Blockchain solutions for supply chain industries secured by The Proof of Trust
Introduction
Blockchain is currently taking the world by storm, and whether you like it or not it is here to stay. Almost every industry is investing heavily in blockchain, and most now recognise the power of decentralised applications (DApps) and smart contracts (SCs), operated using such blockchain platforms as Ethereum or Hyperledger Fabric. A smart contract has the ability to reduce laborious processes and make it nearly impossible for individuals to renege on a deal, once the SC has been signed. Perhaps the simplest definition of a smart contract comes from Investopedia[1], “Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code.”The major benefit of having the agreement encoded is that once conditions are met, the transaction will take place without delay and for the agreed amount. It is absolutely imperative for anyone creating a SC to enter factual, reliable and accurate information. To put it bluntly… ‘rubbish in results inrubbish out’. The worst-case scenario for an error strewn SC is that money will be irredeemably lost, a chance that no business or individual would be willing to take. It seems therefore that smart contracts are a fruitless venture, however Proof of Trust (PoT) can effectively eradicate these concerns.
Supply Chain
This document discusses how several supply chain companies, that have minimum revenues or valuations of in excess of US$1 bn, are utilising blockchain today. The reason for the specific focus on supply chain is because this is currently the most exciting and active area for blockchain investment. It may come as no surprise that blockchain is being hailed as one of the biggest game changers for the supply chain industry, after all it is one of the messiest areas to conduct business and would massively benefit from some added clarity and transparency. In order to successfully manufacture any of the thousands of devices we rely upon daily, a monumental effort on behalf of many hundreds of people and companies is required. It is necessary to coordinate the movement of millions of components through myriad jurisdictions and/or governments. Some of the items may be precious, rare, fragile or even dangerous and come with their own laws and regulations regarding their containment and transportation. In short, to make things happen, a lot of people need to be in agreement about what and how much of something is moving where and at what time. The amount of paperwork required to facilitate effective supply chains is mind boggling. Almost everyone involved, without exception, is in agreement that the process needs to be streamlined and brought into the 21st century. We need to reduce the complexity, reduce the paper consumption, speed up the process while reducing costs in the meantime.
It may also come as no surprise to you that blockchain has the potential to facilitate the majority of the required improvements. Below is a list of general blockchain features that stand to streamline supply chain:
1. Immutable and secure — Every transaction logged on a blockchain is permanent and irreversible, making it nearly impossible to change or delete information once its logged. Unresolved disputes between trustless parties will be all but eradicated.
2. Improved traceability — All parties with access to the blockchain can view any transaction at any time making it obvious to the location of the goods at any stage of the process.
3. Decentralised — One of the founding principles of blockchain technology is that it doesn’t rely on any centralised data storage, all information is stored everywhere on the blockchain, reducing the chances of hacking. Furthermore, the entire chain is self-regulated with no centralised governance, such that nobody can seize control of the operation.
4. Automated — Many of the processes along the supply chain will be automated, such as goods arrive
money is transferred, which will dramatically reduce the need for human input thus speeding up the procedure.
5. Easy to incorporate — Finally all this technology doesn’t require much in the way of new hardware. Provided companies have computers with internet connection, blockchain technology can be accessed almost instantly. Unlike with the advent of the internet, when routers and computers had to be installed in every office building, blockchain is ready for use.
Figure 1. illustrates how Distributed Ledger Technology (DLT) and smart contracts would typically be used along the supply chain. There are of course many more conceivable uses, but these are the most thoroughly investigated areas.
