Blockchain in SCOM

Blockchain in SCOM Table of content Introduction of Blockchain What is Blockchain A brief history of Blockchain Blockchain application areas Blockchain use cases Diamond industry Freight container industry Food retail industry observations SWOT analysis Competency & leadership requirements Introduction of Blockchain What is Blockchain? A Blockchain is a list of immutable records of data that is managed by a decentralized peer to peer network. The blocks are secured and bound to each other using cryptographic principles, where each block has a cryptographic hash, a time-stamp and transaction data. (Fisher,2017) A brief history of Blockchain Blockchain technology made its first appearance through a white paper which was published in 2008 under the name of Satoshi Nakamoto, whose identity remains unknown until now. The white paper described a purely peer-to-peer type of electronic money known as Bitcoin (Forbes.com, 2019). In 2009, the first transaction of Bitcoin was done between Satoshi and a computer scientist. A year later it was used as a digital currency for the first time to buy two pizzas with 10,000 Bitcoins. By 2013, Market capitalization of Bitcoin reached $1billion. Additionally, Switzerland recently began to accept tax payments in Bitcoins (Grantthornton.global, 2019). Nonetheless, The Blockchain technology has been developing and evolving to be one of today’s biggest ground-breaking technologies enabling a variety of application areas such as smart contract application which was introduced through Ethereum project that was launched in 2014. In 2017, seven major European banks announced Digital Trade Chain agreement in order to develop a Blockchain trade finance platform for small and medium-sized companies across Europe (Grantthornton.global, 2019). What kind of technology is Blockchain? Blockchain application areas Until this moment Bitcoin is still the largest application of Blockchain. However, Tech companies, such as IBM, are backing the technology and its possible uses in other industries as the technology has high impact potentials in many industries from financial to food retailing. Although there is no official way of categorizing Blockchain applications, a few areas will be briefly discussed as follow (Fisher,2017): Currency: The original use of Blockchain technology was to allow peer-to-peer transactions of cash. (Fisher,2017) Smart Contracts Smart contracts are digitized programmable contracts that are self-executed under the correct conditions with benefits such as transparency and avoidance of the services of a middleman. (Fisher,2017) Digital Assets Blockchain can be used in creating, transferring and managing the ownership of financial assets, such as stocks and bonds, and the digital twin of a physical asset in the real world. For example, it can be used to track the ownership land titles and diamond certificates. (Blockchain In Logistics,2018) Verifiable Data Blockchain can be used in creating Verifiable records of data, files, or business processes. For example Blockchain can be used in the land registry industry to digitize the real estate processes. (Fisher,2017) Voting By counting votes with digital tokens, the Blockchain can track the total number of votes on a network. Furthermore, everyone can agree on the final outcome as the votes are public and they can count the votes themselves and verify that no votes were altered or removed. (Fisher,2017) Blockchain use cases Diamond industry The situation in the diamond industry is filled with stories of adultery, frauds, document tampering, synthetic diamonds, conflict zone diamonds and black markets. Most of these challenges were deep-rooted back to the lack of transparency along the industry’s supply chain, supported by the heavy reliance on paper based certification system which is vulnerable to forgery, theft or misplacement. (Gutierrez and Khizhniak, 2019) To replace the flawed paper based certification system, IBM created a blockchain platform called “Everledger” to ensure the authenticity of the diamonds is protected and safely stored among all industry participants. Unlike paper based systems where record maybe forged or misplaced, blockchain records are immutable. The process is done by generating a digital thumb-print for each single diamond. The digital thumb-print contains data such as the diamond’s color, clarity, cut, and carat weight along with the certificate number, which can be engraved on the diamond if necessary. Then, the thumb-print is uploaded, stored and made visible with all participants. (Blockchain In Logistics,2018) As a result, there are several consequence benefits of such an initiative such as: increase trust-ability and transparency for cross border transactions in the industry Reduction in the occurrence of frauds,(i.e. synthetic stones being labeled as authentic) Protection of theft and black markets Freight container industry Logistics are the backbone of the global trade economy with an estimation of 90% of annual global trade being carried out by the international shipping industry. However, the logistics process behind the global trade is not a simple process as information has to pass through many parties which might have different priorities and interests (according to IBM, a single shipment from East Africa to Europe take 200 communications between 30 parties) as well as different shipment tracking systems causing several challenges such as informations and shipment delays. On top of that, the system is still paper based system which add more challenges to the situation as one lost form or late approval could leave the container stuck in port and the entire process can take more than one month. At the moment, the administrative costs accompanying with trade documentation are estimated to be around 20% the trade costs. (Blockchain In Logistics,2018) (Chang, Y., Iakovou, E. and Shi, W., 2018) To tackle all these challenges, IBM collaborated with Maersk and created a joint venture project named “TradeLens”; an open, resilient Blockchain platform to share shipping data across all participants in the supply chain ecosystem providing end to end visibility and shared state of container shipments. (Chang, Y., Iakovou, E. and Shi, W., 2018) The Blockchain platform can benefit the shipping industry by: Increase speed and transparency for cross border transactions through real time access to container events. Reduce non-added value necessary business cost increase efficiency through paperless trade Food retail industry According to World Health Organization, it is estimated that 600 million people fall sick cause of consuming contaminated food and about 420,000 die every year. Thus, there is a growing concern among consumers over the quality of the food. (Who.int, 2019) Certain complications arose from the current situation such as the lack of transparency in the supply chain of the food retail industry and the inefficiency of the followed methods of assuring product quality to consumers. Thus, IBM has collaborated with Wal-Mart to address these challenges by creating a joint venture project named” IBM Food Trust”; a Blockchain platform aim to provide a trusted single source of information and traceability to increase transparency and efficiency across the food supply chain. (Chang, 2018) The two companies have established a pilot traceability study to trace a package of mangoes and it involved 16 farms, two packing houses, two import warehouses, and one processing facility. They traced the package back to its origin source in just 2.2 seconds by using the Blockchain platform, where in the past it took to trace the same package seven days. (Chang, 2018) Therefore, the blockchain platform can reduce the impact of food recalls through instant access to a decentralized source of information with an end-to-end visibility to verify data in the food supply chain. In addition, this leads to boost in customer trust as safer and fresher food are provided to them. (Chang, 2018) Observations Despite the dissimilarity of the industries in the three use cases, it has been observed that blockchain platform brings several common merits to any industry’s supply chain such as (Chang, 2018): Traceability Transparency & trust Compliance Digitalization Set industry standards As a result, Blockchain merits give the ability to eliminate several wastes at the same time as show in the below figure: Waste elimination Motion and movement: None Inventory: Decentralization of information Not meeting customer requirements: Trust & Transparency Transportation: Decentralization of information Waiting: Traceability Over Production: None Over Processing: Digitalization Defects/Errors: Immutability SWOT analysis Competency & leadership requirements Takeaways