Blockchain: Basics and Hacks

A Blockchain is a digital platform that hosts a digital ledger of transactions and shares it among a distributed network of computers. The cryptography technology allows each participant on the network to manipulate the ledger in a secure way without the need for a central authority. Once a block of data is recorded on the Blockchain ledger, it’s extremely difficult to change or remove. When someone wants to add to it, participants in the network — all of which have copies of the existing Blockchain — run algorithms to evaluate and verify the proposed transaction. If a majority of nodes agree that the transaction looks valid — that is, identifying information matches the Blockchain’s history — then the new transaction will be approved and a new block added to the chain.

blockchain

Image: Financial Times

A report from financial technology consultant Aite estimated that banks spent $75 million last year on blockchain. And Silicon Valley venture capitalists are also queuing up to back it.

estimated-blockchain

Bitcoin’s Blockchain is often touted as a revolutionary step forward for network security. But August’s theft of nearly $68 million of customers’ bitcoins from a Hong-Kong-based exchange demonstrated that the currency is still a big risk.

The very Fact that all Bitcoin transactions are permanent and cannot be undone, gives hackers a free hand to steal Bitcoins and get away with it. In fact, there are a few clever tricks built in Bitcoin System so that altering a ledger entry in the blockchain invalidates all subsequent entries. So It is Practically Impossible to Undo Payments in this case “Stolen Bitcoins” unless the hacker himself agrees to return the stolen Bitcoins. There are basically two ways a hacker could hack Bitcoin System for Stealing Bitcoins. He is either able to get the Blockchain password (Wallet key) of a User or a group of user and then use it to transfer all bitcoins from users wallet to his Anonymous Wallet. Or he could actually Hijack Bitcoin Mining Pool and redirect all of its computing power to Mine Bitcoins for himself.

Kaspersky Labs and INTERPOL have presented research in which they show how blockchain-based cryptocurrencies can potentially be abused with arbitrary data that can be disseminated through its public decentralized databases. An attack on “The DAO” took place on 17th June 2016. However, believe it or not, the developers did know of the vulnerability before that date (12th of June). One of the DAO’s creators, Stephan Tual, released a blog post where he explained that even though a recursive call bug exists in a similar smart contract framework (MakerDAO), the DAO is not at risk. Whilst the developers were postponing the fix, the network was compromised and 3.6 million ETH (approximate $53 million at the time) were drained from the DAO. To put it into perspective, this was a third of its resources. Security issues will likely always be present in the Bitcoin world, and users will have to rely on cybersecurity firms to constantly innovate and provide solutions.

From IBM’s perspective, industrial-grade blockchain technologies have the following characteristics:

  • A shared, permissioned ledger is the append-only system of record (SOR) and single source of truth. It is visible to all participating members of the business network.
  • A consensus protocol agreed to by all participating members of the business network ensures that the ledger is updated only with network-verified transactions.
  • Crytography ensures tamper-proof security, authentication, and integrity of transactions.
  • Smart contracts encapsulate participant terms of agreements for the business that takes place on the network; they are stored on the validating nodes in the blockchain and triggered by transactions

IBM is a premier code-contributing member of the Hyperledger Project, which is the Linux Foundation’s open source collaborative effort to create a blockchain for business-to-business (B2B) and business-to-customer (B2C) transactions. IBM has contributed 44,000 lines of blockchain code to the Hyperledger Project. IBM’s contributed code helps developers explore the use of blockchain in the enterprise as they build secure decentralized ledgers to exchange assets of value between participants. IBM’s proposed contribution is a “low-level blockchain fabric that has been designed to meet the requirements of a variety of industry-focused use cases. It extends the learning of the pioneers in this field by addressing additional requirements needed to satisfy those broader industry use cases.