The significance of The Proof of Trust
The above benefits are certainly attainable, but it in order to realise them we must also acknowledge the current limitations or inadequacies of blockchain. Of particular importance, and this cannot be underestimated, is the security of smart contracts. In order to create a SC, real world data must be extracted from an API, website or any other reliable data source. A person with significant coding experience (oracle) is often employed to perform the task of translating written information into computer code. While you would expect that an oracle will perform the task to a high standard, it is impossible to guarantee that any individual will work entirely without error. The PoT protocol is a way of minimising the inevitable human error associated with creating and submitting smart contracts. The protocol itself is a security layer that comes into effect before a smart contract submits a transaction immutably to the blockchain. If there are any concerns following digital flags about the validity of the contract, a user will submit the SC for review via a 2-layer Delegate/SuperDelegate system.The chance of invalid contract executionis reducedform an approximate 1 in 20 for a proficient coder, to an infinitesimal 1 in 500 millionwith the PoT protocol employed. For further information regarding the technicalities of PoT, please refer to the PoT website (https://theproofoftrust.com), where detail can be found on the whitepaper. It is unfathomable that any industry would risk significant financial losses to incorporate new technology because of its potential benefits. In order to realise these benefits security is paramount. With the Proof of Trust, it can be guaranteed that both entered and the smart contract itself are error free, which will play a crucial role in facilitating mass adoption of the technology.
Supply chain companies adopting blockchain
As stated above, there are many general benefits to be gained from embracing blockchain technology. There are however many other areas of improvement that are industry specific. Below are just some of the global companies that are piloting different blockchain services, all with the general aim of streamlining the incontrovertibly complex process of supply chain.
Oil and Gas
Supply chain is not the only area within the oil and gas industry that will benefit from adopting new technology. In fact, everything from verification of worker identity to managing the test results of crude oil refining and natural gas purification can be improved with Distributed Ledger Technology (DLT). Perhaps the most pertinent benefit to the oil and gas industry would be directly related to the use of smart contracts. The fact that automation can prevent the need for human intervention could significantly speed up processes that often take longer than they ought to. An example specific to the oil and gas industry is that of fuelling an oil tanker, then automatically charging the cost to the supplier with no human interference at all. There are essentially innumerable ways in which automation will reduce costs and increase the speed along the supply chain. From upstream (locating and extraction of fossil fuels), through to midstream (transportation to refineries) and finally to downstream (post refining) intermediaries are removed transparency is achieved and ultimately costs are lowered (see Figure 2.).
Several oil and gas companies have already made head way into blockchain adoption, often in partnership with a large tech firm that has significant blockchain development experience. One partnership of note is between Block Gemini and the Emirates National Oil Company (ENOC). Christopher Fernandez, founder and CEO of Block Gemini, says that the Blockchain solutions they are trialling “will not only increase efficiency, optimize cost, but will also enhance transparency.” The solutions have been build using IBM’s Hyperledger and Amazon Cloud web services and, according to Mr Fernandez, it is “the first implementation of its kind in the world.” Crucially, Block Gemini are beyond the proof of concept (POC) phase and actually have a fully functional supply chain platform that was originally developed for Tristar Transport. Many companies are investigating and seriously considering introducing blockchain, but the fact that Block Gemini have an operational blockchain solution puts them ahead of the game. The three key features they identify from the distributed ledger technology are: enhanced operational excellence and quality, live tracking of deliveries and instant visibility for all warehouse activities [4]. The solution will enhance system integration and increase operational transparency between TRISTAR and ENOC/EPPCO Lubricants, further cementing the close working relationship between both organisations.
Most importantly, the introduction of blockchain technology helps ENOC and TRISTAR to improve their company’s efficiency in line with the Dubai Blockchain Strategy, a project that aims to reduce time effort and resources in a bid to streamline all government processes. Many industries that operate out of Dubai are venturing into the world of blockchain, and Block Dubai is at the heart of many companies’ efforts to incorporate blockchain and DLT.
Nestlé and Walmart
The global food supply chain is another enormous area whereby transparency and efficiency stand to greatly improve customer experience. Since 2017, Leading retailers and food companies including industry giants, Nestlé and Walmart, have signalled their commitment to “strengthen consumer confidence” in the foods they purchase by announcing a major blockchain collaboration with IBM [5]. Sourcing and supplying fresh producing are arguably the most important and critical processes in any global supply chain. Ensuring that food arrives at the necessary location before it begins to decompose goes beyond loss of product and therefore loss of revenue. If food that is unfit for consumption accidentally makes its way into the system, then hundreds if not thousands of people would be at risk of illness or potentially worse! Figure 3. shows just how blockchain is likely to feature in the global food supply chain.
