© Z/Yen Group
2016
“Zest for Enlightenment”
‘Bit-No-Coin’
Mutual Distributed Ledgers Without The Currencies
Professor Michael Mainelli
Z/Yen Group Limited
Risk Reward Managers
90 Basinghall Street
London EC2V 5AY
United Kingdom
tel: +44 (20) 7562-9562
www.zyen.com
@mrmainelli
michael_mainelli@zyen.com
11 February 2016
Z/Yen
© Z/Yen Group
2016
♦ Special – City of London’s leading commercial think-tank
♦ Services – projects, strategy, expertise on demand,
coaching, research, analytics, modern systems
♦ Sectors – technology, finance, voluntary, professional
services, outsourcing
 Independent Publisher Book Awards Finance, Investment &
Economics Gold Prize 2012 for The Price of Fish
 British Computer Society IT Director of the Year 2004 for
PropheZy and VizZy
 DTI Smart Award 2003 for PropheZy
 Sunday Times Book of the Week, Clean Business Cuisine
 £1.9M Foresight Challenge Award for Financial £aboratory
visualising financial risk 1997
Z/Yen in Finance Research
© Z/Yen Group
2016
♦ Distributed ledgers (1995-present)
♦ LIBOR and FX surveillance (2007-present)
♦ PropheZy and VizZy – automation &
visualisation of compliance monitoring
(2002-present)
♦ Prediction markets and bubbles (1998present) – www.extzy.com
♦ Market intelligence – Ministry of Defence,
e.g. Vision 2020 (1994-present)
♦ Avatars for Big Data (2010-2012)
♦ Financial £aboratory Club visualising risk
(1997-1998)
© Z/Yen Group
2016
The Study Of Money Is
The Root Of Much Madness
[www.dilbert.com, Thursday, 27 January 2015]
[http://illusionsetc.blogspot.com/2005/08/moving-mobius-strip.html]
Money As Technology
© Z/Yen Group
2016
“Money is a technology
communities use
to trade debts across space
and time.”
Representative
money
Backed
Fiat currency
Unbacked
Money
“Tokens of indebtedness are social
desires frozen at a point in time –
tokens depend on the future
persistence of the community and
its values.”
Commodity money
Common tender
Baskets
Composite
- currencies
- commodities
Bitcoin Primer
© Z/Yen Group
2016
Spectrum.ieee.org “How a Bitcoin Transaction Works”
Overview Of Mining
© Z/Yen Group
2016
Making a hash of it…
Ledgers: Look Beneath The Coins
© Z/Yen Group
2016
“the potential impact of the distributed
ledger may be much broader than on
payment systems alone. The majority
of financial assets — such as loans,
bonds, stocks and derivatives — now
exist only in electronic form, meaning
that the financial system itself is
already simply a set of digital
records.”
Bank of England, Quarterly Bulletin
(2014, Q3)
“The consequences of this breakthrough [Bitcoin]
are hard to overstate.”
Marc Andreesen, co-author of Mosaic, cofounder of Netscape, and Bitcoin investor
“[Virtual Currencies] may hold long-term
promise, particularly if the innovations promote a
faster, more secure and more efficient payment
system.”
Ben Bernanke, Chairman of the Federal Reserve
USA
“Bitcoin is a remarkable cryptographic
achievement and the ability to create something
that is not duplicable in the digital world has
enormous value”
Eric Schmidt, CEO of Google
“I do think Bitcoin is the first [encrypted money]
that has the potential to do something like
change the world.”
Peter Thiel, Co-Founder of PayPal
Sharing Ledgers For Sharing Economies
© Z/Yen Group
2016
Potential of Potential
© Z/Yen Group
2016
Professors Michael Mainelli & Mike Smith
Z/Yen Group
“In distributed ledger technology, we may be witnessing one of those
potential explosions of creative potential that catalyse exceptional levels of
innovation.”
Matthew Hancock & Ed Vaizey (January 2016)
© Z/Yen Group
2016
Terms Defined
♦ ledger – a record of transactions
♦ distributed – divided among several or many, in multiple
locations
♦ mutual – shared in common, or owned by a community
♦ mutual distributed ledger (MDL) - a record of
transactions shared in common and stored in multiple
locations
♦ mutual distributed ledger technology – a technology that
provides an immutable record of transactions shared in
common and stored in multiple locations
♦ blockchain - “a transaction database shared by all nodes
participating in a system based on the Bitcoin protocol”
Why Does A Central Registry Exist?
© Z/Yen Group
2016
Financial services are
based on ‘mistrust’ &
leverage
♦ Validate - Sin of
Commission – forgery of
a transaction
♦ Safeguard - Sin of
Deletion – reversal of a
transaction
♦ Preserve - Sin of
Omission – censorship
of a transaction
What Does A Distributed Ledger Do?
© Z/Yen Group
2016
♦ Validates – trust model for timestamping
♦ Safeguards – set of rules for updating state
via blocks
♦ Preserves – a shared state
Persistent & Pervasive
[Nick Williamson, “What Is A Blockchain?” (12 April 2015) - http://blog.credits.vision/what-is-a-blockchain/]
Ledgers Are Boring
© Z/Yen Group
2016
“Sharing Ledgers For Sharing Economies:
A Boring Introduction To Mutual Distributed Ledgers”
Z/Yen (2015) - https://youtu.be/Hwhigpr4720
MetroGnomo
© Z/Yen Group
2016
Possibly Distributively Ledgerable
© Z/Yen Group
2016
Area
Financial
instruments,
records, models
Public records
Private records
Semiprivate/semipublic records
Physical keys
Intellectual
property
Other records
Possible Applications
Currency, private and public equities, certificates of deposit, bonds, derivatives,
insurance policies, voting rights associated with financial instruments, commodities,
derivatives, trading records, credit data, collateral management, client monies
segregation, mortgage or loan records, crowd-funding, P2P lending, microfinance,
(micro)charity donations, account portability, airmiles & corporate tokens, etc.
