One of the most hyped IT buzzwords to have emerged in the last couple of years. Blockchain has found its way into major media headlines on a near-daily basis, but a year and a half ago, it was a word used by a relatively small number of people to describe the peer-to-peer distributed ledger technology.

1. 1
CHAPTER I
INTRODUCTION

2. 2
INTRODUCTION
One of the most hyped IT buzzwords to have emerged in the last couple of years. Blockchain has
found its way into major media headlines on a near-daily basis, but a year and a half ago, it was a
word used by a relatively small number of people to describe the peer-to-peer distributed ledger
technology.
The blockchain is an undeniably ingenious invention – the brainchild of a person or group of
people known by the pseudonym, Satoshi Nakamoto. But since then, it has evolved into
something greater, and the main question every single person is asking is: What is Blockchain?
Before we explore the technology of Blockchain and how it works, it is first worth exploring the
concept of behind blockchain and its uses in different sectors.
It is to no surprise that Blockchain technology being a buzzword of the day has attracted the
attention of entrepreneurs, governments, banks and many more peopleacross the globe see the
advent of the Blockchain technology to ‗the Internet‘. Also,they foresee the shift of power
balance from centralized bodies in the communications and business sectors.

3. 3
Objectives of the Study:
 To study the different aspects the Blockchain.
 To study the impact of Blockchain on the different sectors.
 To study the effects of Blockchain on the different sectors.
 To study about the outcomes of Blockchain on the different sectors.
 To study the effects of demonetization in long run for an economy.
 To study how concept of Blockchain can help a country.
Research Methodology:
RESEARCH DESIGN
My research design will be descriptive followed by partially exploratory because the entire
project will be based on the data collected from internet, reports, journalsand analysis so that the
detailed and clear description will be there in the project, so there is a mix of explanation and
description design. It will cover all the major information about Blockchain and will give a
clearer view to the reader how it works
SOURCE OF DATA
The main source of information in my project will be based on secondary data like facts, figures,
graphs collected from internet, which will be analyzed and summarized in the form of this
project report.

4. 4
SCOPE OF RESEARCH
My project topic basically falls in the category of business, banking & finance. The objective of
the research having the main aim to make people aware of blockchain and its use in different
sectors.
Limitations of the Study:
 The secondary data collected might consist of manipulations, which might have given
bias in the result.
 The lack of experience in preparing the project report.
 Lack of time for completion of the project.
 The method lacks flexibility. In case of inadequate or incomplete information the result
may deviate.
 It is very difficult to check the accuracy of the information provided
 Documents may lack authenticity parts of the document might be missing, and we might
not even be to verify the document, meaning we cannot check whether its biased or not.
 The way things are measured may change over time, making historical comparisons
difficult.
 As a project report the area of study is vast and may be not enough for to give any
limitation.

5. 5
CHAPTER II
PROFILE OF THE ORGANIZATION

6. 6
HISTORY
Bitcoin and the concept of its blockchain were first introduced in the fall of 2008 as
a whitepaper and later released as open-source software in 2009. The author who first introduced
Bitcoin in that 2008 whitepaper is an anonymous programmer or cohort working under the name
of Satoshi Nakamoto.
Nakamoto collaborated with many other open-source developers on Bitcoin until 2010. This
individual or group has since stopped its involvement in the project and transferred control to
prominent Bitcoin core developers. There have been many claims and theories concerning the
identity of Nakamoto, but none of them have been confirmed as of this writing.
Regardless, what Nakamoto created is an extraordinary peer-to-peer payment system that enables
users to send Bitcoin, the value transfer token, directly and without an intermediary to hold the
two parties accountable. The network itself acts as the intermediary by verifying the transactions
and assuring that no one tries to cheat the system by spending Bitcoins twice.
Nakamoto‘s goal was to close the large hole in digital trust, and the concept of the blockchain
was his answer. It solves the Byzantine general‘s problem, which is the ultimate human problem,
especially online: How do you trust the information you are given and the people who are giving
you that information, when self-interest, malicious third parties, and the like can deceive you?
Many Bitcoin enthusiasts feel that blockchain technology is the missing piece that will allow
societies to operate entirely online because it reframes trust by recording relevant information in
a public space that cannot be removed and can always be referenced making deception more
difficult.
Blockchains mix many old technologies that society has been using for thousands of years in
new ways. For example, cryptography and payment are merged to create
cryptocurrency. Cryptography is the art of secure communication under the eye of third parties.
Payment through a token that represents values is also something humans have been doing for a
very long time, but when merged, it creates cryptocurrencies and becomes something entirely

7. 7
new. Cryptocurrency lets you take the concept of money and move it online with the ability to
trade value securely through a token.
Blockchains also incorporate hashing (transforming data of any size into short, fixed-length
values). Hashing also incorporates another old technology called Merkle trees, which take many
hashes and squeeze them down to one hash, while still being able to prove each piece of data that
was individually hashed.
A
Merkle tree.
Ultimately, blockchains are ledgers, which society has been using for thousands of years to keep
financial accounts. When all these old models are merged and facilitated online in a distributed
database, they become revolutionary.
Bitcoin was designed primarily to send the Bitcoin cryptocurrency. But very quickly, the creators
realized that it had a much larger potential. With that in mind, they architected the blockchain of
Bitcoin to be able to record more than the data concerning the movement of the token. The

8. 8
Bitcoin blockchain is the oldest, and one of the largest, blockchains in the world. It‘s composed
of thousands of nodes that are running the Bitcoin protocol. The protocol is creating and securing
the blockchain.
Nodes safeguard the network by mining for the cryptocurrency Bitcoin. New Bitcoins are created
as a reward for processing transactions and recording them inside the blockchain. Nodes also
earn a small fee for confirming transactions.
Anyone can run the Bitcoin protocol and mine the token. It‘s an open-source project that thrives
as more individuals participate in the network. The fewer people who participate, the more
centralized it becomes — and centralization weakens the system. The primary thing that makes
Bitcoin a secure system is the large number of independent nodes that are globally distributed.
The most successful miners have robust systems that can outperform slower miners. Early in its
history, you could run the Bitcoin protocol and earn Bitcoins on a desktop computer. Now, in
order to have any hope of ever receiving Bitcoins, you need to purchase expensive specialized
equipment or use a cloud service.
In order to create a message in the Bitcoin blockchain, you have to send some Bitcoin from one
account to another. When you send a transaction in Bitcoin, the message is broadcast across the
whole network. After the message is sent, it‘s impossible to alter it because the message is
recorded inside the Bitcoin blockchain. This feature makes it imperative that you always choose
your message wisely and never broadcast sensitive information.
Broadcasting the same message to thousands of nodes and then saving it forever in the token‘s
ledger can add up in a hurry. So, Bitcoin requires that you keep your communications very short.
The current limit is just 40 characters.
Bitcoin is a living and ever-changing system. The Bitcoin core development community is
actively seeking ways to improve the system by making it stronger and faster. Anyone can
contribute to the Bitcoin protocol by engaging on its GitHub page. However, there is a small
community of dominant core developers of Bitcoin.

