Thank you very much, Mr. Chair.
My name is Johnny Blackfield. I'm appearing here today as a certified blockchain professional. My goal is to reiterate what Mr. Belcourt just mentioned about using blockchain for an indigenous art registry. My goal today is to tell you a bit about blockchain and then tell you how it's effective in creating an indigenous art registry.
I want to start by telling you what a distributed ledger is. A ledger forms the foundation of accounting, a system to store accounting information and transaction information. A distributed ledger is a database that can be shared across multiple sites, geographies or institutions where all the users within the system can have access to the ledger either via copy or by connecting directly to the larger database. Any changes made on any one of the ledgers will be reflected on all the ledgers that currently exist.
Blockchain is fundamentally an online digital ledger system to record transactions and events. It's built on a distributed network of nodes all interacting with each other and holding an exact copy of the ledger. In its purest form, it is also a decentralized network of nodes that verifies every transaction recorded in the ledger. No central authority is required to authenticate or validate transactions.
The essential properties of blockchain that make it so useful include that it is immutable or irreversible. Once transactions are recorded in a blockchain, they are cryptographically sealed and made irreversible. This prevents double spending, fraud, abuse or manipulation of transactions, which plagues most databases.
The second property is that it requires no intermediaries. Blockchain technology, through the use of cryptographic proof, allows two parties to transact directly with each other without the need for a trusted third party.
Finally, it is transparent. In a public blockchain, every transaction on the blockchain is recorded and is available for anyone to review. For example, for the most common blockchain available today, Bitcoin, you can trace every Bitcoin transaction back to the creation of that coin.
The key technological attributes of a public blockchain include a distributed peer-to-peer ledger. As I mentioned, it's a database with multiple relay points or nodes that all contain an exact copy of the transaction ledger. A node is essentially a computer, a server or a group of computers that forms a single relay point in a blockchain network. Each node talks to every other node in a peer-to-peer fashion. Each node processes and verifies transactions in a blockchain.
In terms of a block, all the transactions that occur in a blockchain are recorded in a block of a certain size. In Bitcoin, that block size is one megabyte. In Bitcoin cash, it's eight megabytes. A block is essentially just a bunch of transactions coming together. Once a block has been processed, it is permanently connected to the previous block using cryptography. Many blocks together form a chain of blocks, or blockchain.
The fourth property is a consensus mechanism. Since blockchains are decentralized with no leader or central authority to make decisions, the nodes need a dynamic way of reaching agreement in a group known as consensus mechanisms. A consensus makes sure that an agreement is reached within the nodes, which could benefit the entire group as a whole.
There are, essentially, two types of blockchains. Public blockchains rule the cryptocurrency world. Enterprise blockchains focus on permissioned blockchains. Public blockchains are fully decentralized and fully transparent. The blockchains are secured by economic incentives and cryptographic verification. There is no reversal of transactions. Confirmations are slow. There are limited privacy protections, but the costs of transactions are low. As I mentioned, Bitcoin, Ethereum and all cryptocurrencies are public blockchains.
A permissioned blockchain, which is the one we would recommend for an artist registry, is a quasi-decentralized, hybrid approach to a blockchain. The consensus process is controlled by a pre-selected set of nodes. Read permission of the blockchain is restricted to participants. There are options for the public to do limited queries. The participants can agree to rule changes, transaction reversals and modification. Near-time confirmation of transactions are possible. A greater degree of privacy protections is allowed, and transaction costs are agreed to by the consortium. It is also called a consortium approach to blockchains.
I told you a little about blockchain, and now I'll start with the primary uses of blockchain technology. Number one is the transfer of value. Blockchain allows for secure, low-cost, near real-time transfer of value between two parties without the need for a trusted third party intermediary. It forms the infrastructure to power functional digital currencies or cryptocurrencies.
Number two is record keeping. Although not the best mechanism to store large volumes of data, blockchain, through its distributed and decentralized ledger technology, offers a highly reliable, secure and low-cost mechanism for record keeping. Records in a public blockchain are immutable and secured through cryptography. Popular applications of blockchain for record keeping include digital identity, credential management, tokenization of financial securities, and audit trails for supply chain and logistics, financial transactions and government compliance.
Number three is that they are smart contracts. Smart contracts are digital contracts created by computer code and programmed to trigger a transfer of value and information under certain conditions. For example, a sale of artwork would be controlled by smart contracts. Popular applications include automated governance of regulatory compliance, trade settlements, clearing, etc.
Blockchain has been making the news lately in several new cases. I've picked a few that were really interesting and relevant. Most of us have sent an international wire transfer using SWIFT. Right now, SWIFT would take anywhere from one to three days to complete a transfer. SWIFT has started experimenting with blockchain technology and has been able to do transfers in as little as two hours, as opposed to three days.
Walmart has created a blockchain, along with certain Chinese retailers, to help monitor food safety and food supply chains in countries like China, where you don't have as much transparency.
One that is of particular interest is Reebok, because one of the challenges Reebok has had as a shoe company, is that a number of counterfeit shoes are coming into the market. Reebok has formed an alliance with one of the major stores called Major, essentially taking brand new shoes created by Reebok, giving them each a unique identifier and burning them onto a blockchain so that any shoe that is not listed there would be known to be counterfeit, whereas any shoe listed there would be authentic.
Finally, I have a homegrown example. IBM will now be implementing a blockchain solution to track marijuana supplies as they move up the supply chain from farm to distributor to retailer to consumers in British Columbia. They're creating a system that puts the entire supply chain on blockchain so there's incredible transparency and they know where each party comes in and out of the system and they can distribute payments to everyone down the blockchain.