Restoring trust in procurement with blockchain
All we hear about emerging technologies these days is a never-ending story of frenzy and failure. Hyped-up expectations lead many businesses to try excessively, but not always successfully, to fit the latest tech into their processes. The latest of these technologies is the development of the blockchain, that can be used in improving trust between partners.
Today’s businesses have a hard time finding new partners due to limited resources and lack of access to prospective matches’ financial and reputational data. If a business is acquiring a partner, it stands to reason it needs reliable, objective information on that partner’s previous dealings.
But getting this information is costly and time-consuming, meaning that businesses end up gambling on subjective word-of-mouth opinions and inaccurate data. They don’t have any real protection against the various risks of transacting with unknown partners, either.
Trust between existing and future business partners
If you’re searching for a restaurant or place to stay, it’s easy to read other people’s feedback on Tripadvisor or some such, then decide whether to go with that provider or take your business elsewhere.
But there aren’t services that help you identify the most stable, reliable and trustworthy business partners. And even if there were, unlike consumer services, you’d have to ensure that the gathered data was real and based on past transactions, to avoid false evaluations and misinformation resulting in business damages.
Trust is at the heart of conducting business, with existing and future partners. On a fundamental level, you need to believe that the other business is going to uphold its end of the deal — providing the right materials or products; delivering goods on time; paying within the requested time frame; and so on.
Blockchain technology, if used properly, can help strengthen trust and ensure transparency. By using permanently confined historical data to review past business transactions of both parties and authenticate everyone involved in a deal, blockchain ensures trustworthiness.
Trust issues
Most businesses don’t have proper coverage against the various business risks involved when transacting with known and unknown partners, mainly because it would be impractical and too costly (e.g. bank guarantees, factoring, …), to protect against these risks on a repeating basis — for each transaction.
Did you know that SMEs dealing with large enterprises are faced with unequal bargaining power, which exposes them to shorter client payment periods and longer supplier payment periods? And if you discovered that a future partner uses its structural power to impose unlawful terms, would you still want to do business together? Probably not.
Enter the Procurean network — the first blockchain-driven procurement network based on trust. Procurean gives businesses open access to a global database of financial and reputational data gathered on behalf of every business in the network.
Each participating business has these two data components combined to form its trust rank, expressed in a weighted composite (0–10) number.
The trust rank is the biggest deciding factor for businesses on the Procurean network, enabling them to transact only with the most reliable and high ranked partners, mitigating risk and lowering unwarranted costs.
The data for the financial component is retrieved from publicly financial data, smart data sources,and data gathered by credit rating agencies.
The reputational component is dependent on datasets collected from multilateral evaluations of participants done on the network. This data is generated through various buyer–seller interactions on the network using smart (procurement) instruments and it is governed by smart contracts to ensure transparency and trust.
In case of disagreements, the disagreeing party can issue a dispute with provided evidence which is resolved by a qualified majority vote (‘wisdom of the crowds’ principle). Only the most appropriate and trusted partners in the network are invited to cast their votes to ensure relevance and integrity of the disputing process.
This way, the Procurean network ensures a decentralized decision process, and gives businesses a credible and reliable mechanism for protecting their trust rank from potentially harmful actions.
The Procurean network aims to ensure trustful and fair behavior for all participants. This also means successful businesses won’t have a hard time proving their trustworthiness to new and existing partners, since their trust rank will be visible on the Procurean network and, with the help of blockchain technology, completely transparent.