9. 9
What is Blockchain?
Blockchain refers to a distributed, encrypted database, which is a public depository of
information that cannot be reversed and is incorruptible. In other words, a Blockchain can be
defined as a distributed public ledger or database of records of every transaction that has been
carried out and shared among those participating in the network.
Every transaction or digital event in the public ledger has to be authenticated via the agreement
of more than half of those participating in the network. This implies that no participant or user as
an individual can modify any data within a Blockchain without the consent of other users
(participants).It could be observed clearly, that the technological concept behind the Blockchain
is interestingly closely identical to that of a database.
The Blockchain makes it possible for first time participants to reach an agreement on how a
specific transaction or digital event can occur without requiring any controlling authority. This
technology (Blockchain technology) is unique in thesense that it reduces the function of the
middleman.

10. 10
Key Features of Blockchain
Decentralized Database
A distributed database is a database in which storage devices are not all attached to a
common processor. It may be stored in multiple computers, located in the same physical
location; or may be dispersed over a network of interconnected computers. With the use of a
decentralized and encrypted communication protocols, messages can be transferred, stored and
retrieved at any time without any form of intervention from the government and a distributed
database system consists of loosely coupled sites that share no physical components.
Decentralized Database also allows both decentralized and secure manner of data exchange. If
required, information can be published and distributed across a huge number of computers in an
encrypted manner thereby eliminating the ability of a single entity to censor.

11. 11
Eliminating Third Party
It records and stores every transaction that occurs in the network, essentially eliminating the need
for ―trusted‖ third parties such as payment processors. Blockchain proponents often describe the
innovation as a ―transfer of trust in a trustless world,‖ referring to the fact that the entities
participating in a transaction are not necessarily known to each other yet they exchange value
with surety and no third-party validation.
Smart Contracts
Smart contact is a term used to describe computer program code that is capable of facilitating,
executing, and enforcing the negotiation or performance of an agreement (i.e. contract) using
blockchain technology. The entire process is automated can act as a complement, or substitute,

12. 12
for legal contracts, where the term of the smart contract is recorded in a computer language as a
set of instructions.
These smart contracts employ the use of the ‗if-this-then-that‘ logic. The execution of smart
contracts does not involve the use of any human in any way. This signifies that Smart contracts
are decentralized and they tend to operate without any middleman or third-party regulation.
Furthermore, they employ the use of a distributed database so that participants can verify that
there is an occurrence of a digital event without requiring any middleman or third party.
Moreover, smart contracts are not written in legal languages but are written as computer
programs and these computer programs have the ability to define strict rules.

13. 13
Self-Executing Systems
Blockchain-based smart contracts are self-executing. They can solve the problems of
counterparty trust in the sense that they automatically implement the terms of an agreement
between parties on pre-set logic without the need for intermediaries. They are executed by a
computer network that uses consensus protocols to agree upon the sequence of actions resulting
from the contracts‘ code.
Coded contracts introduce efficiency of automatically generating contracts based on mutually
agreed-upon patterns and syntax amongst counter parties. This is a major overhaul from how
things are currently done i.e. manual documentation. Prior to blockchain, for an agreement of
this type, parties would have had to maintain separate databases. Blockchain however, allows the
shared database to have self-executing smart contracts where all participants can validate the
outcome instantly without requiring an intermediary.
Best-Fit Scenarios
A good fit for blockchain enabled smart contracts could be a scenario where frequent transaction
happen between a network of participants and manual mechanical tasks are performed
repetitively for each transaction. Smart contracts are particularly well suited for the
permissioned/private blockchain network. For the financial and securities sectors, such a code-
based compliance would save a lot of time and money. Syndicated loans are a $4 trillion plus
market that still run primarily on faxes, emails and Excel spread sheets. It can definitely see
improvement with this technology.

14. 14
Blockchain Smart Contract Use Cases

15. 15
Mastek’s KYC Proof of Concept
Mastek developed a proof of concept around the ‗KYC for Banks‘ use case with blockchain and
smart contract. Know Your Customer (KYC) is an expensive element of on-boarding a new
client and each financial institution must create their own KYC. This means that
banks/companies have a high cost of customer acquisition, and for customers it means a painful
process to go through every time a new account is opened with a new bank.
Blockchains remove the need to trust a third party by trusting the network-agreed dataset. Smart
contracts assure that whenever details like the address is changed, the customer needs to
resubmit the proof for it to be acceptable again by the participating banks/companies. Mastek
successfully developed this PoC and tested it on a private network.
As exciting as all of this may sound, this is just the beginning for this technology. On the
technology front, certain advances will only broaden the applications. On the business side,
businesses will find out more uses for smart contracts and newer models will begin to emerge.
Start-ups have already begun pairing it with IoT devices to provide access via smart locks. This
is the right time for business leaders to examine this technology. Blockchain and smart contracts
represent a new model of computing, development and integration, and it is of paramount
importance to understand these newer protocols when evaluating these applications for the
enterprise.
Faster Settlement
By eliminate the need of third party regulator to a large extent, since the rules and regulations
would be in built and required to follow every time in order to make your transactions official (as
a part of the blockchain), so in this case the network acts as a regulator for every single
transaction. This would not only reduce huge costs levied on customers in terms of commissions,
but would also speed up the process resulting in much faster transaction settlements.
Also, given the number of intermediaries in the system gets reduced, the costs associated with
them like trades record keeping, audits, and trade verifications also gets eliminated. For example,

16. 16
in the current system, 1% processing fee might not seem like much but add a number of
intermediaries and the cost mounts up significantly creating an impact in the long run. This also
restricts access to a lot of small players. Blockchain removes this hurdle. Any transformation,
which helps small businesses compete with big organizations can have major global effects.
For example, remitting money from one country to another takes about 2-3 days whereas
Blockchain application designed to do this can do the same within minutes. It shouldn‘t be hard
to imagine the impact of this efficiency and effect it would have on the global economic
progress.
Better Security
The blockchain addresses the fundamental flaws of security by taking away the human factor
from the equation, which is usually the weakest link. By leveraging a distributed ledger and
taking away the risk of a single point of failure, blockchain technology provides end-to-end
privacy and encryption while still ensuring convenience for users.
Blockchain technologies are here to stay. It is probably going to help us protect as
individuals, companies and governments. Even the pentagon already thinks the
blockchain technology can be used as cybersecurity shield.

17. 17
Different types of Blockchain
All Blockchain can be classified into three categories:
1.Public Blockchain
2.Private Blockchain
3.Permissioned Blockchain
Public Blockchain
In a Public Blockchain, anyone can read and write the data stored on the Blockchain as it is
accessible to everyone in the world. A person can become a member of the Blockchain network
and can store, send and receive data after downloading the required software on his device.
A Public Blockchain is completely decentralised as the permissions to read and write data onto
the Blockchain are shared equally by all the connected users, who come to a consensus before any
data is stored on the database. A Public Blockchain is based on a completely trust-less system
where no user is given special privileges on any decision.
Private Blockchain
In a Public Blockchain, here the permissions to write data onto the Blockchain are controlled by
one organisation which is highly trusted by the other users. This organisation may/may not allow
users to have access to read the data, as public readability might not be necessary in most cases. In
some situations, the organisation might want the public to audit the data. Limited/restricted read
permissions also provide a greater level of privacy to the users, a feature not available in Public
Blockchains.
The organisation in control has the power to change the rules of a Private Blockchain and may
also decline transactions based on their established rules and regulations.

