Trace the origin of your yogurt

Blockchain: transforming trust among organizations and revolutionizing supply chains

Tomaž Levak, Žiga Drev and Branimir Rakić
Co-Founders of OriginTrail

  • This article was originally published as part of the 2018 edition of Bled Strategic Times, the official gazzette of the Bled Strategic Forum (BSF) international conference. You can access the full version of this and other BSF publications by visiting our official website.

There has been a lot of discussion about the blockchain and its potential recently. Many have heard about the technology in the context of cryptocurrencies, but the blockchain can be used for so much more. For instance, blockchain can enable us to reliably trace the origin of the food we buy at supermarkets. So let us talk about a conversion of these two ‘chains’ supply chain and blockchain.

In supply chain context, blockchain provides a foundation to create a neutral layer for exchanging data among companies resulting in a single version of truth for any business transaction. What makes it so revolutionary is that there is no central authority that could retroactively change data, ensuring that trust is built into the network itself. This paradigm shift is revolutionizing relations that are the foundation for doing business today. Blockchain technology holds the promise to usher in the 4th technology revolution.

Because of the way business is done today, often, collaborators, partners and associates have different interests and do not trust each other. Wherever there is an information asymmetry, there is a clear need for a neutral solution (source). Blockchain technology can provide that neutrality. Even if any number of given actors wanted to conspire to alter data, they could not do so, at least not without anyone noticing it. This is the beauty of decentralization. No one actor holds the keys to change the truth.

Where does using the blockchain makes sense?

If you take a moment to look at your surroundings this moment, as you are reading this, there is a very high probability that most of the objects surrounding you went through some form of regional, national or global supply chain to get to you. In the most general terms, what constitutes a supply chain is a network of entities that are in some way interacting with a product or service on its way to the market and during its time on the market. Supply chains today are increasingly growing in complexity, which creates challenges when it comes to managing this multitude of often fluid relations effectively.

With so many claims out there about the blockchain’s potential to revolutionize this or that industry or process, it almost seems like the technology is a solution waiting for a problem. However, the problems are already here and they are plaguing global supply chains. They include opacity where products or their ingredients cross many points and borders and are difficult to keep track of and lost efficiency due to corrupt data. For example, in the current industry, 10% of all freight invoices contain inaccurate data, including duplication, wrong freight mode charges and incorrect fees (source). As supply chains are becoming increasingly global and complex they are actually more networks than chains they are growing more opaque. Until today, no IT system was adequate to address end-to-end supply chain visibility because it was always imposed by a single entity. This, in turn, de-motivated all the rest of the stakeholders to share more data than what was absolutely necessary. With decentralised systems, data governance is turned upside down. Once companies realise that they can keep ownership of their data and still create new value out of sharing it, motivation to collect and share data is established. Blockchain is not only a trust builder, it provides opportunities for cost reduction to the supply chain industry.

Protocols and standards: How can the companies get ready?

It all starts and ends with the data. Introducing a novel technology in the business processes always comes with a risk of compatibility and interoperability, either with legacy technology or with business processes. Adoption of the technology is easily facilitated by compatibility with already used standards. In supply chain industry, GS1 has been recognized as an authority on the “global language of business” it is the not-for-profit organization that led the implementation of the EAN barcodes which transformed global retail when they were introduced in the 1970s.

By utilising protocols like Origin-Trail, most businesses are ready for the blockchain today, as long as they use widely adopted standards, such as GS1’s. In that case, the blockchain can be introduced as an integrity layer that runs on top of legacy IT systems. Once the data between partners is synchronised, further supply chain applications are possible. One possible example is a mobile app that enables consumers to scan the item in a store and see the product journey. After scanning a yogurt, for example, they could exactly see when and on which farm the milk was collected, when it was produced into the yogurt, and when it entered the store. Integrating data from the sensors in a truck, they could also add information if the yogurt was transported at the right temperature. If the farm is certified for ecological farming, this blockchain-based trail of events could also act as an audit that the final product is “bio”. In this example, blockchain leads to increased consumer confidence and helps brands stand out in a market.

Companies can also set up their internal application for more efficient supply chain management. The Chinese online food marketplace Yimishiji found inconsistencies in data provided by their suppliers the first day they connected their system with the OriginTrail’s blockchain solution.

The road ahead

Blockchain technology is here to stay. For the benefits of the blockchain to take effect across industries and add value to the general business environment, there is a need for a proactive approach coming from policymakers, as well. Blockchain redefines the notion of trust and it can redefine the role of agencies and institutions which now act as intermediaries of trust, from arbitrary ones relying on individuals, to ones setting the rules of the global trade game based on data with integrity. Blockchain-based innovations, such as smart contracts, could also require rethinking of legislation.

Some countries are already establishing a welcoming environment for blockchain-based businesses, which can include changes in legislation or like in the early days of the internet giving a strong signal that the regulation will not stifle innovation until the adoption of the technology becomes more widespread. In order to be able to grasp the full potential of this new technology, such support is of crucial importance.


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Bled Strategic Forum

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A platform for high-level strategic dialogue among leaders from private & public sector. Organised by Slovenian MFA & Centre for European Perspective (CEP).

Bled Strategic Forum

The official Medium publication of Bled Strategic Forum (BSF) — a platform for high-level strategic dialogue among leaders from private & public sector. Organised by the Slovenian Ministry of Foreign Affairs & Centre for European Perspective (CEP).

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