Why blockchain is not a good fit for supply chain
From time to time there are articles in the media touting the benefits of blockchain for the supply chain industry. Supply chain is fragmented, complex and having to deal with multiple central parties that do not talk to each other (or atleast not in the same format) causes issues.
Blockchain is supposed to solve all of this by having one single mechanism where truths of all the transactions is preserved along the way. That way everyone gets to see what changed where along the supply chain to ensure the authenticity (for diamonds), proof of origin (again for diamonds, and stuff as diverse as freight, minerals, fish and other food items etc) is maintained in an immutable manner.
Once the truth is on the blockchain it is very hard (and often impossible) to alter it.
However this presents a simple and yet intractable problem. How to ensure that truth flows unaltered/unadulterated from the off chain to the on chain world.
And the simple answer is in most cases you cannot.
All it takes is for one corrupt person along the chain to record an incorrect fact. If the intention is to ensure blood diamonds are not entering the supply chain, how do you ensure that someone at the very start does not pass of a dirty diamond as a clean one? Right when you make a record for it on the chain?
You can do laser bar codes and all kinds of fancy RFID, but the human element will always be there. Which means that blockchain can be a great way to maintain truth but it is not a solution by any means to establish off chain truths (or consensus).
Blockchain can only track the veracity of blockchain native assets. It cannot be used effectively for physical assets. At every step along the way where supply chain interfaces with the real world there is an opportunity for data to be distorted due to human corruption.
There are solutions, security measures to preclude that, but they have nothing to do with blockchain itself.
Instead of blockchain what is really needed is a standardised means of communication.
In the finance world, we have the FIX apis, SWIFT messaging formats, something similar can work here. Even a centralized shared database would probably be a better solution than an unwieldy blockchain which is typically slower, more expensive and less user friendly.
Coming to the application of blockchain to real estate (which is the space we at Konkrete.io play in), the same question comes to mind. Does this problem of offchain interface does not impact us?
The answer is, we are not looking at establishing offchain truths about the real estate using blockchain. Real estate data is verifiable publicly. You may not be able to verify publicly whether a fish is sourced from a particular lake, but whether or not a house exists on a particular site can be verified using publicly available information, in person visits by multiple parties to cross check as well as satellite information.
In supply chain off chain truths have a much greater chance of getting corrupted as only person needs to lie to screw up the chain. While in a real estate world, multiple people can verify if the data in the physical world is authentic of not. This ensure that any data about the real estate that moves on the chain goes through multiple redundancy check and balances.
And even after that our focus is building the frameworks for decentralized smart securities. Applications of which will include real estate. And we will always be finding ways to ensure that any off chain data that moves on to the chain is publicly verifiable.