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100% extra virgin olive oil. Fair trade coffee. Conflict-free minerals. Most of us are familiar with these terms, and every day we place our trust in labels and our favorite retailers, but how do we know these claims are real? Many products are in fact mislabeled or have misleading labels. Did you know that more organic food is sold than produced? Or that about half of all olive oil on US store shelves has packaging with misleading claims? Specialty terms can help justify premium pricing which means there is incentive to mislabel goods to increase margins. Frustrated with fraud or truth-stretching, consumers and businesses are becoming more savvy. They are now increasingly demanding more transparency around the goods that they purchase, be it in relation to sustainability, ethical-sourcing, or authenticity.
Today, enterprise blockchain technology in combination with sensors and Internet of Things (IoT) devices is creating a cost-efficient foundation for supply chain transparency. Rather than being an aspirational vision, a shared, near-real-time record of truth can now be recorded and accessed by members of an ecosystem and shared with their customers. This technological breakthrough has now made it possible to quickly verify the authenticity of products such as premium olive oil or fair trade coffee, as well as the origin and processing of “conflict-free” minerals. The good news is that things are just getting started.
Our book Enterprise Blockchain Has Arrived addresses the use cases, return on investment considerations, and future adoption and growth of this advanced technology across multiple sectors. In addition to supply chain and logistics, we also discuss adoption and use cases in banking and financial services, healthcare and life sciences, government, and the power sector.
Here is an excerpt from Chapter 11 on supply chain:
Key Blockchain Use Cases for Supply Chain Management
As noted above, permissioned blockchain systems can provide visibility and better data across supply chains. Common applications include:
• Product traceability
• Authenticity and product provenance
• Process transparency
• Documentation digitization and process streamlining
Authenticity and Product Provenance
As we have noted, the global counterfeit goods market is a mega billion-dollar problem and growing larger rapidly. A significant fraction of this number, on the order of $100 billion annually, is due to fake luxury goods — including the well-known brands behind handbags, high end clothes, shoes, and accessories. Many people who purchase counterfeit branded products may not be aware that the products are fake, because they may purchase them online through reputable web sites, outlet stores, or replicas of the retailer’s or manufacturer’s web site.
In today’s supply chain systems, there is no simple way to track the provenance and authenticity of a product. More sophisticated centralized systems have used barcodes, unique electronic product codes (EPC), and RFID technology to track items through the supply chain. These systems, however, rely on centralized certificate authorities and centralized databases and so are fundamentally insecure since they have single points of failure that make them susceptible to cyberattacks and insider fraud.
Decentralized and immutable blockchain systems allow product tracking to its origin (traceability) and through every step of the supply chain (authenticity). Building on this foundation, a number of blockchain projects have already deployed decentralized apps (dApps) that use information in the supply chain to authenticate that a product, such as a luxury good or a food product, is in fact authentic. The dApp enables a user to scan a QR code on the product which provides a full trace and validation of the product’s authenticity.
Such an approach tracks the product or a product’s components through every step in the chain, for example via an embedded RFID or NFC chip. At each step in the chain, the RFID chip is scanned, a smart contract is executed, and then multiple trusted nodes verify the information is correct before it is written to the blockchain ledger. Each entry in the blockchain ledger is cryptographically signed and encrypted which deters fraud and reduces the chance of hacking. Since the entire supply chain process becomes transparent, it becomes possible to quickly and inexpensively validate product authenticity. Any product that doesn’t enable dApp-based authenticity then becomes suspect which disincentivizes fraud.
Provenance takes authenticity one step further by also providing information about the entire history of a product through the supply chain. So, for example, the location history, the custody history, and the environmental conditions during the journey can be tracked and stored immutably on the blockchain. This type of information — GPS coordinates, custody IDs, temperature data, accelerometer information (for damage assessment) — is typically provided by Internet of things (IoT) devices. These devices send out data streams that in combination with decentralized consensus are then written to the blockchain. Since blockchain technology reduces verification costs it will likely gain widespread adoption and so make checking product authenticity and provenance commonplace.
Other use cases can include verification of specialty crop certifications (i.e. fair trade, organic), origin and authenticity of high value goods (i.e. diamonds, precious metals, luxury goods, etc.), conflict-free designation (i.e. NOT blood diamonds or using child labor), and provenance/authenticity of medical drugs (i.e. pharmaceuticals — covered in Chapter 12).
From time to time, we invite industry thought leaders, academic experts and partners, to share their opinions and insights on current trends in blockchain to the Blockchain Pulse blog. While the opinions in these blog posts are their own, and do not necessarily reflect the views of IBM, this blog strives to welcome all points of view to the conversation.