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Posts Tagged ‘blockchain’

We noted in our prior post that underlying the cryptocurrency called “bitcoin” is what, in the long run, may be the more important element at play here: the blockchain.  Our prior post quotes The Wall Street Journal’s Christopher Mims’ fine explanation of the concept.  Now we’ll look at some important applications of blockchain technology.

In logistics, Walmart already uses a blockchain to list for sale over a million items, including chicken and almond milk, that provides its supply chain with traceability all the way forward and backward from source to sale.

Global shipper Maersk uses IBM’s blockchain technology to track shipping containers and move them through customs faster.

Both efforts are expanding rapidly, and other companies cited by Mims include Kroger, Nestle,Tyson Foods and Unilever.

A company called Everledger was started in 2014 with the intent of creating a blockchain that traces every certified diamond in the world.  It already has over 2 million diamonds in its registry, and adds another million or so per year.  Everledger records 40 measures of each stone, lending it traceability “from when it’s pulled from the earth to the day it’s purchased by a consumer.”  Every participant in that chain from miner to retailer maintains a node with a copy of the database in the blockchain.

A company in Israel puts internet-connected sensors on pallets and uses business intelligence analytics to determine when and where items could be damaged.  Blockchain participants can record every stage of the package’s journey via package, pallet and shipping container.

Even whole countries are adopting blockchain.  Dubai intends to be “the first blockchain powered government in the world by 2020.”  By moving its central record of all real estate transactions onto a blockchain, it will be faster and easier to transfer property titles, for example.

As blockchain technology becomes more widely accepted and integrated into supply chains, it has the potential, as Mims notes, to be a “fundamental enabling technology,” similar to how new data transmission standards across networks made the internet we know today possible.  It could one day underlie everything from “how we vote to whom we connect with online to what we buy.”

That being said, it’s wise to recognize that the current bitcoin craze is merely one application of the blockchain technology.  Clearly, much more will be, and is, possible through blockchain.  Bitcoin may — or may not — be here to stay; but blockchain seems to have all the merits and rapid adoption of a technological foundation that could change the way businesses run.

 

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With all the hype surrounding bitcoin these days making it sound more and more like a modern-day equivalent of the 17th century tulip bulb mania, it’s important to remember that there actually is something important going on here.  And it’s not about the bitcoin.  It’s about the underlying technology for bitcoin – the blockchain.

Investment manias may come and go, and bitcoin will likely make some folks rich (it already has for those who bought bitcoin at the start of 2017 at $963 and watched its price soar to nearly $20,000 by year-end; it’s since fallen back to around $8,300 as of this writing), and likely leave some ‘greater fools’ broke a little further down the line.  After all, bitcoin has no intrinsic value, it’s not based economically on anything, and its essential value is merely the result of what some other person is willing to pay for it.  As a currency proxy, it has a ways to go.

But the blockchain that bitcoin is built upon – that’s another thing.  And a recent article by Christopher Mims in The Wall Street Journal provides some of the best explanation we’ve seen for why it matters.

What is a blockchain?  As Mims explains:

“It’s essentially a secure database, or ledger, spread across multiple computers.  Everyone has the same record of all transactions, so tampering with one instance of it is pointless.”

He goes on to explain that the underlying cryptography…

“…allows agents to securely interact – transfer assets, for example – while guaranteeing that once a transaction has been made the blockchain remains at immutable record of it.”

Blockchain has the power to transform industries for three reasons, notes Mims.

First, it’s well-suited to transactions that require trust and a permanent record.

Second, blockchain requires the cooperation of many different third parties.

And third is… the hype.  “The excitement around cryptocurrency gives blockchain the visibility to attract developers and encourage adoption.”  In this way, blockchain resembles the cloud, which also gave many industries “new business processes, disruptive startups and new divisions within existing companies, an ecosystem of supporting technologies, and new ways to charge for services.”

We’ll take a look at some of that disruption in our concluding post, so stay tuned.

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We hear a lot these days about blockchains, usually as the underlying technology for something called “bitcoin,” touted as a new virtual currency.  There’s a lot of talk about bitcoin being a future form of currency that might circumvent banks, governments and other authorities.  But bitcoin and blockchain are not at all the same, and should not be confused.

