IBM_Digital_Blockchain_BHTY_Convergyx_Short v2 Making Blockchain Real for Business Revisiting Design principles of Blockchain network: addressing security, scalability and sustainability by design Inspirations from Real World Use Cases & Deployments Nitin Gaur – ngaur@us.ibm.com Director, IBM Blockchain Labs mailto:ngaur@us.ibm.com 22 Blockchain and Digital Money Trust Time & 3 Blockchain A Platform for: • Trusted Digital Transaction System • Disintermediation • Co-creation models • Digital Marketplace • Multiparty trust network • And more … 3 4Page© 2016 IBM Corporation Blockchain and Healthcare Ecosystem Patient Lab Radiology Specialist Payer (s) PCP Hospital Regulator / Auditor / Govt. Research Billing & Payment Resolution Revenue Cycle Management Alternative Payment Models Provider Onboarding Coordination of Benefits Shared Accumulators Utilization Transparency Longitudinal Health Data Blockchain-based solutions can streamline and transform processes in the healthcare industry 5 Bundled Payments: fastest growing Alternative Payment Model “All-in” reimbursement price for an episode of care • Goal is to reduce cost of care while improving patient outcomes • Payers shift risk toward providers Common Bundled Episodes of Care • orthopedic surgery, hip/knee joint replacement, cardiac procedures Program Structure • Two levels of contracts among stakeholders – bundle program & risk-share agreements • Coordination of care across multiple healthcare providers • Information exchange – claim, quality and other data shared across stakeholders • Two primary models – Retrospective, Prospective Source: Forbes (fastest growing APM) ©2016 IBM Corporation7 What makes this problem difficult to solve? 7 Systemic challenges cause pain points contributing to limited adoption of bundled payment programs Manual Processes Manual, inefficient and redundant processes across multiple stakeholders. Lack of Provenance Unclear history of data associated with each transaction. Delayed Reconciliation Protracted time frames for reconciliation of actual vs target costs. Limited Visibility Lack of real-time visibility into bundle status across stakeholders limits proactive risk management Low Trust Payers and Providers do not share a single source of truth. Multiple Stakeholders Cross-Organization coordination required for success Lack of Standardization Multiple program constructs and variation in episode of care definitions Risk Management Bundled Payment programs result in a major shift of risk to providers Operational Challenges System limitations at both Payer and Provider inhibit processing at scale 8 IBM Confidential Bundled Payment Solution Hospital Post Acute Care Physician Claims from providers Payer Convener/ Episode Initiator Bundled claims Payment or Penalty Bank Bundled Payment AllocationGainsharing payment 1 3 4 5 6 2 Bundle identification and performance calculations by Smart Contracts Patient information from provider Out of network providers 9 IBM Confidential Bundled Payments on Blockchain Pre-Operative Risk Assessment Patient Activation Pre-Operative Care Management Referral Management Pre-Operative Efficiency Management Inpatient Intra-Operative Optimization Post-Acute Care Transition and Management Physician Engagement Readmission Management Post- Discharge Care Management Patient Engagement Readmission Management PAC Reporting PRO Surveys Today With Blockchain/DLT Manual reconciliation of claims under a bundle Smart contracts perform automated reconciliation of claims across contract participants Months for payment reconciliation and no view into bundle performance until reconciliation Real-time reconciliation and view into bundle performance Fragmented data regarding claim activity Shared and trusted information about claims stored on chain Lack of provenance for payment decisions Immutable record for provenance and auditing Create the Business Blueprint 4 Steps Identify the Use Case Map Business Blueprint to Technology Blueprint Enterprise Integration Blockchain Network Step 1 Use Case Should Have: Enterprise Impact Industry Impact Why: Network Effect is essential Must justify costs of investments Identify the Use Case Step 2 Understand the Business Process: distill existing process into blockchain model redefine as necessary narrow the focus Why: discover inefficiencies uncover interaction points Find dependencies Create the Business Blueprint. Step 3 Business components feed into technical requirements: define the smart contract logic choose a consensus protocol format the block data data visibility rules existing system integrations Why: uncover risk and total costs understand total impacts Map Business Blueprint to Technology Blueprint Enterprise Integration Step 4 Consider operational integration points: ensure the trust model tenant is met eliminate redundancies of existing systems maximize savings and new efficiencies Why: work with internal business processes proprietary value additions eliminate roadblocks