18. 18
Permissioned Blockchain
A Permissioned Blockchain is a type of Private Blockchain and shares many features of
the latter. A Permissioned Blockchain provides a hybrid between the ‘low-trust’ provided
by Public Blockchains and the ‘single highly-trusted entity’ model of Private Blockchains.
Popularly called a Consortium Blockchain, it is one where instead of allowing any person
with an internet connection to participate in the verification of the transaction process or
allowing a single company to have full control, a few selected nodes are predetermined.

19. 19
Benefits of Blockchain Technology
There are immense benefits the Blockchain technology provides. Some of thesebenefits include;
Trust, Openness, Independence, Speed, Robustness, Global Nature and Effectiveness.
Before any data is added to an explicitly defined Blockchain, it is expected that a greater number
of users of the system reach an agreement. This pattern is quite distinct from the centralized
pattern in which there is a central authority. A more trustworthy system is created when majority
of the users have a say over the writing, creation and alteration of such data. This high level of
trust has been the case of the innovation brought about by Blockchain technology.
Also, through the use of smart contracts that reconciles in real-time, the level of openness has
drastically improved with the advent of Blockchain technology. Also, since trade data is
published to a common platform, trades can be viewed by participants in real-time. This helps to
forestall any form of manipulations or alterations.
The design of Blockchain technology was done in such a manner that this technology is not
dependent on any financial institution such as banks or government. This makes it more
attractive and less prone to regulations. Furthermore, the technology of Blockchain has enhanced
the level of speed of transactions. Since Blockchains can automate messages by the addition of
code snippets called ‗smart contracts‘ that does not involve the involvement of any human in any
way, the speed of payment is enhanced. This implies that there will be a lower transaction
completion time as third parties have been eliminated. The robustness of the Blockchain
technology makes it possible for data to be stored across a large number of nodes. The higher the
number of nodes, the more resilient the data.
Also, the ability for Blockchain technology to serve both locally and globallymakes it more
attractive. Moreover, the technology of Blockchain has enhanced the level of effectiveness that
exists when reconciliation is brought to play in the financial sector. Taking banks for example,
banks usually delegate a system to serveas the trade data for a specific security and this will

20. 20
result into deficiencies in reconciliation. Since Blockchain technology exists, reconciliation is
carried out in real-time.
Blockchain technology may provide several important features that could be leveraged for use in the
creative economy:
 Transactions are verified and approved by consensus among participants in the network, making fraud more
difficult.
 The full chronology of events (for example, transactions) that take place are tracked, allowing anyone to
trace or audit prior transactions.
 The technology operates on a distributed, rather than centralized, platform, with each participant having
access to exactly the same ledger records, allowing participants to enter or leave at will and providing
resilience against attacks.
 Empowered Users: Blockchain provides the users with the ability to control their information as well
as the transaction that they are part.
 Durability, reliability and longevity: Blockchain technology does not depend ona centralized
computing architecture, thus, it will not fail because of a single failure.
 Process with integrity, transparency and immutability: Transactions conductedusing blockchain are
viewable by public and cannot be altered, thus, their integrity, transparency and immutability are
guaranteed.
 Faster and lower costs transactions: Blockchain technology has the potential toradically reduce the
time and costs for the transactions by eliminating theintermediaries or third-party agents.
 Initial implementation cost: The savings promised by the use of blockchaintechnology is encouraging;
however, the initial implementation costs would be considered as an important factor that cannot be
neglected.

21. 21

22. 22
Future of Blockchain
Blockchain technology has a great future if well harnessed and implemented onvarious
platforms. Blockchain technology could govern the future of finance as it will result into huge
reduction of cost for all participants in the market thereby changing global banking
Just of recent, the governor of the Bank of Japan (Haruhiko Kuroda) highlighted that with the
development of Blockchain technology, there could be an evolution in the manner in which
financial services are designed. He pointed out that artificial intelligence and Blockchain
technology could bring about an immense impact on financial services and he also highlighted
that ledgers (the basic information infrastructure) have significantly supported the development
of financial services.
Trade Finance
This area is one of the key areas that Blockchain technology can be applied. It has great
potential. If some banks make a decision to position the financial supply chain by putting the
letters of credit on the Blockchain, this will be immense as these letters have highly complicated
and sophisticated flow of information, even if a Blockchain solution is used mainly by a small
number of participants.
Three key features of blockchain — cryptographic security, distributed ledger architecture and a
network consensus mechanism — are instrumental in treating the major pain points of trade
finance:
• The cryptographic security underlying blockchain technology enables information
immutability and credibility. This capability renders trade transaction records stored on
blockchain tamper-proof, reliable and verifiable by all parties at any time. Data confidentiality
and privacy are ensured through permissioned access rights for trade participants.
• The distributed ledger architecture provides transaction transparency and traceability.
This increases visibility into asset status for merchandise tracking, enables automated execution

23. 23
of contractual obligations through smart contracts, and ensures networks are resilient to
downtime and manipulation risks.
• The network consensus mechanism provides a single source of truth for enabling native
issuance of financial assets (trade receivables and other payment obligations). It also eliminates
the associated problems of double spend, fraud and the need for continuous reconciliation
between trading and financing parties in the transfer of these digital assets.
Together, these features provide the foundation for building robust and synergistic trade finance
ecosystems and platforms that substantially increase the efficiency of trade processes, eliminate
fraud, improve asset liquidity and provide better visibility into the trade supply chain.
BLOCKCHAIN’S IMPACT ON TRADE FINANCE
Blockchain‘s benefits can be looked at across three key areas in trade finance.
1. Providing payment certainty to sellers by automating payment methods.
While payment methods like letters of credit (LC) provide an effective way to mitigate
business risks through bank facilitation of the trade flow and settlement process, their value
can be seriously limited by high costs, contractual delays and process complexities.
Because LC compliance is evaluated based on trade documents and not the actual delivery
or quality of goods, ambiguities in the semantics of the legal clauses in the LC contract
necessitate the bank to apply discretionary determination when interpreting them. As a
result, errors in terminology and interpretation of requirements commonly lead to disputes
between parties, with goods sitting unclaimed at the delivery location

24. 24
Letter of Credit Process Flow
To mitigate the risk of delayed or denied payments, the LC can be modelled as self-
executing contracts on blockchain (see Figure 1, previous page). This would automate
compliance verification with contract terms and ensure faster payment to sellers by
preventing disputes from arising due to ambiguities in the payment contracts. Automating
the payment method on blockchain also expedites payments through early discovery of
discrepancies and increases the efficiency of the amendment process.
2. Providing delivery assurance to buyers through trade asset tokenization.
Visibility into the status of in-transit shipment is essential for buyers to obtain timely
indications of potential delays and damages that can impact fulfilment of downstream
obligations. However, buyers often lack this insight into en-route delays or shipment
damage due to bad weather, port congestion, customs hold-ups and other reasons until the
actual delivery of the shipment. This limits the ability to foresee and mitigate business risk.
Trade documents also move separately from the flow of goods, leading to situations when
goods cannot be claimed by buyers until the title or other physical documents have been
received. Documents can also be easily forged or manipulated due to vulnerabilities in the

25. 25
transport chain resulting from fragmented interactions between stakeholders, variations in
country-specific regulations and trade procedures, and an overall lack of security and
common standards. This increases the risk of document fraud for trading parties.
Parties in the Trade Transport Chain
On blockchain, the trade asset can be digitized through crypto-tokens to denote custody or
ownership of the bearer and link its transfer between trade transaction participants on
blockchain with the movement of the physical asset, establishing a clear chain of
provenance. The trade-related documents can also be directly issued and verified on the
blockchain by relevant parties.
Asset tokenization on blockchain provides delivery assurance and better risk management
for buyers by enabling real-time shipment status tracking and visibility into transport
conditions. Managing the flow and transfer of trade documents, such as bill of lading, on
blockchain reduces hold-ups in the release of cargo to the buyer due to delayed receipt of
trade documents, and it also prevents losses from document manipulation and errors.