Bitcoin isn’t really a currency at all.  It’s more of a currency store.  Think of gold: it has value to holders, and acts as a sort of benchmark, but while it’s a store of wealth, it is not in itself a currency.  Same with bitcoin; it has no intrinsic value.  Unlike a stock, a bond, or a piece of real estate, it’s not a claim on future earnings to which a valuation could be attached.  In fact, most people need to convert bitcoin into cash just to use it, and it’s most commonly ‘valued’ against a real currency — the dollar.

Moreover, as the recent climbs and dives of bitcoin’s value have shown, it’s not even much of an investment in the traditional sense of the word.  It’s more of a gamble, actually.  It’s paid off nicely for some, but those playing in bitcoin are best advised to use some money they can afford to lose.  In fact, a couple legitimate bitcoin exchanges have arisen lately, and they require investors to have sizable assets, and minimum bitcoin investments of around half a million dollars.

So, separating bitcoin from blockchain, we look at the underpinning of bitcoin, the blockchain in which we think lies something worth paying attention to.

Blockchains are part of a digital ledger, a database essentially, allowing for the creation and sharing of a large number of transactions while avoiding error or fraud – not to mention middlemen (i.e., banks).  There is no centralized administrator.  They work via a decentralized, anonymous, open structure, backed with strong cryptography to ensure the accuracy of each transaction.

A blockchain has three components: a transaction; a record of that transaction; and a database in which that transaction is permanently and securely verified and stored.  Once stored, a record cannot easily be undone, because altering that record retroactively affects all other blocks in the network.  Any change to a record, say someone trying to forge or delete a record, would appear as an irregularity to all others in the network, and the new data would be rejected.  It’s basically trust without having to trust any person.

Recently, an article in APICS Magazine describing blockchain in logistics described the nature of the transaction quite neatly, as follows:

A transaction is requested…

The transaction is broadcast to a network of computer known as nodes…

The network of nodes validates the transaction using known algorithms any use can see…

The verified transaction is combined with others to create a new block of data for the ledger…

The new block is added to the existing blockchain in a way that is permanent and unalterable…

And the transaction is complete.

In short, blockchains are useful in generating a less expensive but reliable way to know the status of any transaction in the system.  And as APICS notes, “anyone focused on making a process leaner will appreciate the value this brings.”

As you read more and more about bitcoin (and as we written about in the past), keep your eye on the underlying blockchain.  Dollars to doughnuts, that will be the technology play that matters in the long run.

 

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Be sure to read our previous post beginning here on some basics of “blockchain” technology.  Today, we’ll tell you about an even newer evolution in the rapidly evolving blockchain saga.

Our title headline today is how a fellow named Joe Lubin, founder of a company called ConsenSys that develops applications for the burgeoning “Blockchain” technology, describes Ethereum.  Chances are if you’ve heard of Ethereum at all, it’s because the new platform was the victim of a $60 million hack a while back.

What you may not know is that companies including IBM, Microsoft, BP, JP Morgan and a lot of others recently attended a forum sponsored by an industry group called the Enterprise Ethereum Alliance.  Ethereum technology, while still young, comes with enormous promise, despite last year’s hack setback.  Advocates believe Ethereum “could be a universally accessible machine for running businesses,” according to a Matthew Leising of Bloomberg Businessweek.

Cornell University professor Emin Gun Sirer says “Ethereum gives you a new way for the computer to interact with the real world and how money moves.”  In effect, it’s a complete business-to-business transaction engine and database.  It’s based on the “Blockchain” concept of digital money.  The idea behind Blockchain is to create a verifiable virtual currency that can be distributed as easily as an email.  It’s an online ledger on computers distributed around the world.

We’ll spare you the details, but the idea is that every “bitcoin” distributed is tracked and verified, in a system that basically runs itself.  Its main purpose is to move currency from point A to point B.

What Ethereum adds to the Blockchain is the ability to store fully functioning programs called “smart contracts.”  So beyond moving money, users can potentially control contracts or projects, thus allowing a person to complete a job for a customer and trigger payment on completion – all without added human intervention, in a secure framework.

That’s the concept, at any rate.  As Leising notes, “Once you can create contracts – which in essence are just operating procedures – you can use them to manage almost any kind of enterprise or organization.”

A variant on the technology would see companies participate in an Ethereum platform on a closed invitation basis, given that a public platform tends to increase security risks, whereas a semi-private network among aligned business partners might provide an effective alternative with the same end result.

A variety of companies are exploring their options today.  John Hancock is experimenting with compliance tracking and anti-money-laundering regulations in its wealth management unit.  Airbus is exploring ways to move its entire supply chain to a Blockchain.