According to the World Health Organisation (WHO), approximately 420,000 people die each year as a result of eating contaminated food [6]. The most comprehensive study conducted by WHO also found that 30% of these foodborne deaths affected children under the age of 5. The deaths were generally caused by 1 or more of 31 agents, including bacteria, chemicals, viruses, parasites and toxins. Many of the critical issues impacting food safety such as contamination, food-borne illness, waste and the economic burden of recalls rest on a lack of access to information and poor traceability. In most supply chains there is nobody to oversee the entire process and traceability is only taken in a linear fashion from one supplier to the next. As previously expressed, blockchain is an ideal candidate to fix these glaring issues. With a distributed ledger all processes along the supply chain can me made easily visible to everyone. Even consumers can conceivably access the information about where the goods came from and how long they took to get from A to B. It is clear and obvious how this has the potential to reduce errors in shipping, lowers costs, improve efficiency and most importantly save thousands of lives in the process.
Once again IBM is at the heart of the blockchain technology facilitating the necessary improvements. IBM’s Food Trust platform aims to eradicate the problems discussed in this section. Both Walmart and Nestlé are heavily involved with Food Trust and are using it extensively to improve the quality of food and services brought to consumers. As with other sectors, many people are talking about blockchain but the number of industries that are actually implementing is much fewer. Walmart are very much in the camp that are actively incorporating blockchain solutions right now. As of September 2019, all suppliers of leafy green vegetables to Walmart must upload the data to the blockchain. This technique has already shown dramatic improvements in the tracking of food items. Prior to technological upgrades it would take up to 7 days to trace the source of food, with blockchain it takes approximately 2.2 seconds [8]. This monumental improvement in tracking time has many clear advantages, but crucially easier to trace reduces the risk of people consuming unsafe food. The probability of another outbreak of E. coli occurring due to contaminated lettuce, such as the one that affected many in the US and Canada in 2018 [9], is far less likely to occur if people have access to the data anytime anywhere.
Nestlé are approaching it from a slightly different angle, in that they are addressing another huge global issue using the same technology. It is well documented that Nestlé haven’t had the best publicity in recent years. There have been many claims that Nestlé have acted unscrupulously with regards to child labour and utilising water in countries where it is scarce. But the most recent headlines involving Nestlé are welcome ones. With the introduction of IMB’s Food Trust, consumers will be able to trace where goods have come from and make informed decisions about the products they buy. Nestlé executive vice president, Magdi Batato, says “We want our consumers to make an informed decision on their choice of products — to choose products produced responsibly. Open blockchain technology might allow us to share reliable information with consumers in an accessible way,” indicating that Nestlé are responding to criticism about the way in which they operate by introducing blockchain technology to reduce the harmful impact of irresponsibly sourced and produced goods. Nestlé first introduced blockchain 2 years ago in 2017, when alongside French retailer, Carrefour, they used the technology to track Mouslinepotato puree. In June of this year Carrefour attributed an increase in sales to the transparent tracking that DLT has enabled [10].