26. 26
3. Mitigating risks and increasing financing revenues for banks through payment
instrument digitization.
Trade receivables and other payment instruments such as promissory notes, checks, drafts
or bills of exchange act as negotiable instruments that can be transferred to third parties
like banks and other financial institutions. This makes it possible for suppliers to get
funding to meet their working capital needs by sale or transfer of these payment
instruments through discounting, factoring or forfeiting.
However, banks face challenges in detecting deviations and ensuring compliance because
of process inefficiencies, such as limited availability of trade information, reliance on
documentary proofs of trade, and the high cost of manual screening required, making them
vulnerable to business risk.
Another key pain point in financing is the unavailability of sufficient and timely trade
credit for SMEs, which generally receive deferred payment terms from corporate buyers
but need liquidity in the interim to meet their working capital needs. The overhead
involved in issuing, storing, transferring and redeeming receivable instruments in paper
form also makes for an operationally inefficient, costly and time-consuming process.
Post-Shipment Financing Process Flow

27. 27
Since payment instruments are essentially credit instruments created by the trade
transaction, they can be directly issued on a blockchain network as native assets. Payment
instruments such as bills of exchange or promissory notes can be digitally created as
financial contracts between the issuing and redeeming parties. Direct issuance of payment
instruments on blockchain prevents fraudulent invoicing practices, improves SME
financing options through increased liquidity of receivables, and enables process
efficiencies in managing receivables.
OTHER PROCESS CONSIDERATIONS
In the coming years, we expect blockchain to also play a pivotal role in improving the
peripheral business processes that impact trade finance. These include, among others,
identity management and document and contract management processes.
Identity management
Identity and reputation management is the cornerstone of any trade interaction. Banks need
to facilitate trade transactions to cover the risk of payment or delivery default by the trade
counterparty. Blockchain ecosystems can facilitate credible and effective trade party
credentialing based on immutable and comprehensive payment and trade transaction
history records that can be effectively deployed for assessing the creditworthiness and
financial health of the corporate and initiating financing, as well as for ongoing monitoring
for funds release and disbursement.
Document and contract management
Trade documents related to financial, regulatory, commercial and insurance can be
effectively managed on blockchain by hashing these to ensure that all parties are accessing

28. 28
and making changes to the most recent version of the document. Similarly, trade-related
contracts can also be created, updated and amended directly on blockchain through a multi-
signatory mechanism and carried forward and easily referenced with the rest of the
transaction activities.
These actions increase the auditability of the trade process and ensure that documents or
contract information cannot be tampered with by any single party. Blockchain technology
also lends itself to easier dispute resolution as immutable contract information is preserved
and made accessible to all parties on the blockchain.

29. 29
Financing
When Blockchain technology is used in data exchange during trade, it serves toprovide
irreversible and simple matching of data. Also, it serves to increase the effectiveness and speed
of reconciliation (as this is done in real-time) and helps to increase the level of security of
transactions between parties involved in buying and selling and their banks.
Simply put, blockchain revolves around an encoded and decentralized or distributed
database (the ‘distributed’ part of distributed ledger technology) which serves as a ledger
whereby records regarding transactions are stored.
These records can‘t be changed as the model is distributed: there isn‘t a central authority but
there also isn‘t any involved party (those doing transactions) that can change information.
Blockchain relies on peer-to-peer network principles whereby each encrypted block in the chain
is linked to the next.
Benefits of Distributed Ledger Technologies
There are quite a few benefits for the finance industry to be achieved by using distributed ledger
technologies (for the sake of keeping things simple, I will refer to these technologies as
Blockchain). Traditionally, the financial services industry is known for its legacy systems and
some banks have stacks of legacy systems, some of which 30-40 years old. It is, therefore, not
surprising that the finance industry has embraced Blockchain to improve many of their outdated
systems and, along the way, save a lot of money (which, not surprisingly, might be the main
reason for them to move to the Blockchain). Using a distributed ledger, banks can trade faster
and cheaper and become more efficient. Some of the benefits are:
1. Instant Settlements
Transactions can be done in minutes or seconds, while currently, settlements can take up a
week. With Blockchain, settlements become user-optimized, which will save a significant

30. 30
amount of time and money, for both parties involved. Blockchain will remove the need for a
lot of middle-office and back-office staff at banks, as transactions settles instantly. As such,
banks have an important drive to explore Blockchain for improving settlements and some
banks explore internal options first, while others explore options between banks first.
2. Improve Capital Optimization
One of the main features of Blockchain is that it removes the need for a trusted intermediary
and makes peer-to-peer transactions possible. When Blockchain is applied in the financial
services industry, it could render useless the fee-charging intermediaries such as custodian
banks (those that transfer money between different banks) or clearers (those vouching for
counterparties credit positions). As such, Blockchain offers better capital optimization, due
to a, significant, reduction in operational costs for banks. In addition, when banks share a
Blockchain, the total costs of that Blockchain and the surrounding ecosystem might be
higher than individual costs of managing transactions at a bank. However, the costs are
shared among all participating banks and as such, there is a significant cost reduction.
3. Improved Contractual Performance due to Smart Contracts
When banks and financial institutions are using smart contracts, it will improve contractual
term performance as smart contracts execute automatically once certain pre-set conditions
have been met. It is important that those smart contracts are firmly rooted in law and comply
to any regulatory compliances, across jurisdictions if needed. Because of this, R3CEV had to
tailor-make the smart contracts within their distributed ledger platform. Especially complex
financial asset transactions can benefit from Blockchain, due to automatic settlement using
smart contracts under the control of an incorruptible set of business rules.
4. Increased Transparency
Blockchain is more transparent. It can give regulators and compliance officers clearer
insight into the provenance of financial transactions, helping them to combat money
laundering and manage risk.

31. 31
5. Reduced Error Handling and Reconciliation
A key feature of Blockchain is that any data recorded is immutable. Any data that is
recorded on a blockchain can be tracked in real-time, leaving a very detailed audit trail. As
such, it eliminates error handling and reconciliation.
The Capital Market
As earlier highlighted, some of the benefits the Blockchain technology include: Trust, Openness,
Independence, Speed, Robustness, Global Nature and Effectiveness among other benefits. These
benefits of Blockchain technology can as well have an immense impact on the future of the
capital market. The capital market has four key areas and these areas are; pre-trade, trade, post-
trade and custody and securities servicing.
The record of each security would be held on a flat accounting basis - that is, with multiple levels
of beneficial ownership in a single ledger. There would be no need to operate data normalisation,
reconcile internal systems, or agree exposures and obligations. We would have standardised
processes and services, shared reference data, standardised processing capabilities (such as
reconciliations), near real-time data and improved understanding of counterparty worthiness. For
privileged participants such as regulators, we would have transparent data on holdings, among
many other improvements.
To bring this ideal scenario to life, we lay out below a stylized ‗capital markets utopia‘ based on
blockchains and smart contracts.

