a standards collaboration through organizations like EDM and FIBO, but it's also Driving deliberate development initiatives with with a lot of different counter parties The proofs of concept that we see in financial services today are across asset classes and across audiences in other words We see retail-based applications institutional-based applications going across options derivatives bonds syndicated loans commercial paper so If I was to tell you nine months ago that the blue chip banks the top 20 banks would be Working together on collaborating and working our proofs of concept across, you know 15-20 different asset classes. I would have told you you're insane, but it gives you an idea of how rapidly the development in this space is Progressive next slide, please As I mentioned the consortium driven initiatives are Becoming a foundational component not only in financial services, but other industries as well The most advanced is one called R3 R3 CEV is It's it's official company name and they run a group called the distributed ledger group It's a paid membership model each member pays to be a part of this consortia. They dedicate resources They dedicate code and they dedicate Dollars to make this consortium successful Within a year this consortia has attracted over 46 global institutions and they're already launching proofs of concept last week they Launched Corda their own blockchain fabric and they also have Partnered and are beginning to partner with the buy side as well as the regulators as part of their as part of their consortium Initiative, so this is a very very powerful example of what kind of collaboration is happening to make this blockchain Blockchain implementations happen next slide Outside of the semantic graph Standard space At their actual standards being developed along the lines for these blockchain platforms The most notable is hyper ledger. It was officially launched in January. There are over 300 members to the organization today Ethereum has a community of very proactive developers Its tenor is more like the Bitcoin community But it's a completely open platform with its own touring complete strict scripting language to develop smart contracts As well as support use cases not just industry-based, but across industries for things like identity predictive analytics specific cross cross industry use cases that impact everybody so Going through that, you know, obviously next slide David that is attracting a considerable amount of regulatory interest and I would say in the last month the surprising thing is the regulators are starting to Make announcements pronounce pronouncements along the lines of we want this kind of innovation in the ecosystem We want to treat blockchain development and innovation like the internet innovation that we saw back in the early 90s In a nutshell the posture across the regulatory community seems to be migrating towards the first do no harm Type of scenario, which is really fantastic. We've seen the CFTC Very actively involved U.S. Treasury The Fed is and many other central banks are very very actively working with the community trying to gain knowledge understanding and understanding implications of the technology, but from a larger picture point of view what many of these regulators realize is that there are significant savings in costs in cost and Time, but there are also many many different opportunities for regulators to proactively Collaborate and work on these platforms because it reduces regulatory overhead regulatory costs and it about it and enables regulatory surveillance where regulatory surveillance wasn't necessarily possible without an extraordinary amount of expense before Next slide David. So What's got everybody's attention? What are the key factors here that are attracting so many different Organizations to to the technology. What's driving the hype? So next slide David. So the potential benefits and I say potential because the only production blockchain platform out today With any kind of scale is still Bitcoin. There's a lot of emerging Things and there's a lot of promise in these technologies But all the proofs of concept that we see being launched now our early stage rapidly evolving and most seem to consider that these these benefits that I highlight here will be delivered late 2016 beginning in 2017 so running down the checklist really quickly first better security because Blockchain enables cryptographic identity alongside of the assets and In the rights on the blockchain all of the data within that fabric is cryptographically a hashed so very very robust Security from an encryption point of view is baked into the fabric of most blockchains from Consensus transaction validation and verification Basically, it's network driven reconciliation of transactions using algorithms There are many many different console consensus protocols Byzantine fault tolerance proof of work proof of stake many more on the way And this is a very rapidly evolving end of the blockchain But basically what it allows is a network of nodes to work together to verify transactions Virtually eliminating reconciliation in the transaction chain Blockchains enable what are called smart contracts? Basically, this is the team materialization of assets as we know it today stock certificates contracts titles leases Ad infinitum can be replicated using code on a blockchain Stored on a blockchain and then and then distributed throughout a network so that there's one version of the truth One version of the truth is the universal data source reference in other words, basically what you have is a centrally accessible