Source: https://www.dailydot.com/debug/what-is-blockchain-explained/

I began my career working for companies that profited from the long and complex supply chain that comes with building, maintaining, and operating flying machines. With strict and extensive safety regulations, each part must be certified before it touches an aircraft, making paper certificates fundamental to the logistics network. Often, a certificate is required every time the part changes hands, creating a growing trail of paperwork which is transferred from organization to organization and is seriously prone to logistical error, representing a huge drain on company resources. In an audit of a large U.S. airline carrier, Deloitte research discovered that “greater than 60 percent of the issues with part receiving were due to poor or missing paperwork, and on average it took 34 days to correct the problem.”

Distributed Ledgers

We are already seeing food producers and retailers, along with aerospace companies and other industries, such as mining trying to adopt the use of Distributed Ledger Technology or Blockchain to improve their supply chains. The distributed ledger is only one aspect of blockchain technology, however, and its true potential lies in the more novel solutions involving tokens. Tokens allow people to represent value on a network and design specific mechanisms for how those tokens function. If we then take these tokens and program in modes of automation which negate the need for human intervention, we can unlock new ways for businesses and people to interact and we can come to see where the true disruptive potential of blockchain technology lies.

Shared Standards

Token Overview

Cert, a Non-Fungible Token

Cert Templates

Auditors

The CERT network is an open protocol in which anyone can participate or view what is happening on the network. Therefore, anyone who uses the system is able to issue their own certificates, but a certificate has no real value unless it is trusted or believed to represent some level of quality or standard. To support the trustworthiness of the items created by Cert issuers, outside parties (Auditors) must step in to inspect and verify that these producers are meeting the standards that they are claiming. These Auditors may be governmental or private, but they all oversee industry-wide agreements, specifications, or practices. With a seal of approval from an Auditor, a Cert Template and the Certs issued from that template become s much more valuable because it has the additional weight of the Auditor’s reputation attached. Auditors are meant to give certificates reliability, but in this open system where anyone can join, how do we make sure that Auditors themselves are reliable?

Merit Token, a Utility Token

Issuers

Resellers

End Users

Auditor Vulnerabilities

  • Disparity of Quality between auditors who may be from different countries with different regulations or have varying assessment processes that differ in robustness and reliability
  • Conflict of Interest because auditors tend to be paid by and have close relationships with certificate issuers and thus be biased toward them
  • Predictable Inspections means that certificate issuers may only have to conform to quality standards at certain review periods, which they usually know of in advance

Incentives

Accountability

Merit Token Price

Limiting Wild Speculation

Community Values

User Interfaces/ Decentralized Applications

For a more sequential and visual representation of this concept, please see the link here.

I believe that the best way to construct this network is through the various Cryptoeconomic mechanisms that are available using Ethereum, the Blockchain platform with the most active projects. If you would like to discuss how to make this system a reality, please email kichong@yanggangwisdom.com.

NOTES:

[1] Paper Certificates

At first the non-fungible tokens will have to coincide with the physical paper certificate because of regulatory restrictions, but in time regulations may change so that the blockchain Cert has just as much authority and trustworthiness as the paper version. It is already quite common to sign documents and send money through the internet, something met with skepticism not long ago. In the meantime, the original paper Cert should be held by the Auditors who will be contractually obligate to turn over the original paper certificate to whoever can prove that they hold the blockchain Cert. This would create a reserve of trust in which the blockchain Cert is guaranteed or backed by the paper one in the Auditor’s reserves. The blockchain Cert would be burned as soon as the paper certificate is exchanged for it.

[2] Governance

Changes to the protocol and other system-wide decisions should be voted upon by the Auditors, since they are already a source of trust. The stakes that they hold at the time of the vote will represent the weight of their vote so all token holders would be able to vote indirectly via Auditors as their representatives. This represents a third usage of the Merit Token: in addition to staking trust in Auditors, representing the value of trust in the system, it is also used as a governance mechanism.

[3] Price Control Mechanisms

  1. A fixed rate increase that allows the current actors to allocate the newly generated supply of tokens to a new actor to join the system roughly once every month. This steady and predictable increase to the money supply will not only spread out the token holders, which increases the decentralization and resiliency of the system, but also allow new actors to come in who are agreed to bring about a positive benefit to the network. For example, every month the total token supply will increase by 0.1% and that newly created supply will go to one or more new actors that are approved by the Auditors.
  2. A flexible rate increase that is only activated if the price moves too quickly, for example if the price increases by over 10% in a month, then the flexible rate increase is activated and an extra 0.1% of total token supply is added for the fixed rate increase for new actors. In this example, where there is a month of rapid price increases, the token supply would increase by 0.2%.

The numbers that I am using here are arbitrary to highlight the concept of the increases. The actual implementation of the system will have better thought out and researched inflation numbers and mechanisms.