Read views of Infosys experts on how blockchain technology offers an unprecedented opportunity to transform the transactions of the future, how its adoption will create newer value propositions and what is required for its integration into larger IT systems.

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March 20, 2017

Blockchain - technology advancements are helping expand adoption


Blockchain technology is picking up pace globally. Though many have heard about it, only a few people really know how it works, and if you are in the technological world, then you undoubtedly know what it is about. It has raised much excitement with its promise of changing business and industries; yet, it seems to be out of reach and difficult to actually introduce in our lives. It may be because it is difficult to build quickly or it still does not meet some requirements. Today, I would like to elaborate about few innovations in this technology that truly open up opportunities for many.

Along with scalability issues and lack of protocols, privacy is one of the concerns blockchain technology has to address. Every business is very excited about how this technology ensures security and authenticity, but feel rather exposed by the complete transparency of the networks due to the public ledger. Enter Chain[1], a technology company that enables creation of permissioned blockchain networks tailored for specific requirements on their platform called Chain Core. The remarkable thing about Chain Core is that the company has found a way to preserve privacy while transacting on the blockchain. Thanks to the Chain protocol, parties can transact without disclosing amounts or assets being exchanged or the identities of the participants.

They have achieved this protocol for privacy by using a key derivation scheme by which all private and public keys can be derived from the same pair of master keys. By giving each control program involved a unique public key, the company has made it impossible for others to link an account's identity with its activity. At the same time, information about the transaction and what is being exchanged is also kept secret through homographic encryption. Though intended for the financial sector, the protocol can definitely be extrapolated and used in any suitable scenario.

IBM, Amazon, Microsoft, and Deloitte are all now offering Blockchain-as-a-Service (BaaS). This service opens the door to all entrepreneurs, companies, and developers that are interested in experimenting with blockchain, but lack the infrastructure and expertise.

Project Bletchley[2] of Microsoft enables users to deploy and configure an Ethereum blockchain network on their Azure cloud services platform. Building a personalized blockchain network becomes a matter of minutes; thanks to their Azure Quickstart Template. They have automated the tasks of building and configuring the needed infrastructure to allow users to quickly set up their network focusing entirely on their business. All the capabilities offered by Azure (data analytics, data storage, big data, IoT, etc.) are available for integration into the network being created, adding a whole new level to what distributed ledgers are capable of today.

Project Bletchley introduces another very valuable advancement in the field of blockchain technology - Cryptlets. Cryptlets opens the door for fast, simple, and trustworthy integration of a blockchain network with existing systems. Imagine a financial entity involved in a blockchain network that has launched a smart contract that is designed to sell a financial asset X if it reaches price Y. The smart contract would periodically summon the Cryptlet to fetch the price of the asset X from an external server and use it to determine if it is time to sell. The information provided by Cryptlets follows the security standards involved in the blockchain and does not put its integrity at risk.

Meanwhile, IBM has been working on the Hyperledger project. Hosted on the Linux Foundation, Hyperledger aims to create cross-industry blockchain technology and platforms. The project works as an open source initiative that nurtures the joint effort of developers and member companies. The project wishes to develop a set of standards and protocols for blockchain by creating a modular architecture that aims to meet the requirements of different industries and business by letting companies customize networks.

Under the hood of the Hyperledger[3], there are many parallel projects running at the same time and at different stages. One of the most distinguishable projects is the Hyperledger Fabric. Determined to provide permissioned blockchains that can scale, IBM has come up with Hyperledger Fabric v1 that offers privacy through a modular architecture to fit diverse demands. This system enables parties to celebrate agreements without sharing them with the rest of the network. While the network may have all the stakeholders participating -- the producer, retailer, financial institutions, and key members of an entire supply chain - transactions done privately by two parties don't even appear on the ledger of those who are not involved. Confidentiality is maintained without relinquishing transparency.

Hyperledger Fabric finds itself in incubation, which means, it is open for the community to explore and experiment with it and add new capabilities and components.

These are few examples of how blockchain has begun to expand and evolve, adding improvements and addressing concerns, making it much more amenable for adoption by entrepreneurs, developers and enterprises.




March 2, 2017

Trade finance on Blockchain

Blockchain is a latest technology buzzword that is now common in every boardroom discussions. One of the reasons for this hype could be the revolutionary changes Blockchain is promising to bring that were unthinkable few years back. While research is ongoing to find suitable use cases of Blockchain, trade finance is one such use case that seems to be commonly agreed upon by almost every Blockchain expert.

