October 20, 2018 Valentin

Supply Chain Transparency

Transparency
The lack of transparency along the supply global supply chains create challenges regarding fraud, pollution, human rights abuses and other inefficiencies. Sustainable behaviour of individuals and companies is therefore currently hard to track and not well rewarded. In this context Blockchain has the potential to provide an unprecedented levels of transparency, with a shared, decentralized database where immutable and encrypted copies of the information stored on every computer (node) in the network.

This enables otherwise trust-less parties, such as individuals and firms that do not know each other, to engage in near frictionless peer-to-peer transactions. Blockchains can therefore serve as a transparent bookkeeping machine that everyone can inspect (public and permissionless blockchains) or a limited group of people can inspect (private and federated blockchains). This type of transparency has applications (1) along the supply chain of good and services, (2) in institutional settings, for less corruption and more accountability.

Use Case 1: Supply chains

Supply chains represent a complex networks of distant, separate entities that exchange goods, payments, and data across a dynamic, continuously evolving landscape. Their underlying architecture of has many similarities to how Blockchains are set up. Blockchain based solutions can therefore help us trace the provenance of goods and services along the supply chain, to unambiguously identify a product’s input materials, including the material’s quantity, quality and origin. The Blockchain protocol, as a decentralized network with distributed and transparent data structures, allows a disparate group of network actors to exchange data relatively seamlessly from anywhere in the world, replacing traditional centralized data structures (client server architecture, multiple document copies, data inconsistencies, or in many cases still paper copies) with a distributed ledger, in almost real time, so that auditing can be automated. Such solutions would, however, include a combination of Blockchain, AI and IoT, to provide full transparency over what happens along the global supply chain.

Provenance of goods and services:
When goods reach their final destinations, most buyers and sellers do not know the true origins of the manufactured products including the ingredients of the goods they have purchased. Transparent supply chain solutions have the potential to provide consumers and other downstream participants higher standards of responsibility and sustainability in sourcing and production: (a) transparency of environmental impact, such as or measuring diesel pollution of trucks at shipping ports, (b) food provenance: origins, production type and ingredients of the food we eat, conditions under which the plants are grown, animals treated, like ie. false fishing equipment leaving seal life trapped, or illegal fishing causing a decrease in a population of a species.

Price Transparency:
Lack of transparency, as well as costs imposed by some unscrupulous intermediaries, prevents many end users from knowing who earns what along the supply chain of goods and services they consume or what the working conditions along the supply chain are. Blockchain base solutions have the potential to provide us with greater accountability and responsibility around human rights, eg. monitoring factory working conditions for modern day slavery, child labour, employees being exposed to toxins, or revealing if farmers receive fair prices for the value they created.

Economic inefficiencies & document handling:
Inefficient document handling systems along the supply chain provide a toll on company profits. Maintaining bureaucratic paper trails required to manage modern supply chains are costly and inefficient. Supply chain startups and established industry players are beginning to utilize blockchain to optimize their value chains, improve inefficiencies and free up working capital, and make goods and services more accessible.

Use case 2: Institutional weakness

Blockchain and similar distributed ledger technologies have the potential to mitigate institutional weaknesses though transparency of processes, restricting deception, corruption and uncertainties.

Traceability of Donations
Blockchain provide near real time transparency of what happened to the money that has been donated to charity organizations, supporting civil society accountability by tracking funds and ensuring they support the cause of the donation, tackling bureaucracy and corruption, and releasing funds where needed without sophisticated banking infrastructure. Examples: Giveth, Alice, Aidcoin

State Corruption
Blockchains can provide near real time transparency of what happened to taxpayers money and international loans, and how the funds have been reallocated, preventing corruption and tackling public mismanagement. By providing an unprecedented level of security of the information and the integrity of records it manages, guaranteeing their authenticity Blockchain based applications can eliminate opportunities for falsification and the risks associated with having a single point of failure in the management of data and funds. It can also help overcome data silos in traditional bureaucracies in which public entities are reluctant to share information among themselves. Blockchain is particularly suited to fight corruption in the registry of assets and the tracking of transactions such as procurement processes. It eliminates the need for intermediaries, cutting red-tape and reducing discretionality and strengthen public integrity.

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