The Supply Chain Industry doesn't need Private Blockchains, it needs Interoperability

Within the supply chain industry there are two problems currently plaguing every player. These are ‘isolated data silos’ and ‘untraceable, poorly documented and manipulatable data’. With the introduction of blockchain technology to many industries with ethereum’s smart contract solution in 2015, many teams have been scrambling to develop real world solutions to apply to many industry problems, including those facing supply chain networks.

For the last few years the ‘solution’ was believed to require private blockchain systems in order to protect sensitive data. It was thought that public blockchains, although are not tied directly to identities, are not suitable for confidential business operations. However, this is not only a second-rate solution, but is even a dangerous concept to follow. 

A private blockchain is spread between the participating companies at best, or stored on a single, centralized server at worst. Both situations are not exactly the most secure blockchain solution, but time and time again, companies believe that having ‘blockchain’ in the solution simply ensures privacy and security. This couldn’t be further from the truth. A centralized server is still a centralized server and the security flaws don’t change just because there is a blockchain running on them.

There are two clear concerns that this approach introduces that didn’t exist before. These private blockchains are only as useful as the number of organisations that partaking in them, and hopefully, they are in a businesses current network for their product supply. As soon as they add a new client or change suppliers, freight forwarders, warehouses etc., they will need to convince them to onboard with the private blockchain. But what happens if they are already part of another private blockchain solution. Then the company will need to add their data to this new blockchain network.

In an exclusive interview with aelf, Daks Gunaratne, VP for Victoria & Tasmania SCLAA explained, “Each of the parties may participate in multiple supply chains and processes and may have to participate in multiple blockchains depending on multiple factors, including who owns the chain, who starts it, and what language to be used while this new way is being developed.”

Gunaratne went on to express the questions this raises, “I then wonder, how many blockchains will there be... hundreds, thousands? How many different tools will be used to implement blockchain and will they be able to interoperate?” In addition to all this, there is currently no standardization of governance, this results in each network implementing their own form of governance which may or may not integrate smoothly with another network used by the same party.

The current IT system used by companies around the world already demonstrate these issues. There is no standard, with hundreds of variations of each type of software solution available. This results in companies spending millions of dollars every year on integration of their preferred software to the preferred software of a connected supplier, vendor or other party.

The second concern is that the data is only as secure as the weakest link in the blockchain network. Each company must rely on all other participating companies to protect their data, and any data breach affects everyone on the chain.

There are solutions like Hyperledger which have attempted to isolate different data groups, reducing the number of players seeing irrelevant data. But this approach adds complexity at an exponential rate and as such, creates even more opportunities for weaknesses to be capitalized on by malicious players. There is a way, however, that we can utilise blockchain to resolve both the challenges facing the supply chain. 

The keywords here are ‘interoperability’ and ‘controlled transparency’.

In essence, players within the supply chain industry are after two key improvements - they want increased transparency across the entire network to improve (as an example) food safety and reduce costs from tracing, fraud and data conflicts. In parallel with this, it is essential they are ensured privacy and adequate data control.

The solution is comprised of a multi chain ecosystem which incorporates both private and public blockchains. It makes sense for each company to setup and manage their own private blockchain which keeps full control over the data to themselves but also allows them to share immutable and accurate data easily to other participants in their supply network. This is done through the use of a main blockchain and APIs. The sole purpose of the main chain is to coordinate and share appropriate data and ensure all parties are complying to overarching rules. 

This approach also allows the easy addition or removal of individual players from the ecosystem with minimal impact or cost, unlike current solutions which require very costly on boarding processes or middlemen.

This approach will benefit more than just the supply chain industry, in essence, it will apply to any network that requires the distribution or transfer of sensitive data, which happens in almost any industry. Consider the following case:

A large retail chain chain discovers a dangerous chemical with a child’s toy. The only information they have will be where it came from and the date it was received. A trace by all parties involved to recall all the toys that may be affected by the same issue can cost a significant amount of lost revenue, and there is no sure way to know quickly where the chemical was introduced and if it affected other toys, other batches, or other stores. 

Now, imagine we have employed the multi chain solution. Within minutes we can track the particular toys back to the factory and specific batch. It doesn’t take long to then isolate the problem with a bad batch of paint. Not only this, but we can see each set of toys that have been affected by the particular set of affected paint. We can also see each store that has received any toys with the dangerous paint. Now a recall of 500,000 toys in 250 stores which may or may not have been affected, that took a 3 weeks period, has been reduced to a recall of 5,000 toys in only 10 stores and we know we have been 100% accurate.

There are few projects that have provided real world solutions to the blockchain interoperability solution. The three most prominent ones are aelf, Cosmos and Polkadot. The latter two tend to approach this solution from an academic and technical manner, with less focus on the practical approach of the solution. Cosmos has developed it’s approach with the help of Tendermint. In essence, they use a chain relay system to read and validate data from other blockchains. Similarly to Cosmos, Polkadot also use a chain relay system, called the Relay Chain. All three projects have a central hub, or main chain which focuses on only two components, security and connecting all independent chains together.

Aelf have been developing just such a system for enterprises since 2017 with the recent launch of their enterprise beta platform. They employ a ‘main chain + multi-side chain’ solution, similar to both Cosmos and Polkadot, which allows network participants to customize public, private or hybrid side chains to best fit their individual needs. The main chain’s sole purpose is to oversee the network while providing data verification and interoperability features to other users, both internally and externally of the ecosystem. Where aelf has differed to the previous two projects is through the use of parallel processing and cluster nodes. By developing these new elements, aelf has been able to avoid scalability issues currently facing many other blockchain solutions. Another factor differentiated aelf from the other two projects is in the consensus protocol, while Cosmos and Polkadot use PBFT, aelf has developed using a DPoS protocol which is meant to scale better with the network.

From the enterprise side, companies like Ernst & Young (s), Microsoft (Trusted Compute), IBM and Walmart (Trust Food) are already looking into different solutions or have already employed their own blockchain platform.

It is important to note, regardless of which platform ends up scaling at a faster pace, it is perfectly viable that all platforms mentioned above to co-exist and thrive with interaction between them through their interoperability functions.