Cognitive 101

This era will redefine the relationship between man and machine – Ginni Rometty – IBM CEO

Cognitive computing is one of the most exciting developments in software technology in the past few years. Conceptually, cognitive computing focuses on enabling software models that simulate the human thought process. Cognitive computing offers fundamental differences in how systems are built and interact with humans. Cognitive-based systems, such as IBM Watson, are able to build knowledge and learn, understand natural language, and reason and interact more naturally with human beings than traditional systems. They are also able to put content into context with confidence-weighted responses and supporting evidence. More specifically, cognitive computing enables capabilities that simulate functions of the human brain such as voice, speech, and vision analysis. From this perspective, cognitive computing is becoming an essential element to enable the next wave of data intelligence for mobile and IoT solutions. Text, vision, and speech are common sources of data used by mobile and IoT solutions. Cognitive systems can quickly identify new patterns and insights. Over time, they will simulate even more closely how the brain actually works. In doing so, they could help us solve the world’s most complex problems by penetrating the complexity of big data and exploiting the power of natural language processing and machine learning.

IBM points to a survey of more than 5,000 C-suite executives by its Institute for Business Value (IBV), which found the following:

  • Sixty-five percent of insurance industry CXOs are pursuing some form of business model innovation, but nearly 30 percent feel the quality, accuracy and completeness of their data is insufficient.
  • Sixty percent of retail executives do not believe their company is equipped to deliver the level of individual experiences consumers demand, and 95 percent say they will invest in cognitive in the next five years.
  • The healthcare industry forecasts a 13 million person gap in qualified healthcare workers by 2035, and more than half of healthcare industry CXOs report that current constraints on their ability to use all available information limits their confidence about making strategic business decisions. Eighty-four percent of these leaders believe cognitive will be a disruptive force in healthcare and 95 percent plan to invest in it over the next five years.

The story was similar across all industries: executives surveyed by the IBV cited scarcity of skills and technical expertise — rather than security, privacy or maturity of the technology — as the primary barriers to cognitive adoption.

The most popular cognitive computing platform in the market, IBM Watson provides a diverse number of APIs to enable capabilities such as vision, speech, text, and data analysis. Watson is now available to developers as part of the Watson developer cloud included in Bluemix distributions.

 

Good resource to learn more about Cognitive Computing, visit IBM:

http://www.research.ibm.com/cognitive-computing/index.shtml

http://www.ibm.com/cognitive/

Cognitive Internet of Things?

Internet of Things (IoT) represents the extension and evolution of the Internet, which has great potential and prospects for modern intelligent service and applications. However the current IoT is still based on traditional static architectures and models by our deep investigation. It lacks enough intelligence and cannot comply with the increasing application performance requirements. By integrating cognition into IoT, we present a new concept of Cognitive Internet of Things (CIoT) and its corresponding intelligent architecture.

Most of the current offerings from several point solution vendors for Internet of Things (IoT) focusses on how to connect devices to see, hear, smell the physical world around and report the observations. However, I would argue that only connectivity and reporting is not enough but capability to learn, think and understand both physical, social and contextual data and apply intelligence is the key. This requirement drives us to develop a new model called “Cognitive” Internet of Things. What is Cognitive? It is more appropriate to refer to “cognition” as an “integrative field” rather than a “discipline” since the study on “cognition” integrates many fields that are rooted in neuroscience, cognitive science, computer science, mathematics, physics, and engineering, etc.

Cognitive computing is one of the most exciting developments in software technology in the past few years. Conceptually, cognitive computing focuses on enabling software models that simulate the human thought process. More specifically, cognitive computing enables capabilities that simulate functions of the human brain such as voice, speech, and vision analysis. From this perspective, cognitive computing is becoming an essential element to enable the next wave of data intelligence for mobile and IoT solutions. Text, vision, and speech are common sources of data used by mobile and IoT solutions.