data fabric that's Distributed throughout a network of nodes so basically everybody has a virtual DTCC in the case of financial services Sitting in the middle of their business network and that enables peer-to-peer transactions going across with no intermediary hops Obviously very very powerful When you are building blockchains you you find out very rapidly that you're really enabling very rich data sets because audit trails histories Immutable proofs of transactions are baked into the blockchain as well as the code for the smart contract So you've not only do you have the asset that you also have the changes in states of the asset that you can work with but also the transaction histories that are That have hit that asset for the life of that for the full life cycle of that asset very very powerful stuff And when I refer to asset I'm not only talking about assets like the ones I was referring to before but identity is an asset and Data is an asset. So there's Reference data is an asset. So there are you know, you can you can define your asset virtually any way you can But you can track the value of it moving up and down Very very very closely. It's very very transparent from a from a protection point of view Because all of the information is stored on a network as opposed to in one centralized data store the distributed records are very Makes for a very robust a very robust and hack-proof Data fabric you're not giving You're not giving interlopers one target to go after to bring down an entire Infrastructure they'd have to bring down all nodes in the network corrupt all nodes in the network before the network Would be would suffer any data loss? So all the data is replicated automatically backed up and automatically distributed as part of the as part of the protocols transparent real-time reporting You can enable robust permissioning frameworks that basically allow anybody to read data And take special permission to write data within this fabric and faster settlement I alluded to it before blockchain allows a network of peers to transact directly through the network So no intermediaries involved if Jp Morgan wants to do a swap with Wells they can do it directly amongst themselves and then write that to a Blockchain where all their counterparty's regulators and anybody else any other interested parties who need to know Can know about that transaction if they are They're allowed so very quickly next slide David Let's talk about what is blockchain one of the key? components the key parts David next slide The key parts The key components and again, this is high level. It does get very complex very quickly First you have a network of nodes that are interconnected usually using standard internet protocols Member networks, which will explain in a moment can have different characteristics and different permissioning frameworks based on What they're allowed to do and what they're not allowed to do? the nodes within the Blockchain carried the blockchain distributed ledger itself These are linked blocks of data that represent a chain of transactions Going back since the beginning of time since the blockchain itself was spun up within the blocks within our within those blocks are transactions those transactions are comprised of sender receiver and At the transaction or code itself All that Information is only accessible via an encrypted key Which protects the information and again all those transaction blocks are? Are are blocked and linked together into an immutable record of the transaction history? Next slide David From a logical architecture point of view We're all used to kind of top of the stack bottom of the stack so at the top of the stack you have existing applications today and New applications that are blockchain enabled or necessary for a blockchain You have for instance Wallets which manage keys to transactions and keys to identity very important in the fabric at the top of the application stack Those are all into interconnected through API's and eight SDKs down to the distributed ledger fabric so everything below the API's and SDKs is the blockchain fabric Three key components. I won't go into them all but rights management Which basically says who can be a note on the network who can participate who can read who can write? It it provides a very robust permissioning framework for participation The blockchain itself is the peer-to-peer protocol between nodes transfer back and forth of data full of tolerance The consensus algorithms that I mentioned earlier the actual distributed ledger itself and then the storage mechanism that it's used You can use virtually any storage mechanism that you like We're looking at different organizations now that are using for instance graph storage As well as other different other different storage frameworks The smart contracts are very interesting. We'll go into a little bit more of that and that will be part of David's part of part of the show Smart contracts are encapsulated in virtual machines and containers They are they include things like provenance digital notary They contain also What are called oracles which are calls out to third-party data sources? in addition to the transaction and events that interact with the smart contract and those are all Built into the blockchain and the code is distributed on the blockchain via registry services next slide David There are many different blockchain types and it seems like there are more Emerging that you can enable with that blockchain stack This is a very very high-level decision tree As many people are struggling, you know, why would you use a blockchain as opposed