Blockchain? Isn’t that something to do with Bitcons, where computer nerds are making – or losing? – huge amounts of money, whereby no-one really knows where that money comes from or where it goes? Or is it just a modern hype, nicely illustrated by the “Long Island Iced Tea Corporation” that a few months ago almost tripled its share value overnight just by changing the company’s name to “Long Blockchain Corporation” – while still just selling iced tea?
Do we need it?
But no, even if it got off to a poor start and mixed with disreputable company (Bitcoin, Darknet) at the beginning, the blockchain technology actually has multiple uses in our every-day life, and could prove to be just as disruptive as the IP technology, which was the basis for the internet as we know it today. Perhaps some of the no-longer-so-young readers will still remember when they first heard the word “Internet” and asked themselves what it was and whether anyone really needed it! Blockchain could be similar. It has already found its way into the Coalition Agreement for the new German government, just agreed last Wednesday.
Some days ago we received a press release titled “TBSx3 launches blockchain consortium with DB Schenker and DP World to protect global supply chains.” So, what is that about? And no, it does not mean that DB Schenker is now going to accept bitcoins as payment!
The Chinese consumers especially, as we know, are constantly confronted with fake products. The scandal of the contaminated baby milk powder remains in their collective memory and results still today in huge quantities of milk powder being shipped to China, because Chinese consumers do not trust local produce. Counterfeit drugs, too, pose a serious danger to health. Not to mention all the other fake fashion and luxury products. And this affects not only China, but consumers all over the world. There is an urgent need to protect product integrity, and it is in the interest of both consumers and manufacturers to take action.
The Blockchain technology
So, what is special about the blockchain? A blockchain is a sequence of data and can be seen as a set of interconnected blocks or boxes. Each box contains some sort of information. As more data becomes available more boxes are added. In the case of supply chains, the “boxes” could contain information about the goods, the production, packing, transportation details, distribution at destination, or whatever. During the process “boxes” of data keep being added to the chain. The special thing about the blockchain is the way these “boxes” or blocks are connected or chained together. Each block of data has a unique digital identifier, each block contains a reference to the previous box and the complete chain is encrypted. At the same time the chain is duplicated on all computers which are members of the blockchain network. Every time a block is added the encryption of the whole chain is renewed and the new chain is distributed throughout the network. Typically, by design, each step of encryption and distribution takes 10 minutes.
The integrity of the data contained in the blockchain is protected by the encryption itself and by the fact that the blockchain is duplicated throughout the network. Anyone who wanted to tamper with the data in one of the blocks would have to re-encrypt all the newer blocks in the chain, and that not only once but for every copy on all the computers which hold a copy of the chain. The 10-minute limit for each encryption makes this an impossible task. At the same time, since it is replicated throughout the network, the chain is public, and the complete set of data can be viewed and verified by every member of the network.
What does this mean in practice? In the case of the supply chain every step in the production, transportation and distribution of a product is entered into a blockchain. DB Schenker as forwarder and DP World Australia as port operator supply and input the transportation and distribution data. The consumer who wishes to buy the product has a smartphone app which scans a digital code on the product package. The app checks the validity of the applicable blockchain for this package and gives the consumer the confirmation that it is not a fake. When the product is sold, the sale also is entered in the blockchain. This ensures that the digital code on the package cannot be duplicated and used again for fake goods. Time will show whether this really works in practice.
Obviously, these are still early days for this new technology. But at least a test has been successfully completed and verified for a shipment of wine from Australia to China. As the Chinese say: “A journey of a thousand miles begins with a single step.” This single step has now been taken.