Blockchain for Supply Chain Management - SAPICS€¦ · Resilience & continuity Speed Auditability....

transcript

Blockchain for Supply Chain Management

Arjeh van Oijen, co-founder and CEO Unchain.io

The origin of trade documents & contracts

5,000 years ago

The origin of blockchain

• Trustless network

• Mining

• 21 million coins

• Litecoin, Ripple, Ether

• Bubble?

Currency

“Satoshi Nakamoto”

• Blockchain

• “Distributed shared ledger”

• Cryptograhy (SHA-256, PKI)

• Consensus model

• Smart contract

Technology

Traditional point-to-point collaboration & data exchange across

business networks

Logistics

providerStorage

provider

Customs Bank

Supplier

Single point of

security vulnerability

Ledger

Single point of

security vulnerability

Point-to-point integration

Complex – Inefficient – Expensive – Error sensitive – Vulnerable - Slow

Blockchain based collaboration & information exchange in

business networks

Logistics

providerStorage

provider

Customs Bank

Supplier

Ledger

Simple – Secure – Consistent – Fast – Efficient – Resilient

4 key elements of blockchain technology

Shared distributed ledger Cryptography

Consensus Smart contracts

Shared Distributed Ledger

• Network of multiple servers or nodes

• Data is synchronized across all nodes

• Nodes do not need to hold all transactions

• Nodes can have different roles in network (depending on version)

• Orderer (co-ordinator)

• Validating peer (validator)

• Non-validating peer (holds only transactions)

• Transactions are grouped in blocks for processing

• Breach or failure of a node does not affect the network

Permissionless vs. permissioned blockchain networks

Permissionless blockchain networks

Any party can join the network to participate in the consensus process. Trust is achieved by ‘Proof-

of-Work’ (mining) or ‘Proof-of-Stake’ that make it non-rewardable to mislead the rest of the network.

Permissioned blockchain networks

Only a restricted group of (permissioned) parties participate in the consensus process. Trust is

achieved by a pre-validation of the participating parties.

Cryptography

• Based on cryptographic mechanisms 30+ years old

• Based on public key algorithms

• 3 cryptographic elements

• Hashing – Integrity of data

• Encryption – Confidentiality of data

• Symmetric keys

• Asymmetric keys

• Digital signature – Proof of origin of data

Cryptography used in blockchain

Sample sentence to explain how SHA256 works

Sample sentence to explainhow SHA256 works.

79e8a584005254f7717547b5829fd01fa6c6831bd92a2d28c93305636c71b499

c19617618972f1dc643b2bb7075c7cacac3aea970581ca5c6ec30aee59a74c07

Extra dot

Input data (any size)

Hash value(32 bytes)

Hashing Hashing

Hashing

Input data (any size)

Hash value(32 bytes)

Symmetric Encryption

Confidential text to be secured by encryption a66b311c9b158c1e55d4e6cc555016d2e554ac….

Confidential text to be secured by encryption

Symmetric Decryption

Key sender = Key receiver Key sender = Key receiver

Sender Receiver

Clear text Clear textEncrypted text

Public key generation

Random number or input string

Public keyPrivate key

Generate key pair

Asymmetric Encryption

Symetric Decryption

Public key receiver Private key receiver

Sender Receiver

Clear text Clear textEncrypted text

Combination of Symmetric and Asymmetric Encryption

Symmetric Decryption

Public key receiver Private key receiver

83efaa248bc736ced7a5b82cca47ec63fa6e14e…Asymmetric Encryption Asymmetric Encryption

Generation symmetric encryption key

Clear text Encrypted text

Encrypted symmetric encryption key

Clear text

Sender Receiver

Digital Signature

Text of which the origin must be verified by the receiving party

Private key sender Public key sender

83efaa248bc736ced7a5b82cca47ec63fa6e14e…Asymmetric Encryption(= generate digital signature)

Asymmetric Decryption

Generate hash

Generate hash and compare

Plain document

Sender Receiver

Confidentiality of data in blockchain

• Selective synchronization of data to peer nodes (via ‘channels’)

• Encryption of data that is stored on the blockchain

• Data is exchanged / stored outside the blockchain network (nodes)

Bitcoin is not anonymous

Blockchain.info

Consensus

• Mechanism that is used to come to an acceptance of transactions

submitted by participants to the network

• A certain percentage of validating nodes must have approved block

with transactions (e.g. 51%)

• Validations

• Signatures

• Double spend

• Smart contract validations

• Different types of consensus

• Proof-of-Work (based on amount of effort)

• Proof-of-Stake (based on stake in network based on deposit)

• Proof-of-Authority (based on trusted nodes in permissioned blockchain

network)

Smart contracts

• Business logic that can be placed on blockchain network to

• Validate transactions

• Verify conditions

• Define next actions based

• Submit events to participants to inform on next action

• Possibility to assign one or more approvers to smart contract before it

becomes active (or can be modified)

• Ability to facilitate ‘escrow’ services between participants

Samples of smart contracts – Ethereum / Solidity

Business smart contract authoring

Processing of a blockchain transaction

1. Party A submits a transaction to a node

of the blockchain network.