MAERSK
Shipping giant Maersk (who make up 16% of the global fleet and are the largest shipping company in the world [11]) have teamed up with IBM to create TradeLens. According to the Maersk website, TradeLens is a blockchain platform “designed to promote more efficient and secure global trade, bringing together various parties to support information sharing and transparency, and spur industry-wide innovation”. Currently, in excessive of 100 organisations are actively using the TradeLens platform. More than 20 port and terminal operators are involved with the project, including PSA Singapore, Holt Logistics at the port of Philadelphia and Modern Terminals in Hong Kong. Several other shipping lines including PIL, Hamburg Süd and most recently ZIM are also part of the program. Additionally, multiple customs authorities are using the technology: the Netherlands, Saudi Arabia, Singapore and Australia to name but a few. TradeLens permits collaboration across the many parties involved in international trade. Smart contracts are at the heart of this digital collaboration. One example was found to reduce the transit time for shipment of packaging materials to a production line in the USA by 40% [12]. Some of the participants of the TradeLens platform are predicting that the number of steps taken to answer fundamental questions, such as the ‘what is the location of my container’, will be reduced by a factor of 10. More than 360 million shipping events have been processed on the TradeLens platform, and approximately 1 million more are added each day [13]. Using blockchain technology, the pace of interaction between parties is increased, the amount of empty space in containers is reduced and up to 5 intermediaries are eliminated from the process.
The current cost of global shipping is $1.8 trillion dollars annually, with savings of up to 10% thought to be eminently achievable [14]. Moreover, by improving the efficiency along the supply chain, global shipping volume is predicted to increase by as much as 15%, as shown in Figure 4.. An increase in shipping will create more jobs, compensating for the reduction of intermediary roles.
Intel, Flex and UPS
As of April 2019, Intel, Flex and UPS successfully executed more than a dozen trades on a blockchain system, in parallel to their current traditional systems. The blockchain system that was developed on the permissioned blockchain, Hyperledger Fabric, used predefined templates to model which parties are involved at each stage of the trade. Although just at the proof of concept stage, the test was extremely promising and revealed the following key insights:
· A real time view of the current state of the trade — As each party involved in the trade can view the up to date information on its state of completion, any inconsistencies in information that exist today were immediately eradicated.
· Smart contracts eliminate considerable time and resources — With the end to end process being automated through SCs, delayed shipments and payments were avoided as multiple checks at throughout shipment to permit the next stage were not necessary.
· Tamper-proof and reliable data shared by all parties — Accurate information is available to all parties at any stage of transaction, preventing disputes over costs from goods stuck in warehouses and ports.
According to Ganesh Wadawadigi, writing for Digitalist Magazine, “Intel, Flex, and UPS continue to explore topics like extending smart contracts with automated data validation rules.” While the Proof of Concept unsurprisingly revealed that Blockchain and smart contracts provided a significant improvement to operations at all stages of the supply chain, it is eminently clear that for this technology to become the main system for all operations, all data must be reliable and accurate. When operating on a full scale, with myriad companies across international borders, data accuracy is key. Invalid or inaccurate data would be catastrophic for industries and could even lead to legal proceedings.
Summary
All industries discussed in this document are actively developing blockchain technology today, with a specific focus on how smart contracts can streamline and simplify innumerable process. The companies featured here are just a small selection of many, valued at over US$1 bn, that are committing incredible time and effort into developing blockchain technology. It was the aim of this document to discuss the way in which global businesses are becoming more interconnected, saving billions of dollars and exhibiting greater transparency through the use of blockchain. Many industries have been pouring money into trials and research involving blockchain. Several companies have gone beyond the proof of concept phase and are now actively deploying the cutting-edge technology to facilitate colossal positive changes. Supply chain is possibly the area for greatest return on incorporating blockchain. From saving time and money, reducing the number of required intermediaries and streamlining a multitude of process blockchain has a lot to offer. In the area of global food production blockchain could, quite literally, save lives. In all the cases reported here, smart contracts play a crucial role in permitting the exchange of good and automating many of the processes along the chain. While consumers will have little interaction with smart contracts, industries certainly will need to understand how to use and even create their own in order to conduct business efficiently.
Wherever smart contracts are to be employed, security is paramount. Transactions amounting to billions of dollars occur along the supply chains of oil and gas, global food and general shipping. When huge sums of money are involved the risk is far too large for all companies to take, without assurance that funds are going be transferred correctly. It is the firm belief of The Proof of Trust that the PoT protocol will dramatically improve smart contract security, whilst reducing the effects of the ‘oracle problem’ at the point of real-world data entry. With improved security, regulation will follow and will encourage greater use between businesses and consumers. In short, The Proof of Trust will play a vital role as industries look to increase the use of blockchain and DLT technology.