32. 32
Potential benefits for capital markets
The blockchain vision is clearly a massive change to the structure of capital markets. Why would
the industry want to begin to go down this route? To understand the level of interest, it is worth
thinking about the benefits across pre-trade, trade, post-trade and securities servicing.
Implications for Market Structure
With such a fundamental change to the system, the role of market participants would change,
with profound impact on their business models.
Clients
Many clients (particularly on the buy side) will expect to accrue the most benefit, from the
reduction in costs of capital markets dealing and securities servicing. Retail and wholesale
investors may transact more among themselves, now with guaranteed execution on open
markets.

33. 33
Dealers
Dealers will still play a valuable role in the market by being better at sourcing liquidity for
assets, or taking principal risk where liquidity is thin. Their primary value will be in price setting,
advising on transactions and execution management, rather than in providing market access.
Private trading companies
A near real-time settlement process would have major implications for private trading
companies, particularly market-makers and High-Frequency Traders (HFTs). If trading moves to
pre-trade validation of ownership prior to the asset being sold, HFTs will need to wait (for even
just a few seconds) for each settlement cycle before they can transact again. This would give rise
to a substantial slowdown in their rate of activity, which may mean that the scope of blockchain
is limited only to post-trade processes in markets where HFT is insignificant, or in markets
which could operate on hybrid models, enabling HFTs to trade on credit lines that are regularly
cleared through the blockchain consensus cycle.
Venues
Execution venues may remain much as they are today, facilitating price discovery and matching
counterparties who wish to deal. The cryptographic signature data formed at the time of
transaction also serves as the data required for settlement, increasing the value of the role
provided by venues. However, given that trading strategies such as HFT account for such a large
share of traded volumes (and hence fee revenue), profound changes to market structure may have
a knock-on impact on exchanges and other venues.
Central Counterparties (CCPs)
In a near real-time asset transaction settled for cash, there is no longer a need to clear the
transaction centrally (as both sides have pre-trade transparency that their counterpart will be able

34. 34
to meet the terms of the transaction, and settlement happens almost instantly). However,
transactions with a longer lifecycle (such as derivatives) still need the advantages of CCP
novation to achieve netting benefits and reduced future counterparty credit risk (replacement
risk).
Custodians
Distributed asset ledgers with flat accounting structures could remove some of the role that
custodians and sub-custodians play today. Custodians‘ role may change to that of a ‗keeper of
the keys‘, managing holdings information and ensuring automated securities servicing operations
are performed correctly. It may lead to the unbundling of accounting from the other services
provided, and erode their stickiness for clients and the ability to cross-sell other services (such as
collateral management).
Central Securities Depositories (CSDs)
The need remains for coordinated oversight of asset issuances and ensuring orderly functioning
of the market. As for the custodian, the ledger may become the primary destination of asset
issuances, although we might expect traditional CSDs to play the role of operational governance,
responsible for coordinating the evolution of the ledger protocols, managing the introduction or
cancellation of tokens on the ledger, regulator interface, and so on.

35. 35
Ways Businesses Are Already Using Blockchains
Shipping
Maersk, the world‘s largest shipping company, completed an inaugural test this spring
of using a blockchain to track its cargo. The test involved not just Maersk but a series of
third parties—the shipper, Dutch customs, and the U.S. Department of Homeland Security—
with all of them tracking containers remotely. The tech‘s reliance on cryptographic
signatures makes it harder for anyone to mislay goods or tamper with labels while cargo is
on the move, and can reduce the time goods spend in transit.
Banking
Despite its sophistication, the banking industry is still bedevilled by sluggish systems that
can take hours or days to confirm basic transactions such as stock sales or money transfers.
But the ongoing adoption of blockchains by the likes of Barclays, which conducted a
ground-breaking transaction (it involved butter exports) using the technology in 2016,
means this is changing. In the near future, look for rapid increases in the speed of banking
services as well as the disruption of intermediaries like brokers and clearinghouses. Big
banks are even planning to use blockchains to remake the SWIFT system, which is used for
global interbank transfers.
Law
All sorts of agreements—from home sales to business purchases to employee contracts—
require lawyers and courts to enforce. Now, more firms are experimenting with ―smart
contracts‖ that execute themselves: A blockchain system can, for instance, release money
from escrow once one party to a contract transfers a deed. Lawyers nervous about their jobs
can rest easy for now, as smart contracts are still a novelty. But this could change soon,
especially as states like Arizona pass laws that confirm smart contracts are valid.

36. 36
India Government Views on Blockchain
This favorable view of the Indian governments and the industry signal the opening of one of the
world's largest markets to the Blockchain Industry. It‘s going to be an exciting space to watch.
Reserve Bank of India (RBI), India's central bank also has been conducting various evaluations
on the Blockchain technology and in a research report released in Jan 2017, mentioned that
Blockchain Tech can bring cost savings, efficiency, and transparency to the banking industry.
Large private banks and other corporates have already made significant progress in adopting the
technology in India.
The Reserve Bank of India has successfully tested blockchain technology for trade application.
The evaluation was carried out in partnership with MonetaGo, domestic banks and other
financial institutions.
The Indian central bank recently tested Bitcoin‘s underlying blockchain technology. The Reserve
Bank of India‘s research arm is said to be involved in its first ever end-to-end test of the
technology along with other stakeholders of the country‘s financial system.
Institute for Development and Research in Banking Technology (IDRBT), the Reserve Bank‘s
research arm has worked closely with the regulators, banks, financial institutions and clearing
houses during the evaluation process. MonetaGo, a New York-based cryptocurrency firm served
as a technology partner during the study.
The adoption of blockchain technology among stock exchanges and trade platforms is
increasing. The potential of blockchain technology to automate trade settlements and transactions
can prove to be a huge cost saver for financial institutions. Even Reserve Bank of India‘s
experiment involved the use of blockchain in a trade application and the results are now
available in a white paper titled ―Applications of blockchain technology in banking and financial
sector in India‖.

37. 37
The Reserve Bank‘s blockchain research follows a recent partnership between one of the Indian
banking majors, ICICI Bank and Stellar. ICICI bank had announced its plans to develop a
Stellar-based blockchain application for transactions within closed groups. Few other Indian
banks working on blockchain technology includes Axis Bank and Yes Bank. Axis Bank, in
partnership with Ripple, is set to offer cross-border payment services over distributed ledger.
Successful exploration of blockchain technology by the country‘s central bank will also help the
growing Indian Bitcoin community. In the recent days, the country has seen a dramatic increase
in Bitcoin adoption and the government‘s openness to the technology can translate to a lenient
regulatory view towards the cryptocurrencies.