As per IEEE, Cognitive Internet of Things is a new network paradigm, where (physical/virtual) things or objects are interconnected and behave as agents, with minimum human intervention, the things interact with each other following a context-aware perception-action cycle, use the methodology of understanding-by-building to learn from both the physical environment and social networks, store the learned semantic and/or knowledge in kinds of databases, and adapt themselves to changes or uncertainties via resource-efficient decision-making mechanisms, with two primary objectives in mind:

  • bridging the physical world (with objects, resources, etc) and the social world (with human demand, social behavior, etc), together with themselves to form an intelligent physical-cyber-social (iPCS) system;
  • enabling smart resource allocation, automatic network operation, and intelligent service provisioning

The development of IoT depends on dynamic technical innovations in a number of fields, from wireless sensors to nanotechnology. Without comprehensive cognitive capability, IoT is just like an awkward stegosaurus: all muscle, no brains. To fulfill its potential and deal with growing challenges, we must take the cognitive capability into consideration and empower IoT with high-level intelligence.

Blockchain use cases for FinTech/Insurance

The World Economic Forum published a report entitled, Deep Shift – Technology Tipping Points and Societal Impact. By 2025, 58% of these experts and executives believed we would hit the tipping point for Bitcoin and Blockchain. This was defined as – “10% of global gross domestic product will be stored on Blockchain technology”. Blockchain has the potential to improve the way insurers’ record risk, increasing the speed, accuracy and transparency of our processes. Blockchain offers a decentralized register of ownership by recording every transaction in the system, from creation of a block and through any number of transfers made. Every computer tapped into the system stores a copy of this Blockchain, and before a transaction can be made the system checks that their version of the Blockchain is in sync with all other versions in the network.

The potential applications of Blockchain technology stretch from wealth to health. Financial institutions, including Barclays and Allianz, are now considering how this technology could revolutionize financial services by tracking assets, automating processes and recording the transfer of value.

Blockchain use cases for Insurance

  • Smart Insurance Contract – Smart contracts powered by a Blockchain could provide customers and insurers with the means to manage claims in a transparent, responsive and irrefutable manner. Imagine an insurance policy where claims are paid automatically as soon as a loss occurs and without the need for a claims assessor. Contracts and claims could be recorded onto a Blockchain and validated by the network, ensuring only valid claims are paid. Insurance companies spend over several billions each year on fraud and compliance. There is tremendous use of Blockchain to improve the claims process. Claims-handling could become more efficient and streamlined, resulting in an improved customer experience.
  • Counter Fraud – Fraud is a very real problem for insurance companies. High value assets can be fraudulently registered as stolen, insurance companies pay out, and then the asset registered with a new insurer for the process to be repeated. By using Blockchain to create a decentralized ownership ledger for these high value assets, registered using certificate number and laser inscribed ID number on the diamond itself, it will be possible to recover these items once they resurface.
  • Online digital deal-rooms that could considerably modify the way business are conducted globally. Digital deal rooms will define how documents can be securely shared and logged. A Blockchain-based deal-room would strip out the need to trust an intermediary while providing an accurate record of the documents shared by the deal’s participants. It gives you a database that’s unalterable and nobody owns. It’s a ledger of who sent what to whom, when, forever. That’s an important part [of the insurance process
  • Piracy prevention of Digital Assets – Piracy can also be combatted by tracking ownership of digital assets. Current DRM technology often requires that a song you purchased from iTunes can only be played through an Apple device. By using a decentralized ledger for ownership of digital content the ownership of digital assets can be authenticated across platforms, and can be transferred securely to new parties when sold.
  • Peer to Peer insurance – Blockchain will also give rise to P2P insurance in which policyholders’ pool together, based on a sharing economy concept, and support each other financially in the event of any claim. But instead of a policy managed by people who process applications for new policies and applicants for new claims, the peer-to-peer insurance would only be managed by smart contract code, significantly reducing costs and expediting pay-out thereby significantly increase policyholder experience. Additionally, Lower operating costs are the biggest beneficiary for insurers.