2. The transaction is digitally signed with

private key of party A.

3. A node places transactions that have been received from clients in a block, executes proof-of-

work (if applicable) and submits the block to the other nodes for verification and approval.

4. The other nodes verify the block with transactions and return the result to the node that

submitted the block.

5. If more than a certain percentage of the nodes has approved the block, it is officially accepted

by the network and irrevocable.

6. The official status of the block and underlying transactions is replicated to all other nodes of

the network.

7. Party B is informed about the new (or updated)

transaction that has been accepted by the network.

In order to access the transaction data, party B

needs to identify itself with its private key.1

Party A

Party B

Blockchain client

Not just one blockchain technology

Differences between technologies

• Open source or proprietary

• Types of nodes

• Consensus model

• Storage technology

• Smart contract language

• Access control and confidentiality

• Extensibility

• Interfaces (APIs)

• Performance

‘Mother’ of all blockchain technologies

Most applied blockchain technologies

Other blockchain technologies

Comparison Ethereum, Hyperledger and Corda

Layers of a blockchain eco-system

Internet(tcp/ip, http, html, Javascript)

Blockchain(Hyperledger, Ethereum, Corda, …)

Applications(Message & Smart Contract standards)

Dev Frameworks(IDEs, modelling, configuration)

Value of blockchain for business networks

Reduced complexity and costs Identity & trust Reduction of errors

Resilience & continuity Speed Auditability

Areas for which blockchain is suited and for which it isn’t

Suited Not suited

• Exchange of data and assets between organisations/actors

• Situations where sharing of data and single point of truth is

essential

• Situations where trust is essential (identity, authenticity,

integrity, non-repudiation, confidentiality)

• Situations where auditability and transparency is essential

• Situations where orchestration and control of processes

across multiple parties is essential

• Exchange of data within one organisation

• Situations where trust is not relevant

• Situations where high throughput and low latency is essential

Application areas of blockchain (not limitative)

Financial Services

• Payments

• Securities registration & processing

• Lending

Property

• Real estate

• Intellectual property

• Cars

Governmental services

• Voting

• Registrations (passports, driving license)

• Permits

Identification & Security

• Party/device authentication

• Self sovereign identity

• Digital signatures

Trade & Supply Chain

• Document exchange

• Provenance

• Trade agreements

Internet of Things (IoT)

• Autonomous devices, such as

▪ Cars

▪ Drones

▪ Sensors

Application areas of blockchain for supply chains (not limitative)

• Supplier and product catalogue data management & distribution

• Logistics management, monitoring and control

• Custody and declarations

• Quality assurance

• Provenance and compliancy

• Freight insurance

• Payments and trade finance

• Supply chain financing

Blueprint for applying blockchain in supply chains

Source &

ProcureOrder

Delivery &

Shipment

Invoicing &

Financing

Payment Reconcile

Blockchain Network

Data exchange, contracts, process orchestration, traceability, matching, identity & security

Buyer Supplier Logistics service providersInspection

agenciesAuthorities

Banks /

Financing

Advantage blockchain vs. ‘traditional’ technology

• Out-of-the-box and standardised technology

• Secure and validated by development community

• Everyone can continue working with own system (ERP, logistics, QA, etc.)

• Vendor independent (open source) → acceptance by stakeholders in business network

• Deployable across multiple different data center providers (distribution of trust)

“Blockchain is an operating system

for business networks”

IoT, Blockchain and AI : A deal made in heaven

IoT Blockchain Artificial Intelligence

• Automated collection of data

• Smart/autonomous devices

• Secure and trustful exchange of data

• Shared data repository for all

participants

• Orchestration of supply chain

processes

• Interpretation of data

• Automated decision

making/preparation

• Determining next actions

Attention points for setup and implementation of blockchain networks

Organisation • Consortium organisation and governance

• Scheme specification, processes, roles, responsibilities

• Legal structure and financing

Technology • Blockchain and other technology related choices

• Blockchain network setup (consensus model, node deployment, scalability)

• Standardisation, APIs and interoperability

Roll-out • Onboarding of participants (incl. identity & key management)

• Integration with business applications and devices of network participants

• Blockchain network interoperability and integration

Integration ‘existing world’ with blockchain networks

Application /

Device

Application /

DeviceApplication /

Device

• Complex point-to-point integrations

• Hard to manage and operate

• Dependent of scarce blockchain experts

• No secure storage of keys

Unchain.io blockchain integration gateway

Application /

Device

Application /

DeviceApplication /

Device

• Any application/device to any blockchain network

• Easy, fast and secure integration

• No dependency of blockchain experts

• Low cost

Case : Distribution of medicines in Africa

Winners blockchain hackathon 2018

Mobile App for medicine verification and dispatch registration

Control Tower front-end

Unchain.io Blockchain GatewayConfiguration

Browser App Gateway FO

Blockchain Network + Application

Medical professionals

NFC sensor

Gateway Adapter(s)

Mobile AppERP

Control Toweroperators

Use of fiat currencies on blockchain networks

Bank issues digital fiat currency and places it in its account on blockchain network. Digital currency has 1:1 rate with fiat currency.