to a distributed database or some other type of Solution well, you know the decision tree is actually kind of simple You know, how many ledger copies are needed? Well, if you are one organization and you only need one internal ledger well You just can use a regular database for that kind of fabric So give Oracle a call if you need many different ledgers and you need many different Counterparties to use and access that then you start running into okay, how do we manage distribution? How do we control distribution and how do we share data back and forth now? This kind of leads to the branching of the different blockchain fabrics that we've seen before So if you have a very closed owner group for instance today's clearing networks Are similar to this where you have basic permission private shared distributed ledgers This is a perfect application for that type of thing where you're not going to bring any counter parties in but you only keep it a very very tightly closed Stack for a specific small group of members If you want anybody to have access to that data and you want to enable enterprise applications retail applications Then you need to figure out a way to permission it for the public component But either maintain control of it from a trust point of view or distribute trust to all the nodes Most of the blockchains being developed on a Wall Street today are permissioned public shared ledgers They're federated, but they're accessible By a different permissioned public entities. So for instance, Korda, which is what our three just launched Actually enables regulators to participate in the network by having their own special type of node on the network They're not given any right access to those nodes, but they can read a certain level of data for their own regulatory reporting purposes and Then on the bottom, you know where you don't have anybody who you can trust But you want to maintain a public posture. This is a Bitcoin blockchain type of fabric where everybody and anybody and everybody can join anybody can be a node and through Proof proof of work, which is algorithmic Algorithmic consensus an algorithmic consensus mechanism. Anybody can verify and mine transactions And they are there they monetize that through through the mining process where they're given Bitcoin awards for solving cryptographic problems proofs Next slide David so high-level transaction flow Transactions created either somewhere on the application stack it can actually be a transaction created by a smart contract based on an event That transaction it hits a node on the network It is validated and grouped with several other nodes in block creation the Rest of the network at that point needs to Based on the consensus rules verify and validate that Transaction and then once the transaction is validated by the network it is Written to the blockchain and that copy and a new copy of the blockchain is issued to To the network next slide David. I believe this is my my last slide So is a lot of talk about things like smart contracts now smart contracts are code used used generally speaking with touring complete programming languages for instance a third aetherium has a programming language called Solidity Where you can stand up an instance of a contract? You can code it and then write it into an aetherium blockchain the contract is built so that Transactions can change the state and value of that contract and that contract can also generate additional transactions and events based on the code in that contract all Audited all replicated throughout the ledger so when you think about The number of applications in use cases for this type of technology. It's virtually limitless And that's why there's so much hype but as you can see by through the through the Thing there that the slide Basically, you can replicate contractual terms through code The contract is created and brought on to the ledger events and updates can Can again impact the transaction and the state of the of the contract you can execute Transfer of that asset directly on blockchain So for instance stock certificates written in a smart contract format can change ownership Virtually in a pure dematerialized way with instantaneous transfer instantaneous value transfer and instantaneous auto trails on a blockchain so t plus zero is everybody ready Again instantaneous clearing and settlement and then off-chain physical assets Are can be interlinked through different design patterns. So for instance if you have an MRI being done on a Philips Philips healthcare MRI machine that machine can actually take that MRI data write it to a blockchain and there's proof of and providence of that transaction throughout so that You know several different doctors can collaborate using that same That same for instance MRI image Now in the case of financial so what got me really excited was the discovery of FIBO FIBO as as you already know You know represents financial contracts and provides a standard some semantic on apology that can be used and power these smart contracts written to these blockchain fabrics very very powerful metaphor and David why don't you take it from here? David can show you actual use cases on how it all comes together David. Go ahead. Okay. Thank you Chris and We're pretty much out of time. So I'm going to just sum this up and wrap it up very quickly I think that blockchain really is a very big thing it turns the internet into a Distributed ledger where those with the right to know can have access That's a huge thing and even larger than that with the advent of ethereum It turns the internet into a huge huge Distributed