The possibilities are endless and it is for the insurance companies to invest, explore and experiment with the different use cases. The regulatory compliance will also be a considerate issue which will get addressed in coming years.

 

 

Blockchain for Dummies!

Many companies are accepting bitcoins, many are not. Here is a list. These include Target, Tesla, Whole Foods, Microsoft, Home Depot, Intuit, Dell, PayPal/EBay, Sears, Bloomberg.com and many others.  With many companies accepting the change and others getting ready to, bitcoins are an extremely fast-spreading currency. The crypto-currencies have multiplied in the market place in recent years. QR codes are the biggest help in real-world bitcoin transfers. Using a smartphone and a Bitcoin wallet app, a user scans a label and presses a small buttoned aptly named “spend.”

Every transaction that happens between a buyer and seller or a transferor and transferee or between 2 members on the network, is verified and validated by “miners” to ensure it is secured and there is no risk of double spending. These miners are similar to VISA or MasterCard or Amex of the credit card world that provides a platform to exchange, validate and authorize. The miner creates a block of records which holds a copied record of all the verified transactions that have occurred in the network over the past ‘n’ minutes. Each transaction in every block is made at specific time and linked to previous block of transactions. Digital records are lumped together into “blocks” then bound together cryptographically and chronologically into a “chain” using complex mathematical algorithms. This encryption process, known as “hashing” is carried out by lots of different computers. If they all agree on the answer, each block receives a unique digital signature. The groups/chains of these blocks of transactions is referred to as Blockchain. The Blockchain is seen as the main technological innovation of Bitcoin, since it stands as proof of all the transactions on the network. Blockchain, or distributed ledger, technology is more secure, transparent, faster and less expensive than current financial systems. The distributed nature of a Blockchain database means that it’s harder for hackers to attack it – they would have to get access to every copy of the database simultaneously to be successful. It also keeps data secure and private because the hash cannot be converted back into the original data – it’s a one-way process.

In short, Blockchain is a method of recording data – a digital ledger of transactions, agreements, contracts – anything that needs to be independently recorded and verified as having happened. The big difference is that this ledger isn’t stored in one place, it’s distributed across several, hundreds or even thousands of computers around the world. In 2015, some of the leading financial institutions such as Visa, Goldman Sachs, Citi and other Wall Street incumbents joined venture capital firms to pour $488 million into the industry. In a World Economic Forum report released in September, “Deep Shift: Technology Tipping Points and Societal Impacts,” 58% of survey respondents said that they expected that by the year 2025, 10% of global gross domestic product will be stored on Blockchain technology. If banks started sharing data using a tailor-made version of Blockchain it could remove the need for middlemen, a lot of manual processing, and speed up transactions. If banks and other financial institutions are able to speed up transactions and take costs out of the system, it should mean cheaper, more efficient services for us.

 

Start your Internet of Things ‘IOT’ project

IDC estimates that as of the end of 2013, there were 9.1B IOT units installed. IDC expects the installed base of IOT units to grow at a 17.5% CAGR over the forecast period to 28.1 billion in 2020. The number of connected devices is growing at an astronomical rate these days as more and more manufacturers jump into the fray. From Nest thermostats to water sensors to connected home, it’s no surprise that firms like Morgan Stanley are predicting the number of connected IOT devices will approach 75 Billion by 2020. So what makes up this IOT market?

  • IOT Platforms
  • IOT Sensors – Connected Home, Connected Auto, Connected Work, Connected Life, Connected Consumer
  • IOT Devices, Monitors, Controls, etc.
  • IOT Applications and Mobile Apps
  • IOT Network and Connectivity
  • IOT Analytics
  • Social Business
  • Weather Data
  • Consumer data – Health, Locational, Interactions, etc.

But what does this all mean for the manufacturer? What do they need to consider when laying out their connected device strategy.