Company Y submits a transaction on network for Bank to request a certain amount digital currency .

Bank debits Company Y’s bank account and submits transaction to network to transfer digital currency.

Company Y submits a transaction to network to transfer an amount in digital currency to company Z.

Company Z sends an transaction to network to transfer a certain amount to bank in exchange for credit on company Z’s bank account.

Bank processes request and credits Company Z’s bank account.

Company Y Company Z

Financial settlement within a supply chain

Container supply chain process executed over supply chain blockchain Network (N). At the moment the container needs to be handed over from harbour to truck the supplier wants to have certainty of payment needs to take place. The buyer does not want to transfer the funds to the supplier as long as the container has officially not been handed over. Therefore an account of the supply chain network is used as an escrow/deposit.

Buyer submits a transaction to payment blockchain network to transfer the funds from its account to the account of the supply chain network.

Payment network informs supply chain network about receipt of payment.

Supply chain network informs Harbour and Truck company that container can be handed over.

After confirmation of hand-over, the supply chain network submits an instruction to payment network to transfer funds from its account to sBank debits Company A’s bank account and submits transaction to network to transfer digital currency.

Buyer (B)Supplier (S)

Supply Chain Blockchain Network

Harbour Truck company

1 14 4

Network interoperability securities post-trade processing

Securities Post-Trade Blockchain Network

A. Buyer C. SellerB. Stock Exchange

PaymentsBlockchain Network

Securities DepositoryBlockchain Network

Securities deal between buyer and seller

Exchange submits post-trade smart contract to network

Buyer and seller send money and securities transfer instructions

Transfer of money and securities to blockchain accounts of exchange

Transfers are confirmed to post-trade network

Smart contract is updated on basis of confirmations

Smart contract instructs transfer of money and securities to seller/buyer

Transfer of money and securities to seller/buyer

A B C4 8 C B A4 8

Origination of blockchain networks

Existing network organisations New consortia One initiating organisation

Reducing document processing costs in maritime logistics

“Blockchain could save

$300 per container in

terms of labour and

processing associated

documents.”

Streamlining data exchange for ocean shipping

Benefits

• Reduces data entry by up to 80%

• Simplifies data amendments

• Streamlines the data exchange

• Single point of truth

• Reduces incompliancy risks (and penalties)

AB InBev, Accenture, APL and Kuehne + Nagel

successfully test blockchain for Ocean Shipping

Better control on risks in marine insurance

Maersk, MS Amlin, XL Catlin to incorporate

blockchain into marine insurance

More efficient and faster trade finance

Group of banks found We.Trade to create the first

blockchain-based trade finance platform

• Deutsche Bank

• KBC

• Rabobank

• HSBC

• Natixis

• Nordea

• Unicredit

• Santander

• Society General

BITA – Blockchain in Transport Alliance

BLOCKCHAIN IN TRANSPORT ALLIANCE

A STANDARDS ORGANIZATION

700+ members and counting

• Fleets, 3PLs, and Shippers

• Technology Companies, OEMS, Suppliers, and Service Vendors

• Startups and Investors

• Consultants, Advisors, Universities, and Trade Associations

Topics covered (not limitative)

• Freight tendering and contracting

• Freight payment

• Asset ownership and transfer

• Gray trailer pools

• Freight custody

Faster Bill of Lading document exchange with reduced costs

Improve transparency and reduce waste in food chain

• Transparency to consumer

• Fair trade & sustainability

• Reduce waste

• Optimisation of production & supply chains

End-to-end traceability and fair trade

Provenance and sustainability in food supply chains

Stopping the spread of conflict diamonds

Busting counterfeit and reduce waste in medicine supply chain

Boosting agriculture growth in Africa

by Cellulant

Agrikore is a block-chain based platform that

ensures that everyone in agriculture can do

business with each other in a trusted environment

- Identity management

- Secure data exchange

- Supply chain management

- Payments

- Financing

Thank you!

Arjeh van Oijen

CEO/Co-founder unchain

Mob: +31 6 5121 9946

Mail : arjeh@unchain.io

Web: unchain.io

Blockchain for Supply Chain Management - SAPICS€¦ · Resilience & continuity Speed Auditability....

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