computer there are opportunities and implications from from blockchain that we haven't even considered Thinking through the possibilities. It's almost scarce me when I think of when we apply Machine learning and cognitive computing capabilities to the peer-to-peer computing nodes running on ethereum We're really at the door of Skynet. It really is something At one level huge huge opportunities at another level something very scary We have to really be very careful about As we roll this out, but what are the implications for FIBO so the big big Gap within the whole blockchain initiative is they're moving very quickly and they're not thinking about standards yet And so FIBO has an opportunity to fill a huge gap So that we don't kick off this whole new world of blockchain Opportunities creating yet more and more silos, which would be a bad thing So there is a discussion among ourselves the EDM council and the R3 Initiative and we'll be talking with hyper ledger folks and we've had some conversations with some of the companies involved with Ethereum consensus for example, and they're looking at derivatives as use cases using interest rate swaps And we would like to get them on board with The path forward using FIBO so very quickly I covered this use case where we have loan Securities loan origination and securitization cuts across many different silos But fast forwarding it to having if FIBO were able to Be a pervasive standard over the blockchain Then we would have borrowers that would have their assets and their debts on what would be called the permissioned public shared ledger Where the borrower us the individual would have control of our over our data. That's part of the data Personal data locker initiative the personal data ecosystem initiative where we would then provide access through Handing over a public key to the loan originator who could also take a look at if we're bar if we're borrowing money for a home purchase or a home equity line the Title of the property would be on an unpermissioned Public shared ledger versus a permissioned one unpermissioned is totally open anyone can have access to it The actual originator then as they're originating the loan would have more of a private shared ledger where all the loans would be pooled together as they are cutting across the Securitization process into tranches that would be on a permissioned private shared ledger Investors would be able to also create another permissioned private shared ledger that They would then have access to the tranches Ultimately being able to get access to the borrowers to detect risk the risk of the loan That was something that had we had this capability where we would have a Common standard through FIBO where all of this information would be Transparent and accessible the risks of the global financial crisis would have been dramatically minimized So we have some real opportunities. So we're FIBO supports the The notion of contracts and we've gone through How we would look at derivatives, so I'm going to jump through this slide Here's where the next I think very cool opportunity is is where today where we have XML Representing many of the standards with XML schema XML payloads We fast forward over to FIBO where we can use a JSON LD extraction of the ontology, so we have common terminology Within the ontology we have common terminology for data at rest We have common terminology for data in motion FIBO Makes all of this possible so that I think is a really really big thing where we no longer have this Tower of Babel So moving forward FIBO then can be used with the creation of these smart contracts because again FIBO is based on the notion of the semantics of the contract will be able to see standards in this example for derivatives that could run over a blockchain Eliminating the intermediary so there's a whole new notion of disintermediation The next opportunity for FIBO, which I think is another really big thing is in regulatory Reporting over the blockchain, so we have a common use case that Lynn Callahan talked about yesterday For loan origination called humda for the home mortgage disclosure act reporting where we get different reports from different Siloed organizations and someone has to put Humpty Dumpty back together again and assemble it all and make sure It's curated and correct and move it on on a quarterly and annual basis to the CFPB to validate the the reports. Well, if we use blockchain and FIBO What we will be able to have is that each line of business will write using FIBO terminology over JSON LD payloads To a blockchain so the blockchain would have a pointer back To the actual data in the legacy systems, which would be mapped through R2 RML That would be captured on the blockchain And FIBO would again make sure we have this common terminology So that at the end of the day we can aggregate all these different reports from different legacy systems that write to a common terminology using FIBO on the blockchain where the regulators can Look at this and do an automatic audit that has already been curated through FIBO So that the data would be classified to be correct or incorrect if it's not correct. It doesn't get on the blockchain Long story short is that we have an opportunity here to solve That major problem that companies have with regulatory reporting where we get dinged with MRAs because we're off This will be an automated way of having Fully consistent high-quality Regulatory reporting, so I think this is really a huge opportunity for FIBO where FIBO can provide these standards so with that thank you very much for your patience during these presentations