Looking at the applications of Blockchain in the industry beyond the rise of cryptocurrency and its role in revolutionising Supply chain management.
What is Blockchain?
Blockchain is a distributed database that holds records of digital data or events in a way that makes them tamper-resistant. While many users may access, inspect, or add to the data, they can’t change or delete it. The original information stays put, leaving a permanent and public information trail, or chain, of transactions.
If the entire blockchain were the history of banking transactions, an individual bank statement would be a single “block” in the chain. Unlike most banking systems, however, there is no single organization that controls these transactions. It can only be updated through consensus of a majority of participants in the system.
In short, blockchain is a record-keeping mechanism that makes it easier and safer for businesses to work together over the internet.
This technology relies on three principles:
Transparency: everyone can visualize the transactions recorded on a blockchain from the time it was created.
Decentralization: blockchains operate on a network and are therefore not centrally controlled by a single entity.
Security: transactions carried out on blockchains are encrypted, making it impossible to forge data.
The most popular application of Blockchain is Bitcoin and other cryptocurrencies. Block chain has enabled a systematic peer to peer exchange of currencies that has enabled users to transact without the need for any 3rd party.
But blockchain’s applications is more than just recording of financial details. It includes the recording of all kinds of data. Thought it was initially intended for financial transactions, businesses of all kinds are getting creative with the blockchain ledger, as it can be used to record, track, and verify trades of virtually anything that holds value.
From ride-sharing to cloud storage to voting, companies in all industries are beginning to see blockchain’s potential. Every time a product changes hands, the transaction could be documented, creating a permanent history of a product, from manufacture to sale. This could dramatically reduce time delays, added costs, and human error that plague transactions today.
Advantage of Blockchain in SCM
Some supply chains are already using the technology, and experts suggest blockchain could become a universal “supply chain operating system” before long. Consider how this technology could improve the following tasks:
- Recording the quantity and transfer of assets – like pallets, trailers, containers, etc. – as they move between supply chain nodes
- Tracking purchase orders, change orders, receipts, shipment notifications, or other trade-related documents
- Assigning or verifying certifications or certain properties of physical products; for example determining if a food product is organic or fair trade.
- Linking physical goods to serial numbers, bar codes, digital tags like RFID, etc. Sharing information about manufacturing process, assembly, delivery, and maintenance of products with suppliers and vendor
This will result in Automated Buying process, Better transaction flow, secure supply chain, integral tractability, more reliable and streamlined document storage. It can be implemented across the chain as depicted in the diagram given below.
Blockchain is being adopted by the industry at a rapid pace:
Automated meter reading and SMART metering: Feeding energy consumption data digitally into a blockchain, to verify a customer’s usage with 100% certainty, generate accurate bills, and collect payments on the blockchain without incurring fees associated with bank transfers. South African Bitcoin startup Bankymoon built the world’s first blockchain smart metering solution for modern power and utility grids.
Energy delivery: Car charging with the charging station acting as a point for both customer authentication and payment processing, leveraging blockchain-based smart contracts to authenticate users and manage the billing process to cut costs and improve customer experience.
Smart energy use and lower power bills: Enabling household customers to constantly search for cheaper energy prices and instantly change providers for a better deal, all of which is automatically handled by the blockchain-based application.
Green energy and energy credit: Blockchain can be leveraged as a public ledger with recording of solar energy production and feeding production data directly into a blockchain and owners automatically being rewarded for the energy produced in SolarCoin.
SMART grid: Consumers can use blockchain-based applications to join a smart grid in which participants can track their energy use and production (such as via solar panels) and sell excess energy to others on the smart grid, leading to more competitive energy pricing for consumers.
Blockchain in the Internet of Things: Blockchain combined with IoT can be leveraged to create mesh networks (a flexible and secure network that connects computers and other devices directly to one another) to solve complex utilities infrastructure problems. Filament, an American company, is experimenting with “taps” on power poles, with motion detectors on each pole that can detect any trouble on another pole up to a distance of 10 miles and communicate to the company through the closest internet backhaul location within 120 miles.
In a nutshell, applications based on blockchain are being explored globally and a new ecosystem of blockchain community comprising energy startups such as LO3 Energy, Grid Singularity, Slock.it, Power Ledger, Wattcoin Labs BlockCypher, Ripple, etc.), utilities (Vattenfall, RWE, Fortum, etc.), technology providers (Ethereum, Tendermint, Tierion, Monax, MaidSafe, Ascribe, Digital Asset, and Blockstream, etc.) and consulting companies is emerging. Many pilot partnerships are being established by major utility players (such as RWE and Vattenfall) and investing in utility startups.
The blockchain is a fast-moving disruptive innovation technology across industries, including utilities. While it is difficult to predict how quickly this technology will be adopted in the sector on a large scale, current areas of interest unveil a clear picture of innovation initiatives around blockchain in the near future.
Blockchain has great advantages in terms of cybersecurity, but there are several challenges associated with maturing this technology for supply chain purposes:
- The technological talent is scarce and expensive; much of it has been scooped up by fintech startup firms.
- There are network effects associated with deriving value from blockchain in logistics. The more entities that participate, the more valuable the solution is. But this network effect makes things difficult at the start.
- It is likely that to get to scale, large companies will need to require their supply chain partners to participate. But this could hinder the drive to create the necessary standards. Further, while several organizations are seeking to play the necessary role of standards body; none has yet achieved the necessary scale.
- “Miners” are used to validate that the data added to a blockchain is valid. With Bitcoin, this process can take several minutes. There are supply chain processes where less latency would be very desirable.
Read more at: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-blockchain-to-drive-supply-chain-innovation.pdf