Blockchain is the underlying protocol of famous crypto currency Bitcoin. At its core, Blockchain is distributed network of servers, popularly called as nodes, communicating with each other in cryptographically secure, peer to peer fashion and maintaining exact same copy of data at each node at any given point of time. Single or multiple time-stamped transactions after network consensus are grouped together in a block - and such blocks are linked to each other using hashing mechanism - creating an immutable chain, hence the name is Blockchain. With such structure in place, Blockchain enables disintermediation i.e. no central authority dependency and also acts as single source of truth which brings efficiency and disruption to many existing business processes. Pundits are guessing that Blockchain could be a threat to many successful businesses that are based on centralization or aggregation of information. Of course, this will take time as Blockchain technology is still evolving and Bitcoin remains its only successful production example. 

Blockchain's application to trade finance seems logical. International trade is growing day by day and no business is insulated from it. Most products are designed in one country, have material sourced from other country, assembled in some other country and sold in entirely different country. This is possible partly due to globalization and partly due to multiple trade finance products offered by financial institutions. Still trade finance is lagging behind in technological adoption. Even in this digital era, it is majorly physical paper exchange process that requires age old practice of maintaining paper contracts and multiple set of receipts that incurs both delays and costs in sending the papers from one party to other. It also runs a risk of losing original important trade documents while in courier or a party with bad intentions can create fake documents to dupe other parties. Status tracking of trade is currently a dream for all trade stakeholders.

With emergence of Blockchain, this dream could be fulfilled. First and foremost, Blockchain is capable of bringing diverse set of industry players on single network. So, exporters, importers, banks, shippers, insurers and government agencies can transact securely on single and permissioned Blockchain network with minimal changes to their existing systems. A new trade asset may be created every time new sale contract is signed between an exporter and an importer. This trade asset will then be required to transfer from one entity to other as per action taken by each entity in trade workflow. The trade documents (digital or scanned) can be attached to Blockchain transaction by hashing so that document integrity is maintained. Counterfeiting of documents will not be possible in such scenario. Document digitization will remove need of physical paper transfer and reduces risks of loss or delays.

Shared ledger of trade transaction will help in transparent status tracking at one place which in-turn will boost business planning of each trade stakeholder. Open source software stack and cheaper disk costs should make it a viable option from cost perspective. Permissioned nature of such a Blockchain will not require very difficult transaction validation processing aka mining that we see in public Blockchain such as Bitcoin and will consume less energy enabling quicker consensus between trade participants. Faster trade amendments and easier disputes resolution are some of the additional benefits that Blockchain promises to bring to trade finance processes. 

While benefits seems enormous, there will be few initial adoption hurdles. Scalability of Blockchain is yet to be proved for non-Bitcoin applications. Technology complexity will require more time to understand Blockchain. But, such challenges are common to any new emerging technology and those will be overcome as Blockchain proves its mettle.  Some organizations have already started testing this technology. Infosys has recently successfully implemented trade finance Blockchain pilot for ICICI and Emirates NBD Bank. Few other global banks did similar pilots. Many more are expected to execute such pilots in next couple of years. If you are also looking to explore Blockchain, do connect with us!

March 1, 2017

3 things to know before adopting blockchain

In case I haven't said it often enough in my previous blogs, here it is again: Blockchain-based systems have the potential to transform the financial services market and save billions of dollars in infrastructure costs alone. That's a huge amount of money saved! Having outlined the types, deployment models and applications of blockchain in my previous posts, if I have piqued your interest in this technology, here are a couple of things to know about adopting blockchain:


Your existing investments won't become obsolete - If you are worried about losing value from existing investments, you can rest assured that blockchain does not aim to replace all financial systems. Financial systems use closed networks that have a ledger hierarchy such as ledgers for core banking, enterprises and between banks. This means that investments in some traditional ledger technologies will stay relevant even when adopting blockchain. All that enterprises need to do is leverage interoperability connectors and find ways in which shared ledgers can co-exist with traditional ones. So, instead of replacing existing infrastructure, banks can augment their systems with distributed ledger features. Some ways of doing this include using interoperable transactions, leveraging in-built and cross-ledger analytics, ensuring assets are not issued only into distributed networks, or conducting transactions while ensuring privacy as well as the option of net settlement. You can even integrate APIs that leverage known protocols such as ISO-8583 with core banking systems, ensuring seamless integration with any core banking ledger.