38. 38
Use of Blockchain Technology in India
Banking Sector
Recently ICICI Bank said that it had successfully executed international trade finance and
remittance transactions using ‗blockchain‘ technology.
ICICI, India‘s largest private bank, says it collaborated with Dubai‘s largest bank Emirates NBD
on a pilot project to execute international trade finance and remittance transactions using
‗blockchain‘ technology. What makes this development significant is that it is being used for the
first time by banks in India as well as in the Middle East. The banks say they have partnered with
banking solution Infosys Finacle for this.
Know public-sector bank, government-owned State Bank of India (SBI) is India‘s largest
banking corporation with assets over $460 billion and services in a number of areas including
retail and corporate banking as well as financing and insurance. Earlier in February, SBI took the
lead to establish ‗Bankchain‘, India‘s first financial blockchain consortium comprising of India‘s
biggest banks (both public and private) alongside technology companies including IBM and
Microsoft to develop and implement blockchain applications in the financial services industry.
SBI is now pressing ahead with its first implementation of the decentralized technology by using
an enterprise blockchain solution for managing its Know Your Customer (KYC) system, via a
new partnership with Intel that sees the technology giant become the consortium‘s official
technology advisor.

39. 39
Financial Services sector
The Financial Services industry is witnessing an increasing number of Blockchain-based use
cases that yield the potential to drive operational efficiencies and improved customer experience.
There are multiple experiments in ―Cross-border remittances‖, ―Post trade settlements‖, ―Trade
Finance‖, and even ―Loyalty programs‖ applications from the financial services giants.

40. 40
Non-Financial Services sectors
Despite financial players being the first movers to explore this Distributed Ledger Technology,
non-financial players have been paying attention and looking for ways to leverage the
opportunities that Blockchain offers. The front-runners among them are retail, travel, healthcare,
telecommunications and public-sector industries. The major use cases applicable to these
industries are focused on the decentralized data storage, data immutability, and distributed
ownership features of Blockchain.

41. 41
Cross industry use cases
As we found during our research, there is lot of press and hype around how blockchain can
impact industries and the broader society. As someone tweeted ―We need a ledger to store all the
press and hype around blockchain‖. Here is a glimpse at the gamut of blockchain applications
The Financial Services industry is witnessing an increasing number of Blockchain-based use
cases that yield the potential to drive significant operational and client experience improvements.
There are multiple experiments in ―Cross-border remittances‖, ―Post trade settlements‖, ―Trade
Finance‖ and even ―Loyalty programs‖ applications from the global financial services giants.
Some of the use cases are not specific to a particular industry and can be adapted across the
different organizations. The prominent among these are Loyalty, Transfer pricing, and Smart
Identity

42. 42
CHAPTER III
REVIEW OF LITERATURE

43. 43
INTRODUCTION
Reviewof literature forms an integral as well as an essential part of modern researchstudies. No
research study is considered complete unless an extensive literaturereview is made by the
researcher. The basic purpose of undertaking this exercise isto find the research gap between,
studies conducted so far or literature available, andalso to finalize precisely the topic of research
and to get insight into the researchtopic selected for study. In this sense this exercise becomes a
sort of exploratoryresearch.
REVIEW OF LITERATURE
1. Vincenzo Morabito,Technological advancements and innovation is constantly evolving and
growing at such a fast rate that everyone is required to stay abreast of these advancementsand
innovations. The paradigm change of Blockchain is not left out from this evolution. The
technological concept behind the Blockchain is interestingly closely identical to that of a
database. However, it is clearly one of the key concepts that needs to be understood for the
future. There are five key concepts that not only need to be understood but also explored in a
manner that examines how they interrelate one to another: smart contracts, decentralized
consensus, the Blockchain, trusted computing and proof of work/state. This exciting
computingparadigm is critically important because it will be instrumental to the creation of
decentralized applications.
2. Primavera De Filippi, in their research paper they said that the blockchain is more than just
ICT innovation, but facilitates new types of economic organization and governance. Suggests
two approaches to economics of blockchain: innovation-centred and governance-centred. Argues
that the governance approach—based in new institutional economics and public choice
economics—is most promising, because it models blockchain as a new technology for creating
spontaneous organizations, i.e. new types of economies.‖
3. Goldman Sachs, in his article he said that blockchain has the potential to redefine
transactions and the back office of a multitude of different industries. From banking and
payments to notaries to voting systems to vehicle registrations to wire fees to gun checks to

44. 44
academic records to trade settlement to cataloguing ownership of works of art, a distributed
shared ledger has the potential to make interactions quicker, less-expensive and safer.
4. Laura Jutila,in his research paper he acknowledges that Industries and old ways of doing
business have been reshaped or become entirely obsolete due to the new digitalization trends.
The current technology to truly revolutionize and disrupt especially industries that rely on trust,
such as the financial sector, is the blockchain technology. The core idea of this technology is that
it is a public, shared and tamperproof ledger that allows people who do not know or even trust in
each other to share information in a trustworthy ledger, where any sorts of immaterial
information of value can be stored. This thesis is a literature review that provides a theoretical
framework to examine how the blockchain technology affects particularly the financial sector
5. Anders V. Hua & Jorgen S. Notland:The blockchain is a new ground-breaking open-
source technology (Nakamoto 2008) which was initially released as the underlying technology
for the world‘s first decentralized global digital currency, Bitcoin. The blockchain is an
immutable and transparent distributed database. The supply chains for commercial markets are
opaque and complex, they can span over hundreds of production stages and several geographical
locations so that the provenance and history of a product is usually unknown to upstream actors.
Lack of transparency and trust in the supply chain lead to lack of information about the
provenance and working conditions behind the product. There has been shown that some actors
behave illegally and unethically.
6. Gavin Smith We‘ve seen distributed ledger technology move out of the lab and onto the C-
suite agenda of our clients, from startups to multinational giants with centuries of transactions
behind them. While perspectives are many and varied, the overwhelming view is that distributed
ledger technology has the power to shift economies, businesses and behaviors. Whichever side of
the ledger they‘re on, businesses need to understand how the technology works and its potential
applications, and how it interacts with existing legal frameworks. Businesses that are investing
in, or considering using, any variant of this technology, must be able to assess the associated
risks and benefits.

45. 45
CHAPTER IV
ANALYSIS & INTERPRETATION

46. 46
Investors into the sector tend to be specialists in blockchain technology
Figure 1
In the above figure 1 it is showing that in which sector the more investment is done regarding
blockchain technology like in Digital Currency the most investment is done and the lowest
investment is in BiT Capital.

47. 47
Blockchain technology activity is dominated by acquisitions
Figure 2
In the above Figure 2 it is showing that the exit events within blockchain technology grew in
which sector from 2011 to 2016. In 2016 the most technology grew in the Public sector as well
as in acquiring the technology in different events.

48. 48
Recent blockchain technology funding events
Table 1
In the above Table 1 it is showing that the funds rose by different company by showing the use
of blockchain in different ways and what the blockchain can do in the different
Recent blockchain technology funding statistics
Figure 3
It is showing the recent funding statistics of blockchain and also the number of new funding for
innovation of blockchain technology in different sectors.

49. 49
Companies using blockchain for solutions in different industry
Figure 4
In the above Figure 4 it is showing that the companies using blockchain technology for solutions
in different industries like consumer products and manufacturing, financial services etc in 2017.