The IOT is still at an early stage; the connected market has started over a decade back to monitor and control every information from physical and social environments. In the past, most of these units were hardwired together into a complex system but with wireless connectivity, mobile/telematics, cloud, analytics, intelligence and other technology advancements, the birth of IOT took place. For example, the Nest Learning Thermostat performs the basic function of an ordinary smart thermostat: It monitors, adjusts and maintain as per predetermined configuration. But the Nest also senses humidity, activity, and light, and its built-in intelligence “learns” how and when the user likes to adjust the temperature. It can even optimize the house’s temperature for energy efficiency. All this, together, still doesn’t make the Nest part of the IOT. But when it’s connected to an insurance company or the Nest Account (hosted by Google, Nest’s parent company) through a home Wi-Fi network, it has far greater value. That connection allows people to monitor and change the temperature from their smartphones, modify the heating schedule, and analyze their home heating activity. It also allows insurance companies to offer incentives for precautionary and timely alerts preventing losses.

Organizations are now accumulating terabytes and petabytes of data from various devices – machine, mobile, user, web logs and cookies, social media, etc. The challenge is not in storing this information, but in actually using this data for competitive advantage. Organizations are rushing to store this wealth of information fearing missed opportunities. This takes us back to the key questions: what, where and how do I start?

The key to winning the race to competitive advantage is not by storing all or most of the data, but by deriving value and insight that can be tied to a business outcomes, ROI and profitability. Here are the high level steps I recommend to begin your big data journey:

  1. Identify business use cases tied to business outcomes, metrics and your IOT roadmap
  2. Identify business champions and sponsors of your organization that can lead the IOT as business initiative
  3. Select right set of people, processes, technology including platform, solutions for your IOT project
  4. Build a lab – IOT Lab that can prototype different solutions and integration points. Use point solutions for speed to market and cost considerations but plan to build or buy or rent the underlying IOT platform before the system becomes overly complex with many point solutions
  5. Be Agile. Execute your project/POC in sprints or short projects with tangible and measurable outcomes that either increases efficiency, enhance customer experience, reduces cost, prevent losses or increase revenue
  6. Plan for the security and privacy of the data. Consider and simulate the risk of data breach.
  7. Build on small successes and integrate with your data platform and operational applications that will empower your field sales and customer representatives to use the insight to delight your customers

This is a journey and not an end or a destination. Improvise your processes, technology and finally train your people as ‘Connected World’ is here to stay and grow.

The Big Data Institute – Top Ten 2016 Predictions

 customer experience predictions

Here are our predictions for 2016 that The Big Data Institute sees shaping your businesses:

1. Customer Digital Experience will take the center stage for companies competing to win mindshare and share of wallet. Majority of the customer transactions will be initiated through mobile platform – smart phones, tablets, phablets, wearable devices, etc

2. Analytics will become secret weapon for many companies with Big Data and Internet of Things projects on rapid rise. Data Management and Advanced Analytics will become more sophisticated but more business user friendly.

3. Privacy and Security will continue to be top priority for companies as consumers behavior and new laws will drive corporates towards compliance requirements.

4. Consumers will start monetizing their own data using various mediums.

5. Leadership ranks and roles will be transformed with primary corporate roles as – Chief Data Officer, Chief Analytics Officer and Chief Intelligence Officer becoming dominant roles driving IT and Business.

6. Artificial Intelligence, Robotics, Cognitive Computing will be at the top of Hype Curve as companies start exploring and piloting AI, cognitive solutions while Big Data and IOT move towards plateau.

7. M&A on the rise with several acquisitions in IOT, Digital/Mobile and Security solutions.

8. Cloud will become the new standard and will become first choice in many cases for platform.

9. Businesses making IT purchase decisions (solution, software, and project) will be on the rise. In some companies, IT may get decentralized to address the speed and agility requirements.

10. Industry will move more towards pre-packaged/prebuilt solutions include point solutions building towards transformation project instead of large in-house builds.

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