Regulatory compliance is easier with blockchain - As an emerging technology, blockchain definitely has some regulatory challenges owing to lack of common standards. However, by its very nature, blockchain provides complete transparency at lower cost - which has a lot of regulators interested. The regulators in Dubai and Singapore are offering incentives to vendors and ecosystem players to re-imagine a blockchain enabled future for several scenarios. Even the Reserve Bank of India recognizes the potential of blockchain to transform back-office functions within banks by improving speed and cost efficiency in payment systems and trade finance and is encouraging banks to investigate the technology


Test first to know how it works - The first step in your blockchain adoption journey should be a trial/pilot phase. A test-bed environment can help you understand how the technology works - and how you can better contextualize blockchain for use-cases that are relevant to your business. For instance, a pilot project will not only validate your investment in blockchain but also help uncover how existing infrastructure can be leveraged. Some of the larger financial institutions have already identified nearly 20 business and technology use-cases in the areas of payments, remittances, trade finance, post-trade processing, repurchase agreements, debt distribution, and insurance processing.


With all proven benefits and possible innovations, I am excited by the prospects of how blockchain will evolve in 2017. The journey promises to be a thrilling one as several enterprises are already in the race from PoC to production. I believe that the early adopters - the ones who leverage blockchain to create new business models - will be the ones to establish their market position and leadership. Hopefully, 2017 will be the year in which more enterprises take the plunge and grow their blockchain networks. 

How various blockchain models can address different needs

The shared and distributed ledger of blockchain is great when it comes to transparency and visibility. But, this is not ideal for all companies and use cases. Companies that use conventional databases have defined user controls, thereby restricting access to data. In blockchain technology, the ledger is shared, allowing all participants to see what other participants are doing - and this is important to validate transactions.


Say your company wants to protect sensitive information and share only need-to-know data. Can blockchain still be used - and, if so, how?


In my opinion, blockchain deployment models can be tailored to specific business contexts to meet the different needs of different industries. Since a one-size-fits-all approach does not work, there are various ways in which these deployment models can be leveraged.


Bilateral blockchains are extremely useful in competitive scenarios such as in financial markets or when trading where complete transparency is impractical. With bilateral blockchains, you can securely exchange information in an auditable and transparent way.


Multi-party system blockchains are useful when participants need to share information with each other, much like a co-operation paradigm.


When sharing need-to-know information such as KYC documents, blockchains can encrypt and store data using a private key of the sender's node such that only the receiver can view the shared data.


Public blockchains have information that is visible to everyone - either all participants in the external world or all participants within a specific network. The first category is useful in situations where information must be public such as notarized documents, land/property records, collateral data, etc. The second category of blockchain (information shared only between network participants) is useful during audits such as when contract information must be recorded and enforced. But, on a simpler note, I think it also promotes transparency and trust. For instance, email exchanges can be recorded in an auditable way as proof that correspondence took place.


All these models are viable when there is regular communication or transaction between different parties. In cases where correspondence is infrequent, say once every quarter or perhaps on a project basis, participants can use blockchain on-demand. With this model, they can correspond while the project is under way and, once it is over, they can archive the data and close the blockchain.


A key point to remember is that blockchain is a valuable technology that can greatly simplify operations and promote better collaboration and trust. You just need to choose the right deployment model for the needs of your enterprise.


Watch this space for a glimpse into the future of blockchain technology

Industry applications of blockchain

Ever wondered why the industry is buzzing with innovations in blockchain? One key reason is that blockchain can transform how banks and financial firms function with the potential to significantly lower cost and streamline operations.


In my last post, I had outlined the main types of blockchain and their various benefits to different industries. In this post, I want to outline the revolutionary applications of this dynamic technology. While its use-cases are many, I am focusing on some of the key applications that deliver instant benefits to enterprises.


Blockchain is a network as well as a database, whereby every transaction and asset transfer is recorded on the ledger in near real-time. These two singular capabilities - meticulous records and near-real time processing - create numerous opportunities to transform operations. Here's how:


Optimize operations - Blockchain eliminates the need for conventional systems for clearing and settlement such a SWIFT or RTGS, making it faster and simpler to transfer money or assets.  Banks no longer need to maintain and reconcile multiple levels of ledgers. Near real-time settlements promote anytime operations as these systems do not have restricted hours of operation. Blockchain also reduces the dependence on middle and back-office operations by standardizing instruments and processes for trade enrichment, error correction, allocations, and counterparty matching.


Monetize data and save cost - Blockchain can help banks securely store and exchange documents and terms of transactions - with the added benefit of monetizing data and lowering cost. For instance, sharing KYC information through blockchain reduces the customer acquisition cost for the acquiring bank. Creating an industry-level repository of all KYC information can be useful to share customer data across sectors/departments, consolidate global operations, enforce AML, blacklist checks, etc. By eliminating multiple bilateral accounts, participating banks can slash liquidity cost and maintain a single account to transact with other banks (instead of Nostro Vostro accounts within various banks).