50. 50
CHAPTER V
CONCLUSION & RECOMMENDATION

51. 51
CHALLENGES & ISSUES
Blockchains are not without their hurdles. While blockchain has immense potential to the
society, it is also recognized that this is hard to achieve without substantial regulatory will and
collaborative effort from all parties involved.
• Total transparency a double-edged sword - The demand for change in business processes
(transaction processing) will come either from the grassroots demanding that certain data go on a
blockchain and form a record which cannot be subsequently edited, or from regulators and
policymakers mandating such change.
• Requires a lot of coordination - Blockchains can also be used in industry platforms for the
sharing of data that is helpful to the industry as a whole. In this case, a majority of players in an
industry need to come together and agree on what such a platform would look like, who would
pay for it, and what value each participant would get from it.
• Regulatory clarity over data sovereignty - Regulatory clarity of on and off-chain assets is
something that is often discussed, in the context of bitcoins and the issues of data governance of
a share certificate on a blockchain. What is often neglected is regulatory clarity over data
sovereignty. In an industry blockchain, the same data is copied over many data centres, often in
different countries. A lot of the data are encrypted so that only the intended recipient can see it.

52. 52
CONCLUSIONS
In many ways, Blockchain today is comparable to where the Internet was in early 1990s. While
we have witnessed how the ‗Internet of Information‘ has changed our societies over the past two
decades, we are now entering a phase where Blockchain is likely to do the same by ushering in
new paradigm comprising ‗Internet of Trust‘ and ‗Internet of Value‘. It is expected to disrupt the
way stakeholders would interact in a decentralized framework of trust, thereby increasingly
democratizing value. Banks and financial services institutions play a very important role in those
wider societal interactions today and Blockchain is therefore forcing them to rethink their roles
to stay relevant in this emerging paradigm.
It's early days, but industry leaders are sponsoring a wide range of blockchain use cases
supported by industry consortiums. Having seen the potential of this technology and the
challenges, we think the opportunity is clear but the blue sky is too far off and companies need to
validate use cases and business / technical viability before implementing blockchain.
RECOMMENDATIONS
There are many possible ways that blockchains can make government more accountable,
transparent, efficient and fraud-proof, which include contract management, electronic voting and
health care. There are already several pilot projects in different countries regarding the use of
block chain technology in e-health, e-resident systems, elections and especially land and property
registration. A prominent country which has already several applications of blockchain
technology in use is Estonia. Other countries include for example Sweden, Hong Kong, Ghana,
Kenya, Nigeria or Georgia. However, despite these pilot projects blockchain technology is still in
its infancy, so that there are still unknown factors and vulnerabilities.

53. 53
Recommended actions
 To provide a balance between privacy and confidentiality on the one side and
transparency on the other side
 Resolve challenges such as transaction speed, the verification process and data limits
 Provide high-performance, low-latency operations
 Ensure that distributed ledgers are scalable, secure and provide proof of correctness of
their contents
 Energy efficiency
 Ensure high level of cryptography
The societal demand for a trustworthy public sector resonates until today. This need also
includes issues such as better quality public services – fairness and customer service standards in
public service provision. Informants mentioned establishing trust in governance, accessing
timely and accurate information, unlinking public sector and politics as some of the key needs
under this header. One informant expressed his opinion as: ―A clear point of authority to be
established (often have to roam offices because it is not clear the authority for a particular task).‖

54. 54
BIBLIOGRAPHY

55. 55
BIBLIOGRAPHY
References from Books
Morabito Vincenzo, Business Innovation: Through Blockchain the B³ Perspective
Springer Publisher, Edition 1st
2016
Gold Steve, Blockchain: Understand Blockchain, CreateSpace Independent Publishing
Platform Publisher, volume 1st
2017
References from Below Links
https://www.blockchain.com/
https://www.ibm.com/blockchain/
https://en.wikipedia.org/wiki/Blockchain

56. 1
ANNEXURE

57. 2
Case Study
A Case Study for Blockchain in Healthcare: “MedRec” for
electronic health records and medical research data.
Abstract
A long-standing focus on compliance has traditionally constrained development of fundamental
design changes for Electronic Health Records (EHRs). We now face a critical need for such
innovation, as personalization and data science prompt patients to engage in the details of their
healthcare and restore agency over their medical data. In this paper, we propose MedRec: a
novel, decentralized record management system to handle EHRs, using blockchain technology.
The purpose of this paper is to expose, in preparation for field tests, a working prototype through
which we analyze and discuss our approach and the potential for blockchain in health IT and
research.
Introduction
EHRs were never designed to manage multi-institutional, life time medical records. Patients
leave data scattered across various organizations as life events take them away from one
provider's data silo and into another.In doing so they lose easy access to past data, as the
provider, not the patient, generally retains primary stewardship. Through the HIPAA Privacy
Rule, providers can take up to 60 days to respond to a request for updating or removing a record
that was erroneously added. Beyond the time delay, record maintenance can prove quite
challenging to initiate as patients are rarely encouraged and seldom enabled to review their full
record.

58. 3
Interoperability challenges between different provider and hospital systems pose additional
barriers to effective data sharing. This lack of coordinated data management and exchange means
health records are fragmented, rather than cohesive. Patients and providers may face significant
hurdles in initiating data retrieval and sharing due to economic incentives that encourage ―health
information blocking.‖
In this work, we explore a blockchain structure applied to EHRs. The blockchain uses public key
cryptography to create an append-only, immutable, timestamped chain of content. Copies of the
blockchain are distributed on each participating node in the network. The Proof of Work
algorithm used to secure the content from tampering depends on a ―trustless‖ model, where
individual nodes must compete to solve computationally-intensive ―puzzles‖ (hashing exercises)
before the next block of content can be appended to the chain. These worker nodes are known as
―miners,‖ and the work required of miners to append blocks ensures that it is difficult to rewrite
history on the blockchain.
System Implementation
Overview
For MedRec, the block content represents data ownership and viewership permissions shared by
members of a private, peer-to-peer network. Blockchain technology supports the use of ―smart
contracts,‖ which allow us to automate and track certain state transitions (such as a change in
viewership rights, or the birth of a new record in the system). Via smart contracts on an
Ethereum blockchain [10], we log patient-provider relationships that associate a medical record
with viewing permissions and data retrieval instructions (essentially data pointers) for execution
on external databases. We include on the blockchain a cryptographic hash of the record to ensure
against tampering, thus guaranteeing data integrity. Providers can add a new record associated
with a particular patient, and patients can authorize sharing of records between providers. In both
cases, the party receiving new information receives an automated notification and can verify the
proposed record before accepting or rejecting the data. This keeps participants informed and
engaged in the evolution of their records

59. 4
MedRec prioritizes usability by also offering a designated contract which aggregates references
to all of a user's patient-provider relationships, thus providing a single point of reference to check
for any updates to medical history. We handle identity confirmation via public key cryptography
and employ a DNS-like implementation that maps an already existing and widely accepted form
of ID (e.g. name, or social security number) to the person's Ethereum address.
Blockchain Background
Originally designed for keeping a financial ledger, the blockchain paradigm can be extended to
provide a generalized framework for implementing decentralized compute resources [10]. Each
compute resource can be thought of as a singleton state-machine that can transition between
states via cryptographically-secured transactions. When generating a new state-machine, the
nodes encode logic which defines valid state transitions and upload it onto the blockchain. From
there on, the blocks journal a series of valid transactions that, when incrementally executed with
the state from the previous block, morph the state-machine into its current state. The Proof of
Work consensus algorithm and its underlying peer-to-peer protocol secure the state-machines'
state and transitioning logic from tampering, and also share this information with all nodes
participating in the system. Nodes can therefore query the state-machines at any time and obtain
a result which is accepted by the entire network with high certainty.
We utilize Ethereum's smart contracts to create intelligent representations of existing medical
records that are stored within individual nodes on the network. We construct the contracts to
contain metadata about the record ownership, permissions and data integrity. The blockchain
transactions in our system carry cryptographically signed instructions to manage these properties.
The contract's state-transition functions carry out policies, enforcing data alternation only by
legitimate transactions.
To navigate the potentially large amount of record representations, our system structures them on
the blockchain by implementing three types of contracts. Figure 1 illustrates the contract
structures and relationships.

