Building digital bridges with blockchain
With disruptive collaboration becoming the norm, businesses need tools to establish trust quickly and reduce the costs and delays associated with traditional transactions. Blockchain, a distributed database that maintains an ever-growing list of data records, is one such tool.
“Ecosystems depend on managing transactions, payments and receipts,” says Paul Brody, EY Technology Sector Strategy Leader. “Blockchain has a couple of amazing features. First, it’s distributed among all participants, so all have a shared copy of the same data. Second, it’s almost impossible to commit fraud or collude with another because the audit trail is so good.”
Blockchain technology principle
Blockchain is best known as the technology underpinning bitcoin, the peer-to-peer digital currency. But cash transactions are just one of blockchain’s possible applications. The same underlying principle — known as “distributed ledger” — can be used to combat counterfeiting and fraud. As an adjunct to this, distributed ledger systems provide an execution environment for “smart contracts.” These are computerized contracts that can be verified and enforced automatically.
Blockverify is one of a number of start-ups using blockchain to build trust, promote transparency and enable transactions within complex supply chains for products such as pharma and electronics.
“We create digital assets that correspond with digital or physical goods,” explains Pavlo Tanasyuk, CEO of Blockverify. “These are validated at each point along the supply chain, from the blueprint owner to the end customer. And, as everything is managed on a distributed ledger, it enables participants not only to trust the provenance of physical goods, but also to verify all the documentation that goes with them. The same technology also lets us use smart contracts as enablers for deals within the supply chain.”
Supply chains and counterfeiting
The need for transparency in supply chains has never been greater. According to one estimate, counterfeiting and piracy cost the global economy about US$1.7t annually. One place where the need for transparency is especially high is the world of diamonds. The pipeline from mine to marketplace is highly complex and fraught with issues such as recent tightening of finance terms and fraud.
“We’re using the emerging technology of blockchain and smart contracts as a way to assist in the reduction of fraud,” says Leanne Kemp, CEO of Everledger, a Barclays Accelerator startup. The company provides a permanent ledger for diamond certification and transaction history. Launched last year, Everledger has registered close to 1 million stones.
Diamonds highlight one of the key challenges at the heart of the IoT: the question of identity. Even the most robust certification systems are only as good as their ability to match the right data with the right asset. The problem with diamonds — as with many other objects — is they cannot be ”connected” in the conventional sense: you can’t wirelessly enable a diamond and serial numbers on stones can be ground off. Everledger’s solution to this problem draws on the world of forensic science. “We create a digital thumbprint of the diamond,” explains Kemp. “Not only do we take the serial number, we also gather 40 metadata points of that diamond and we create a 3D map of that as a thumbprint, and put it into the blockchain.”
This ability to bridge the gulf between digital data and physical assets has the potential to transform not only the diamond pipeline, but also supply chains right across industry. “It’s about capturing uniqueness,” says Kemp. “Industrial supply chains have been blind up until now. What we are learning from this technology is that they don’t have to be.”
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