to adoption 15 Path to enterprise adoption Enterprise Impact and Industry Impact Meaningful issues should revolve around significant costs to enterprise and industry Use Case Identification Business Blueprint Technology Blueprint Enterprise Integration Existing business process is distilled down to blockchain- based model Reinventing the business based on a trust system Technology to align with the business imperatives Technology design decisions and deployment options Integration with down stream transaction systems reflecting on critical business systems Blockchain network 16 Lessons learnt: 7 design principles of sustainable blockchain business networks Providing network participants control of their business Provision for an extensible business network – Flexibility in membership Permissioned but protected network – Protecting competitive data Open access and collaborative global network – Collective innovation Scalability – Transaction processing and data encryption processing Security – New security challenges of shared business network Coexisting with existing systems of record and transaction systems Recent Publication: Blockchain for Business Making Blockchain Real for Business THANK YOU! Nitin Gaur – ngaur@us.ibm.com 19 Making blockchain real for business with over 600 engagements and multiple active networks 19 20 Network of networks: Driving NextGen economies GLOBAL TRADE Freight Forwarders Airlines Port Authorities Ocean Carriers Customs / Govt. Agencies Supplier s Agriculture Flowers & Perishables Cattle Farms Warehouses Retail Wholesal e Consumers Consumers Wholesale Consumers FINANCIAL SERVICESTrade Finance Insurance Payments Supply Chain Finance Insurance Payments Provenance Digitization Shared Economy CONSUMER INDUSTRY 21 Going back to basics Fundamental Tenets – Trade, Trust and Ownership Duality of Transactions – Issues of Clearing and Settlement Focus just cannot be on digital assets (Tokenization of assets) Is Digital Identity Essential? • Non repudiation • Establish ownership • Claim on instance of an digital/crypto asset What are we solving if we are ONLY solving for reconciliation of ledger entries? Digital Fiat or a similar instrument is essential to solve the last mile – settlement issue Digital Identity is diagonally essential to Digital fiat/crypto asset/ Digital asset 22 Digital identity foundation technology to ensure the trade and ownership Digital fiat address the last-mile issue of settlement for every financial transaction Asset tokenization ensure that digital manifestations reflect real-world assets Security design of the blockchain system address non-repudiation, privacy, confidentiality; and verifiability of claims with consent-driven models Business of blockchain business models a befitting business model to progress blockchain agenda Governance model self-governance networks to consortium-defined; and semi-autonomous governance structures My focus for 2019 wrt to Blockchain $ 23 What would enterprise chain infrastructure look like? Integrated enterprise will need more than one specialized use case • Driving synergies between blockchains • Invisible blockchain infrastructure • Inter- and Intra-enterprise connections • Concept introduction – Interledger – Intraledger • Cross the trust systems for transactions • Fractal visibility of ledger data • Enterprise visibility – control systems Enterprise Chain Infrastructure Payments Mortgage Initiation Securitization Trade Finance Crowdfunding Identity Partner Enterprise / DAO Interledger / ILP Conditional Contracts Conditional Contracts 24 Vision – ‘Interprise Synergy’ Enterprise chain infrastructure Design that enables new business models • Invisible enterprise chain infrastructure will provide foundation • Use of connectors, APIs to enable incumbent systems chain aware • Conditional contracts between chains – ‘Interprise Synergy’ • New business (e.g., P2P lending, crowdfunding) solely on blockchain Enterprise Systems BI / Data Enterprise Systems BI / Data Enterprise Chain Infrastructure Payments Mortgage Initiation Securitization Trade Finance Crowdfunding Identity Partner Enterprise / DAO Interledger / ILP Conditional Contracts Conditional Contracts Enterprise Systems BI / Data Enterprise Systems BI / Data Enterprise Systems 25 Separating blockchain from cryptocurrencies • Cryptocurrencies are one specific usage of Blockchain technology • Blockchain can be used to solve many more real-life business challenges without the fallacies of cryptocurrency • Exchange of digital currencies using cryptography • First crypto currency = Bitcoin • Fully decentralized • Anonymous participation, Transparent activity Cryptocurrency Blockchain Key Attributes • Distributed and Sustainable (Finality) • Secure and Un-editable (Immutability) • Transparent and Auditable (Provenance) • Consensus-Based and Transactional (Consensus) • Flexible and Orchestrated (Smart Contract) However, we need few key attributes for Blockchain to be business ready