60. 5
Smart Contract Structures
Registrar Contract (RC)
This global contract maps participant identification strings to their Ethereum address identity
(equivalent to a public key). We intentionally use strings rather than the cryptographic public key
identities directly, allowing the use of already existing form of ID. Policies coded into the
contract can regulate registering new identities or changing the mapping of existing ones.
Identity registration can thus be restricted only to certified institutions. The RC also maps
identity strings to an address on the blockchain, where a special contract described below, called
the Summary Contract, can be found.

61. 6
Patient-Provider Relationship Contract (PPR)
A Patient-Provider Relationship Contract is issued between two nodes in the system when one
node stores and manages medical records for the other. While we use the case of care provider
and patient, this notion extends to any pairwise data stewardship interaction. The PPR defines an
assortment of data pointers and associated access permissions that identify the records held by
the care provider. Each pointer consists of a query string that, when executed on the provider's
database, returns a subset of patient data. The query string is affixed with the hash of this data
subset, to guarantee that data have not been altered at the source.
To enable patients to share records with others, a dictionary implementation (hash table) maps
viewers‘ addresses to a list of additional query strings. Each string can specify a portion of the
patient's data to which the third-party viewer is allowed access.
Summary Contract (SC)
This contract functions as a bread crumb trail for participants in the system to locate their
medical record history. It holds a list of references to Patient-Provider Relationship contracts
(PPRs), representing all the participant's previous and current engagements with other nodes in
the system. Patients, for instance, would have their SC populated with references to all care
providers they have been engaged with. Providers, on the other hand, are likely to have
references to patients they serve and third-parties with whom their patients have authorized data
sharing. The SC persists in the distributed network, adding crucial backup and restore
functionality. Patients can leave and re-join the system multiple times, for arbitrary periods, and
always regain access to their history by downloading the latest blockchain from the network. As
long as there are nodes participating in the network, the blockchain log is maintained.
The accepting or rejecting relationships is done only by the patients. To avoid notification
spamming from malicious participants, only providers can update the status variable. These

62. 7
administration principles can be extended, adding additional verifications to confirm proper actor
behaviour.
System Node Description
We design the components of our system nodes to integrate with existing EHR infrastructure.
We assume that many nodes, and in particular care providers, already trustfully manage
databases with patient data stored on servers with network connectivity. Our design introduces
four software components: Backend Library, Ethereum Client, Database Gatekeeper and EHR
Manager. These can be executed on servers, combining to create a coherent, distributed system.
We provide a prototype implementation of these components that integrates with a SQLite
database and is managed through our web user interface. Notably, any provider backend and user
interface implementations can participate in the system by employing the modular
interoperability protocol as defined through our blockchain contracts.
Primary Software Modules
Backend API Library
We construct multiple utilities, bundled in a backend library, to facilitate the system's operation.
Our library abstracts the communications with the blockchain and exports a function-call API.
Record management applications and their user interfaces can thus avoid the hurdles of working
directly with the blockchain. One such hurdle is verifying that each sent transaction is accepted
with high confidence by the network. Our library automatically handles the uncertainty of when
transactions are mined and deals with cases when they are discarded. The backend library
interacts with an Ethereum client to exercise the low-level formatting and parsing of the
Ethereum protocol.
Steps 1 and 2 in Figure 2 illustrate our backend implementation of a scenario where a provider
adds a record for a new patient.

63. 8
Ethereum Client
This component implements the full functionality required to join and participate in the
Ethereum blockchain network. This handles a broad set of tasks, such as connecting to the peer-
to-peer network, encoding and sending transactions and keeping a verified local copy of the
blockchain. For our implementation we use PyEthereum and the PyEthApp client.
We modify the client to be aware of our mapping of identity and addresses. We then implement a
service to locate the node's Summary Contract (SC), via Registrar Contract address lookup. This
service runs continuously within the client to monitor real-time changes to the SC. In the event
of an update, the service signals the EHR Manager to issue a user notification and, if necessary,
sync the local database.
Steps 4 to 6 in Figure 2 continue the use case described above from the patient node perspective.

64. 9
Database Gatekeeper
The Database Gatekeeper implements an off-chain, access interface to the node's local database,
governed by permissions stored on the blockchain. The Gatekeeper runs a server listening to
query requests from clients on the network. A request contains a query string, as well as a
reference to the blockchain PPR that warrants permissions to run it. The request is
cryptographically signed by the issuer, allowing the gatekeeper to confirm identities. Once the
issuer's signature is certified, the gatekeeper checks the blockchain contracts to verify if the
address issuing the request is allowed access to the query. If the address checks out, it runs the
query on the node's local database and returns the result over to the client.
Steps 7 to 9 in Figure 2 illustrate how a patient retrieves personal data from the provider node.
EHR Manager
We tie together all the software components previously mentioned with our EHR management
and user interface application. The application renders data from local SQLite databases
(designed to be interchangeable with other DB software) for viewing, and presents the users with
update notifications, and data sharing and retrieval options. Our user interface prioritizes
intuitive, crisp, and informative design, as recommended by the Department of Veteran Affairs
and ONC‘s Blue Button design competition. Our application is conveniently accessed through a
web interface, built on a python backend framework. We are especially cognizant of
compatibility for mobile devices, as modern users expect easy access and high-quality
experiences while on-the-go.
MedRec Blockchain Mining
We incentivize ―miners‖ to participate in the network and contribute their computational
resources to achieve a trustworthy, gradual advancement of the chain. We propose a model that

65. 10
engages the healthcare community in network stewardship—MedRec brings medical researchers
and health care stakeholders to mine in the network. In return, the network beneficiaries, i.e.
providers and patients, release access to aggregate, anonymized medical data as mining rewards.
MedRec in the Context of National Healthcare Priorities
As mentioned in the introduction, we do not present MedRec as a panacea nor as the only
blockchain-mediated solution that would be needed to achieve our stated goals of data access,
patient-empowerment, interoperability and improved medical research. In the analysis below, we
refer to MedRec by name to suggest how such a project might address national healthcare
priorities, likely as part of a larger suite of blockchain solutions to which we hope to contribute.
Conclusion
The MedRec provides a proof-of-concept system, demonstrating how principles of
decentralization and blockchain architectures could contribute to secure, interoperable EHR
systems. Using Ethereum smart contracts to orchestrate a content-access system across separate
storage and provider sites, the MedRec authentication log governs medical record access while
providing patients with comprehensive record review, care auditability and data sharing.
We demonstrate an innovative approach for integrating with providers‘ existing systems,
prioritizing open APIs and network structure transparency. We look forward to continued work
on the MedRec project infrastructure, following the ONC‘s call for policy and technical
components of an interoperable health IT stack. We remain committed to the principles of open
source software and will release our research framework on GitHub as a platform for further
development in the fall of 2016.