Land and property titles, vehicle registries, shipping registries, satellite registries,
business license, business ownership/incorporation/dissolution records, regulatory
records, criminal records, passport, birth/death certificates, voting ID, health and
safety inspections, tax returns, building and other types of permits, court records,
government/listed companies/civil society, accounts and annual reports, etc.
Contracts, ID, signature, will, trust, escrow, any other type of classifiable personal data
(e.g. physical details, date of birth, taste) etc.
High school/university degrees and professional qualifications, grades, certifications,
human resources records, medical records, accounting records, business transaction
records, locational data, delivery records, genome and DNA, arbitration, genealogy
trees, etc.
Key to home, hotel, office, car, locker, deposit box, mail box, Internet of Things, etc.
Copyrights, licenses, patents, digital rights management of music, rights management
of intellectual property such as patents or trademarks, proof of authenticity or
authorship, etc.
Cultural, historical events, documentary (e.g. video, photos, audio), (big) data
(weather, temperatures, traffic), SIM cards, archives, etc.
Buzz or Hype? The New New Thing
© Z/Yen Group
2016
[Ken Tindell mashup - 14 May 2015 https://twitter.com/kentindell/status/598865133247569920]
The Old Old New New Thing…
© Z/Yen Group
2016
[www.dilbert.com, Friday, 17 November 1995]
[Internet (1976 for me), databases (Oracle, Ingres, DBII,
relational/hierarchical/distributed), web (SGML, Gopher), ‘Internal Internets’ (i.e.
intranets), social media (SixDegrees)…]
Buzz Or Hype - Old Old Things?
© Z/Yen Group
2016
♦
♦
♦
♦
♦
♦
♦
♦
♦
♦
♦
1976 – Diffie-Hellman & Merkle (also RSA)
1990 – Mondex, Digicash, Flooz
1993 – Encrypted Open Books
1995 – Z/Yen Stacks, WebDNA
1996 – Ricardo payment system
1998 – Wei-Dai b-money 1998
1999 – LOCKSS & CLOCKSS
2004 – Ripple
2009 – Bitcoin
2013 – Silk Road, FBI, Alderney coin
2014 – Regulators – Jersey & Alderney, Isle of Man, FATF, ECB, State of New
York
♦ 2015 – IBM-Samsung, Bank of England research agenda, UK budget for
cryptocurrency standards, Barclays, UBS, BNY Mellon, Goldman Sachs,
USAA, NASDAQ, Honduras land registry, Channel Islands Standards for
MDLs, Fine (sic) Sign of having arrived – Ripple $700,000, Sign of the Tines –
Bitcoin forking hell, Blythe Masters, Economist Special, FT Special
♦ 2016 – UK government
Logically One, Physically Many
© Z/Yen Group
2016
♦ Identity systems – PwC KYC Centre
of Excellence
♦ Wholesale insurance (deal rooms)
♦ Retail insurance – motor, home,
small business
♦ Credit validation and scoring
♦ Cloud storage & archiving
♦ Timestamping – MetroGnomo.com
with States of Alderney
InterChainZ & IntereXchainZ
© Z/Yen Group
2016
InterChainZ Deal Room
© Z/Yen Group
2016
Insurance - ACORD Messaging
© Z/Yen Group
2016
© Z/Yen Group
2016
Cloud For Ledgers
Hire A Semi-Trusted Third Party!
Binary Choices:
♦ Public versus private?
♦ Permissioned versus permissionless?
♦ True peer-to-peer or merely decentralised?
♦ Proof-of-work, proof-of-stake/consensus/identity/voting
mechanisms, ‘agnostic’ broadcasting?
Strategic Questions:
♦ One, few, many, or multitudes?
♦ Easy, middling, hard, too hard?
Process versus Technology
© Z/Yen Group
2016
Identity
Technology
Change
Difficulty
Contract
Execution
Wholesale
Payments
Asset
Maintenance
Archiving
Market
Regulatory
Reporting
Timestamping
Asset Transfer
Shared Data
Deal Rooms
Process Change Difficulty
Mistrust Costs Coins
© Z/Yen Group
2016
Central
Database
Efficient
‘Agnostic/Woven’
Broadcasting
Free for
All Nodes
No
Trusted
Third
Parties
Bitcoin
Master
Node
Majority
Nodes
Collective
Nodes
Ethereum
Supervisor
Nodes
Ripple
Inefficient
Single
Trusted
Third
Party
© Z/Yen Group
2016
Thoughts?
♦ Mutual distributed ledgers help make
better utilities by providing:
shared ‘preserved’ data
shared ‘safeguarded’ transactions
♦ Mutual distributed ledger technology will
displace much messaging and shared
data functions
… try one out … www.MetroGnomo.com
When Would We Know Our Commerce Is Working?
© Z/Yen Group
2016
Thank you!
“Get a big picture grip on the details.”
Chao Kli Ning