If all this sounds a lot like the future of enterprise business models, one shouldn’t be surprised.  There are security and logistical wrinkles to be worked out, to be sure, but the idea of a self-regulating supply chain of integrated enterprise systems that embrace project management, verifiable currency transfers and contract fulfillment has a lot of companies paying attention to the Blockchain ledger technology.

Right now, Ethereum is helping to lead the way.  It’s a name worth remembering.

 

 

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As we began in our prior post to look at a new technology called “blockchain,” we posed the question: What if you could document and preserve all the data associated with a product’s life cycle from the origin of the raw materials to the final sale of the finished good as it travels along the supply chain, with 100% certainty?

In today’s concluding post, we start with a supply chain counterpoint: Even if you could, is it worth it?

An analyst at Aberdeen Group, Bryan Hall, is quoted in a recent article in the Mar/Apr 2017 issue of APICS Magazine pointing out that supply chains are full of unexpected events and disruptions, ranging from damaged goods to carrier capacity issues, not to mention customs delays, clogged ports, theft and other issues.  The key to adjusting and correcting often lies in what Hall calls the “occasional heroics” that keep plans on track – and none of these actions are possible without visibility.

According to Aberdeen, fewer than 60% of companies had online visibility into in-transit shipment status.  The percentages were even lower for visibility into data to make decisions, or to view supplier quality and manufacturing processes – in other words, traceability.

Other studies have generally confirmed that most companies lack full visibility into their supply chains, and most experience supply chain disruptions periodically.  Often, the source is not even analyzed, and all come at a cost.

And as Business Insider reports, according to APICS, the growth of IoT (Internet of Things – i.e., internet connected devices and machines) will generate yet more massive amounts of data.  Writes Crandall, “Blockchains have the potential to provide security and accountability that traditional databases don’t.”

As examples he cites IBM using a blockchain in the diamond industry… PwC using blockchain to deliver on-stop solution for financial service firms… Wal-Mart testing blockchain’s abilities to track the flow of certain food items to quickly identify items that may be tainted and subject to recall.  The downstream implications of that one – the ability to possibly prevent foodborne illnesses which cause 3,000 people per year and hospitalize more than 100,000 – quickly become clear.

TechCrunch contributor Ben Dickson has written of how blockchains will “enable companies to register information about a product transfer and the product’s price, location, quality and any other information that is relevant to managing it.”

And by its very nature, a public blockchain will ensure that all users have equal and common visibility into everyone’s supply chain.  The decentralized and open nature of blockchains inherently restricts withholding or manipulating information to gain advantage, while built-in encryption will help to ensure data integrity.

In the end, blockchains in the supply chain will eventually assure better regulation compliance, product integrity, customer satisfaction and confidence in product knowledge and movement for the entire family of producers, distributors and consumers.  According to APICS, The World Economic Forum has said that 10 percent of all global domestic product will be stored in a blockchain by 2025.

While still in its infancy, this new technology will present supply chain professionals with both opportunities and challenges.  But as noted business guru Peter Drucker observed long ago, the best executives focus on opportunities, not problems.

 

In our next post, we’ll take one final look (for now) at the newest wrinkle in blockchain, called Ethereum.  A lot of very big companies are getting on board with it as you’ll see.  We’ll tell you more in our very next post.  Stay tuned…

 

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What if you could document and preserve all the data associated with a product’s life cycle from the origin of the raw materials to the final sale of the finished good as it travels along the supply chain, with 100% certainty?

That could be a reality in the not too distant future, thanks to a fast-growing technology we’ve written about several times here before, called “blockchain.”  We thought today we’d take you through a few of the basics of this important new technology, which you’ll be hearing more about in the future.

Some of our source material here comes from APICS and APICS Magazine (Mar/Arp 2017 issue, and others), and other publications.  APICS is an organization devoted to improving the skills of supply chain professionals everywhere through teaching and training in principles of supply chain excellence.  We are a long-time supporter of the organization and its efforts, and recommend their programs often to our clients.  As disclaimer, we are in no way affiliated with APICS other than as longstanding members, benefiting over the years from their training programs, most notably the CPIM (Certified in Production and Inventory Management) certification program.  PSSI also holds multiple “Company of the Year” award designations from our local chapter.  Learn more about the local chapter here.

Blockchain is basically a ledger system built on a peer-to-peer network (think: database) used to record and track transactions on computers.  The first blockchain was developed by Satoshi Nakamoto in 2008 and was implemented in 2009 as a ledger for a new kind of currency called “bitcoin.”

