The rise of digital payment systems has brought the blockchain into the public consciousness. But can blockchain be used to aid supply chain transparency?
Just shy of ten years ago, technological innovation and the supply chain might have been considered strange bedfellows. Now they go hand in hand. But as technology advances at an ever-increasing rate, it makes sense that supply chains the world-over are also becoming increasingly complex as a consequence.
However despite the numerous advantages brought about by this envelope-pushing, we must remain vigilant and alert to the increased risks such new avenues afford us.
Recent years have seen a rise in both the adoption and implementation of digital payment systems and so-called “crypto currencies”. Such innovations in payments have removed the need for traditional, physical currency, as well as the bricks and mortar institutions that process them.
Bitcoin – A New Way to Pay
Bitcoin is but one example that’s fast revolutionising the payment industry. Bitcoin is a digital currency that’s been heralded as both an innovator and disruptor in yearly tech trend reports.
Bitcoin is effectively a peer-to-peer system. Its users can carry out transactions without the need for a middleman, but all activity is recorded and verified by the blockchain. Think of blockchain as a ledger and you’re halfway there.
Bitcoin has given the blockchain an early success with its 15+ million bitcoins already in circulation. But with a limit of 300,000 transactions per day (a ceiling that’s fast-approaching), we have to wonder – is there a future for a digital distributed database format?
It’s worth noting that the blockchain isn’t owned or operated by a singular body – hereby distinguishing it from a conventional ledger system. Instead, each network node stores its own copy of the blockchain, so whenever a transaction is made it is first recorded in one place, before being transmitted to other nodes that make up the database.
The “block” comes from the name given to accepted transactions. The system checks approximately six times per hour for new ledger activity, and to determine if a bitcoin amount has been spent.
Blockchain – Bigger than Bitcoin?
Putting bitcoin’s reliance on the blockchain aside for a moment, various figures have spoken out about its potential to transform not just payment systems, but improve the delivery of services and assure the supply chain of goods.
Nothing if not an encouraging sign, a report from Mark Walport, the UK Government’s Chief Scientific Advisor, made proposals that the Government itself should explore applications for the burgeoning technology.
Walport said: “Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services.”
Records ultimately lie at the crux of the blockchain. So a technology that serves as an incorruptible ledger, and one that can trace each and every interaction, could prove extremely valuable in areas where accountability is key.
Gordon Donovan, Procurement & Supply Chain Manager for Metro Trains, has previously been quoted on Procurious suggesting the development of a ‘supplier wiki’ in order to build knowledge of the entire supply chain.
Blockchain technology could indeed be used to increase transparency, but there would be considerable work required in advance of opening this up, thanks in no small part to the highly complex nature of organisational supply chains and the numerous suppliers involved.
A Chain is Only as Strong as the Weakest Link
If this reliance on blockchain is going to come to pass, more work needs to be done around trust and security – a fact that hasn’t gone unnoticed by bitcoin’s most vocal critics.
With high visibility services like Twitter, the BBC, and both the global networks for Xbox and PlayStation, all being taken offline by distributed denial-of-service (DDoS) attacks, what crippling effect would such activities have on the blockchain?
Moreover it wouldn’t be too much of leap to suggest vulnerabilities could lead to ‘botnets’ taking control of nodes to reveal the identities of the parties involved in transactions.
But is all of this worry warranted? It would certainly seem so if the letter penned by bitcoin’s high priests is anything to by. The open letter informed the community at large of an action plan to reach a consensus on improving bitcoin security.
“We have worked on bitcoin scaling for years while safeguarding the network’s core features of decentralisation, security, and permissionless innovation” – it began.
“We’re committed to ensuring the largest possible number of users benefit from bitcoin, without eroding these fundamental values.”
In order to achieve these aims, 30-plus bitcoin developers organised two workshops (in Montreal and Hong Kong respectively) to try and carve out a scalable path for the cryptocurrency’s future.
If we’re not looking for a repeat of the Silk Road scandal, let’s just hope they came up with a solution…
Is it possible for blockchain and bitcoin technology to transform the future of digital payments and aid supply chain transparency? Let me know your thoughts.