Reduce systemic and operational risk - With near real-time records of obligations, there is better risk management. Blockchain can eliminate credit and liquidity risk, and ensure secure digitized processes when pre-funding accounts before transactions occur. In trade finance, blockchain can help banks reduce operational risk and cost across the lifecycle, i.e., by reducing duplicate invoice financing, blockchain can deepen trust between lenders, thereby fostering a transparent and efficient trading environment


Higher transparency for compliance - Blockchain includes a permanent history of asset movements, providing participants and regulators with greater visibility, traceability and transparency for internal audits, regulatory reporting and compliance. Private companies can use these to issue, catalog and trade shares or open new business lines. It also becomes easier to consolidate data from multiple traditional ledgers for better regulatory compliance at lower cost.


These applications are not just theoretical. Several developments in this space are already underway. Ripple is creating protocols that promote communication between different types of ledgers. NASDAQ has a Linq platform that can issue, catalog and trade shares of privately-held companies on the NASDAQ private market. is developing a collaborative procurement platform that leverages blockchain and smart contracts to lower the cost of money transmission for buyers.


The key question is: can one ledger fit all use-cases? In response, several vendors are adopting purpose-built ledgers that address various industry-specific needs. I expect that in 2017 we will see greater collaboration between players to apply blockchain in truly innovative ways - and the early adopters will win big with higher savings and better operations.


Watch this space for information on 5 different ways to deploy blockchain models

Understanding blockchain systems

Did you know that between 2012 and 2016, US $1 billion of investments have  found their way into blockchain - or that 50% of these investments were made in 2015-16 .As enterprises begin to understand the potential of blockchain and distributed systems ,the prospect of re-imagining legacy processes and saving costs is generating a great deal of excitement.

If you aren't aware of what blockchain does, here is a quick introduction. Blockchain uses several techniques to create a unique and shared distributed system that handles value transfer in a secure - and inherently trustless - environment. Some of these techniques include secure peer-to-peer communication, transactions grouped into blocks, advanced cryptography, distributed multi-party consensus algorithm, and multi-version concurrency control.


The way I look at it - blockchain is both a  network and a database that enforces trust between different parties using a set of old techniques combined in a new way. One of the more revolutionary aspects of blockchain is the shared write access ability, allowing users to unanimously decide on the 'true copy' of the data.


However, to maximize value from blockchain, you also need to be aware of its various forms. Here's a brief overview of the 3 main types of blockchain systems:

Public ledgers - These are open to all online users and have decentralized ledgers - so anyone can read, submit transactions and participate in the verification and validation of transactions. Here, one can ensure that the blockchain is secure by using economic incentives and cryptographic verification such as proof-of-work or proof-of-stake. Some examples of these are Bitcoin and Ethereum public network


Private ledgers - Here, applications such as database management and auditing belong to a single company. Permissions are assigned by a central entity. If the central entity can assign computers to verify transactions, there is no need for embedded currency.


Hybrid or consortium ledgers - These systems are partially decentralized. Here, consensus validation is controlled by pre-selected individuals or organizations such as a consortium of financial institutions or customers of a company. Access to read the blockchain may be public or restricted. The need for embedded currency to provide incentives depends on the degree of trust, which depends on the degree of decentralization.

While these are the main systems used by blockchain, I see innovations driving change. For instance, the private, permissioned system/ledger is gaining significant interest within the banking industry as it combines the advantages of the different models outlined above at a lower cost. Some its benefits include:


  • ·         Hybrid features - Banks can choose to combine new components such as more relevant consensus algorithms from private ledgers with existing ones from public blockchains such as secure peer-to-peer communication, cryptographic techniques, etc.
  • ·         Simplified mining - As mining consumes a large amount of CPU power, it can be replaced with permissioned chains that use only permitted miners.
  • ·         Better security - By combining permitted miners with a relevant distributed consensus algorithm, banks can ensure that the private network is not fully controlled by groups of miners.
  • ·         Lower cost - In a permissioned network, the incentives lie largely in the privilege of participating, rather than financial gain. Without expensive mining, the cost of running a permissioned blockchain is significantly reduced.


While there are myriads of applications and use-cases of blockchain technology, enterprises must be aware of how they can best leverage the various systems to suit their needs and maximize value from blockchain.


Watch this space for more information on the applications of blockchain.

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