One of block chain’s appealing characteristics is that it does not require a “central authority” or a trusted third party, such as a bank.  Instead, a blockchain relies on three components: a transaction, a record of that transaction, and a system that verifies and stores the record.  Once stored, it is said to be difficult (though as the remedy to a recent Ethereum blockchain hack has demonstrated, not necessarily impossible) to delete.

According to an APICS Magazine article by Dr. Richard Crandall of Appalachian State University (referencing an article in The Economist in 2015), blockchain has “… a mixture of mechanical subtlety and computational brute force built into its ‘consensus mechanism,’ the process by which the parties involved agree on how to update the blockchain to reflect the transfer of [records or] bitcoins from one person to another.”

When someone wants to add to a blockchain, the other participants run an algorithm to evaluate and verify the proposed transaction.  If approved (a process too complex to describe here), the new transaction is added to the blockchain.  Or, in the case of the bitcoin currency, a new coin is added.

Marc Andreessen, a highly successful venture capitalist and inventor of the first popular web browser, Mosaic, describes the importance: “The practical consequence is that for the first time… one internet user can transfer a unique piece of digital property to another [that] is guaranteed safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer.  The consequences of this breakthrough are hard to overstate.”

Ultimately, say blockchain advocates, if chains can be used to transfer and track bitcoins, companies can use blockchains as public ledgers to track product attributes including ingredients and history of production.

And that will usher in the next generation of supply chain innovation.  We’ll take a look at some of the implication of blockchains on supply chains in our concluding post next.  Stay tuned…

 

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blockchain_2We began in our prior post with a brief primer on a new database technology called blockchain.  Today, we’ll look at its potential impact on supply chains and other areas.

Blockchain has the potential in supply chains to save costs, and of course reduce errors.  Since all sides have the same view of a common transaction, there is no re-scripting or recording.  According to Blythe Masters, CEO of Digital Asset Holdings, in an interview with the Wall Street Journal’s Kimberly Johnson on 6-20-16, the major market infrastructure providers – think: exchanges – are operating on decades old infrastructures.  In banking alone, she estimates, there are billions of dollars out there in potential savings.

In supply chain coordination, you are “managing the movement of money in return for the provision of goods and services,” notes Masters.  And the most efficient way to do that is when “there’s no disagreement between those parties about the timing of when cash should flow… and/or goods are needed to be supplied [or] manufactured, as you work your way back in the manufacturing process.”

Essentially, blockchain then is software, in that it allows you to share information in a secure environment between different points on a network.  And importantly, it doesn’t require all new, capital intensive hardware infrastructure.

What blockchains ultimately will do, of course, is greatly improve the speed of transactions, which saves costs all up and down the chain.  In the finance arena, for one, transactions that originally required, days to be consumed for legal or administrative reasons will now happen in seconds.  Eliminating these delays, whether in banking or in supply chain, frees up capital, eliminates the need for most low-value-added handling processes done largely by back office operations spent tying together two or more different records of the same transaction, and lubricates the flow of trade and money.

Circling back to bitcoin and crypto-currencies one last time, a later article in the Journal mentions yet another “hot thing in cryptocurrencies,” one of the newest variants on blockchain.  It’s called “Ethereum” and it’s an open-source software platform with a currency called “ether.”  It too is a public blockchain ledger, with all the “tools for building so-called smart contracts that automatically make payments when their terms are fulfilled.”  With Ethereum’s open-source software construct, anyone can develop applications that take advantage of its code.

The Journal notes in a June 21st article (“Bitcoin Rival Gains Steam”) that the investors in Ethereum are part of a growing revolt “against the centralization of the internet under big companies like Google and Facebook by creating financial structures that can run themselves.”

But, just like bitcoin, the platform has its challenges.  It recently suffered a large theft of its virtual security when “a hacker rewrote some of the startup’s code and funneled money into a private account.”  The price of ether dropped 43% upon disclosure of the hack.  Still, as the Journal notes again, the underlying technology that underpins currencies like these “open and immutable transaction ledgers” could transform a wide variety of commerce for millions of consumers, in particular in finance and banking.

Ultimately, these blockchains are going to grow, becoming more transparent, efficient and secure than existing online platforms.  Still, critics say they have a long way to go before it reaches stability and mainstream adoption, and that the technology is largely unproven.

But then, we’ve heard that about just about every technology that’s come before.  Including of course, the Internet.

 

 

 

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