References
1. Frankenfield, Jake. “Smart Contracts.” Investopedia, Investopedia, 18 Apr. 2019, www.investopedia.com/terms/s/smart-contracts.asp.
2. Rooyen, Jan van. “Blockchains for Supply Chains — Part I.” Resolve Solution Partners, 8 May 2017, resolvesp.com/blockchains-supply-chains/.
3. Heroback,. “Blockchain + OIL= The Future” Steemit, 2018, https://steemit.com/blockchain/@heroback/blockchain-oil-the-future.
4. Block Gemini. “Block Gemini: Building the Future via Blockchain Technology.” Medium, Block Gemini, 18 Dec. 2017, medium.com/block-gemini/block-gemini-building-the-future-via-blockchain-technology-f2a92dac60c2.
5. Aitken, Roger. “IBM Forges Blockchain Collaboration With Nestlé & Walmart In Global Food Safety.” Forbes, Forbes Magazine, 25 Aug. 2017, www.forbes.com/sites/rogeraitken/2017/08/22/ibm-forges-blockchain-collaboration-with-Nestle-walmart-for-global-food-safety/#1937368e3d36.
6. WHO. “WHO’s First Ever Global Estimates of Foodborne Diseases Find Children under 5 Account for Almost One Third of Deaths.” World Health Organization, World Health Organization, 2015, www.who.int/en/news-room/detail/03-12-2015-who-s-first-ever-global-estimates-of-foodborne-diseases-find-children-under-5-account-for-almost-one-third-of-deaths.
7. Safaryan, Artur. “Food You Trust: How Blockchain Will Reinvent the Supply Chain.” Hackernoon, Oct. 2017, hackernoon.com/food-you-trust-how-blockchain-will-reinvent-the-supply-chain-1d6ae601ae53.
8. Miller, Ron. “Walmart Is Betting on the Blockchain to Improve Food Safety.” TechCrunch, TechCrunch, 24 Sept. 2018, techcrunch.com/2018/09/24/walmart-is-betting-on-the-blockchain-to-improve-food-safety/.
9. FDA. “Outbreak of E. Coli Infections Linked to Romaine Lettuce | E. Coli Infections Linked to Romaine Lettuce | November 2018 | E. Coli | CDC.” Centers for Disease Control and Prevention, Centers for Disease Control and Prevention, 2019, www.cdc.gov/ecoli/2018/o157h7-11-18/index.html.
10. Kuhn, Daniel. “Nestle Announces New Blockchain Initiative Separate From Ongoing IBM Project.” CoinDesk, CoinDesk, 2 July 2019, www.coindesk.com/nestle-announces-new-blockchain-initiative-separate-from-ongoing-ibm-project.
11. Maersk and IBM Introduce TradeLens Blockchain Shipping Solution. Aug. 2018, www.maersk.com/news/2018/06/29/maersk-and-ibm-introduce-tradelens-blockchain-shipping-solution.
12. Techutzpah. “Maersk and IBM Joint Blockchain Venture.” Medium, Medium, 2 Apr. 2019, medium.com/@techutzpah/maersk-and-ibm-joint-blockchain-venture-14f3565aaeee.
13. Stashenko, Olga. “Top-10 Use Cases of Enterprise Blockchain Solutions.” Merehead, Merehead, 26 Mar. 2019, merehead.com/blog/top-10-use-cases-of-enterprise-blockchain-solutions/.
14. White, Michael. “Digitizing Global Trade with Maersk and IBM.” Blockchain Pulse: IBM Blockchain Blog, 19 Sept. 2018, www.ibm.com/blogs/blockchain/2018/01/digitizing-global-trade-maersk-ibm/.
