10/3/2019

Blockchain

Kevin Zhu
PhD, Stanford University
Professor, UCSD Rady School of Mgmt
https://rady.ucsd.edu/people/faculty/zhu/
[email protected]
Credit: Xiaofeng Liu
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How blockchain works

Video link: https://www.youtube.com/watch?v=SSo_EIwHSd4

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Key technologies of blockchain

• Distributed ledger
A distributed ledger is a consensus of replicated, shared, and
synchronized digital data geographically spread across many
computers, without a central administrator or centralized data storage.

• Encryption algorithm
Asymmetric encryption algorithms are mainly used with two ciphers:
• the public key (an address on the blockchain) and
• the private key (like a password that gives its owner access to
their digital assets).

Key technologies of blockchain

• Consensus mechanism
Algorithms, protocols and rules that define the consensus process,
ensures that the information stored in each node is not forked, thus
ensuing the consistency and reliability of the entire network.
(Common consensus mechanisms: proof of work, proof of stake, etc.)

• Smart Contract
Computer protocol intended to digitally facilitate, verify, or enforce the
performance of a contract.
trackable and immutable.

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Benefits of using blockchain

• Decentralization
Decentralization makes blockchain enjoy the benefits of trustlessness,
censorship resistance and immutability.
Every node in a decentralized system has a copy of the blockchain. No
centralized “official” copy exists and no user is “trusted” more than any
other. Mining nodes validate transactions, add them to the block, and then
broadcast the completed block to other nodes. Blockchain uses various
time-stamping schemes, such as proof-of-work, to serialize changes.

• Immutability
Data in the blockchain cannot be altered.
Every block not only contains a hash or digital signature for itself but
also for the previous one. This functionality of blockchain technology
ensures the security of the system.

• Transparency
It stems from the fact that the holdings and transactions of each public
address are open to viewing.

Picture source: https://101blockchains.com/enterprises-implementing-blockchain/

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Applications
• Food Safety
Walmart requires selected suppliers to use blockchain

• Cross‐border Payments
Goldman Sachs and Morgan Stanley used the IBM solution for bilateral
payments.

• Insurance
Insurwave, a blockchain-powered platform for marine insurance in now
in a commercial use offered by EY, Guardtime, A.P. Møller-Maersk,
Microsoft.

• Fraud Detection
IBM researchers is using blockchain to prevent counterfeit drugs in
Kenya
Toyota partnered with the blockchain startup Lucidity to minimize the ad
fraud.

Potentials

• Digital Assets

• Identity Solutions
Swiss Federal Railways are testing the uPort identity solution.

• Intellectual Property
Bernstein allows companies to create a digital trail of records of their
innovation processes using blockchain technology.

• Electronic Health Records

BlackBerry is working on a network to support blockchain solutions for
patient data.

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Blockchain + Finance

Blockchain in financial services

1. Supply Chain Finance
Pain points of current supply chain finance (especially for
small and medium‐sized enterprises)
• High cost of financing
• Lack of transparency, information asymmetry
• Unable to efficiently manage the compliance risk
• Trust and communication issues due to a lack of system
integration

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Blockchain in financial services

1. Supply Chain Finance
Blockchain will empower supply chain finance
• Ensuring data validity
Guaranteeing adequate security and integrity of the documents
Ensuring the prevention of fraud

• Transparency & auditability

Smart contracts will enable all parties in a supply chain finance
solution to act on a single immutable shared ledger.

• Real‐time information exchange

Reducing time in transaction, payment and loan approval

• Reducing errors and risks

Reducing risk of fraud
Lowering the cost of financing

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Blockchain in financial services

1. Supply Chain Finance
Ongoing blockchain supply chain finance projects:
• Yijian Blockchain Technology Application System in
collaboration with IBM
• Chained Finance launched by China-based electronic firm
Dianrong and online marketplace lender FnConn (a
Foxconn subsidiary)
• Mahindra common platform with IBM
• Maersk global cross border blockchain-based supply
chain solution

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Blockchain in financial services

2. Credit scoring
Why we need a better credit reporting system
• Insufficient cybersecurity of personal data
2017 Equifax left 143 million Americans’ and 700,000 Brits’
personal information exposed.

• Lack of consumer transparency and control
Consumers usually have little visibility on the process behind
credit scores, credit checks, and the sharing of their personal
information by credit reporting agencies to lenders.

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Blockchain in financial services

2. Credit scoring
Why we need a better credit reporting system
• Widespread credit report errors
A 2013 survey found that the credit data pertaining to 1 in 5
Americans contained mistakes, negatively affecting their credit
scores.

• Insufficient coverage of users

Only provided a score to the banked. There are 1.7 billion people
in the world without access to a bank account. Unbanked adults
can potentially bring in about $380 billion in revenue.
Difficulty obtaining credit is a common issue for small and
medium enterprises. The size of this market is about  $2.4 trillion
globally; it is also growing at about 10% annually.

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Blockchain in financial services

2. Credit scoring
Blockchain could set up a better credit scoring system
 Full control of people’s own data
 Correcting any mistakes directly
 More time efficient
 Reduction in errors

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Blockchain in financial services

3. Cross‐border payments
Challenges of traditional cross‐border payments

Picture source: https://www.ibm.com/downloads/cas/VGYAKENA

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Blockchain in financial services

3. Cross‐border payments

Picture source: https://www.ibm.com/downloads/cas/VGYAKENA

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Blockchain in financial services

3. Cross‐border payments
Key benefits of blockchain in cross‐border payments
• Increasing security and transparency
• Decreasing need for intermediaries
• Simplifing transaction processes
• Near real-time remittance
• Easy consensus between originators and recipients

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Blockchain + Healthcare

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Blockchain in healthcare Payments

Management

EHR

Pharma Supply Chain

Picture source: https://ww2.frost.com/frost-perspectives/does-blockchain-have-place-healthcare/

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Want to Dive Deeper?
• Rady Executive Course on Bloackchain and the Future of 
Healthcare

• https://rady.ucsd.edu/programs/executive‐
education/professional‐
development/blockchain/index.html

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Blockchain + Healthcare
‐‐ More Details

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Blockchain in healthcare
1. Pharma Supply Chain

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Blockchain in healthcare
1. Pharma Supply Chain
The benefits of applying blockchain:
• Clinical Trial Management
Traceability and transparency of consent in clinical trials
Improving the quality of clinical trials data
• Manufacturing Supply Chain
Compliance in production, transport and storage
Lowering the financial burden
Monitoring costs, labor and waste emission
• Drug Safety
Prevention of counterfeit drugs and medical devices
Verifying the authenticity of returned drugs

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Blockchain in healthcare
2. Electronic Health Records (EHR)

Video link: https://www.youtube.com/watch?v=-gfwR07cANc&t=1s

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Blockchain in healthcare
2. Electronic Health Records (EHR)

How blockchain works in EHR?

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Blockchain in healthcare
2. Electronic Health Records (EHR)

How blockchain works in EHR?

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Blockchain in healthcare
3. Payments & Claims Management

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Blockchain in healthcare
3. Payments & Claims Management

• Billing‐ and insurance‐related costs are an estimated 
18% of total national health expenditure
• More than 25% practices had to wait 3+ business days 
for a prior authorization (approval from a patient’s insurer 
to cover a drug)

Blockchain + data standards
→ speed up the processes + reduce costs

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Blockchain in healthcare
3. Payments & Claims Management

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