Bitcoin blockchain technology

Pros and Cons of Blockchain

Marc Simony
April 10, 2018

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Editor’s note: This is the second in a pair of blog posts where TraceGains Head of Product Strategy Marc Simony discusses blockchain and what the technology might mean for the food supply chain. If you missed the first part, you could check it out here.

There are more tactical uses for blockchain in the near-term. One of these is simple data collection.

Today, critical data are still collected manually at relatively sparse intervals (e.g., once per hour), which is why the “Internet of Things” (IoT) is becoming so important. IoT-generated data are multiplying exponentially, and critical business decisions will increasingly stem from them. Therefore, an obvious blockchain candidate is time-series data and insights from IoT-enabled data loggers. Because the data are now broadcast via a globally accepted protocol, rather than unique data interfaces, they can be generated quickly and frequently collected in a centralized system, if the “blocks” themselves can be produced at the required speed.

Having these data in an immutable format makes them incredibly useful in audits and for epidemiology. Further, these historical data can then be analyzed to help predict potential changes in the future based on past trends: Six Sigma on a blockchain.

Traceability data is another great application for blockchain. Shipments, dispatch, receipt, etc., could be reliably recorded and reported. With the advent of autonomous trucking and lights-out warehouses, material movement traceability data could become incredibly trustworthy, which is vital since supply chains are global.

At the product level, traceability data can become trustworthy when dealing with discrete items that aren’t typically transformed and can help substantiate specific marketing claims (e.g., non-conflict minerals), critical for maintaining consumer trust.

Food Industry Challenges

Generating and appending reliable blockchain data is more complicated in food production. Unlike picking and shipping, manufacturing includes processes such as rework, co-mingling, blending, and other “messy” steps that are difficult to capture on a blockchain.

Let’s look at baked goods: Grains are harvested across multiple fields, then co-mingled with other lots from other farmers at the elevator, and blended into the flour with yet other lots, probably from other elevators. The flour is sold to multiple manufacturers and distributors. Distributors again transform the product by creating various new lots that get resold. Manufacturers blend the product again with other lots to achieve the proper pH and moisture levels. And finally, the flour is incorporated into a variety of goods, which themselves are distributed to multiple locations, including warehouses and ultimately retail.

Enterprise resource planning (ERP) systems, when properly configured, can manage the traceability of most of these processes within a manufacturer’s facility and warehouses they own. But no true farm-to-fork system exists [yet] that can tie together all the disparate supply chain and manufacturing steps and their data systems, across all transformations. Therefore, neither can any blockchain, reliably.

The Human Element

Whenever humans are involved, so is greed. Put differently: any possible abuse will probably be attempted at some point. This axiom has always been true and is the reason we need laws (proactive) and law enforcement (reactive). Thus, the ability to reliably verify claims about a product’s integrity is critical to gaining and maintaining the consumer’s trust.

In statistics, a 95% confidence level is enough to support a claim. However, when dealing with immutable blockchain data, it’s at the very least implied and often publicly pronounced that there’s 100% certainty that all the claims made are verifiably valid. This implicit/explicit guarantee that anyone employing blockchain technology in the substantiation of marketing claims is staking its entire reputation.

Why is human behavior a concern, when data on a blockchain can’t be compromised? Because blockchain verifies the data, not the event. The data are just representations of events. And often, in food production, the data are still inputted by humans. Unless robots run your factory, you carry the risk of data integrity — either by accidental or intentional incorrect data input. And no blockchain will record data about events that aren’t entered in the first place. So, food bioterrorism remains a possibility, despite transparency. Every reader inevitably recalls the intentional melamine contamination in infant formula, pet food, and animal feed.

Product claims such as organic, non-GMO, terroir, gluten-free, etc., generate market differentiation, which provides the ability to increase prices and generate more revenue. Edible graphene tattoos on food can make product traceability to the point of origin a cinch. Put those data on a blockchain, and you got something.

But consider this real-world scenario: Regulators discovered Domestic fresh-catch shrimpers inflated their catches with cheaper Southeast Asian farm shrimp to increase their “catch” and improve profitability. The truth is that many products in the food supply chain — vanilla extract, coffee, saffron, olive oil, and even shrimp — are high-value targets for economically motivated adulteration (EMA). Can blockchain 100 percent guarantee that all the graphene-tattooed apples are organic? Can your brand withstand the fallout generated by one bad actor in the supply chain?

The need for digitally recording manually input data won’t go away and will only increase. So, when embarking on your blockchain, or any data-driven project, ask yourself:

  • What are you trying to accomplish with your data?

  • What are the reasons you wouldn’t trust your current data, whether it’s in your systems or from a service provider?

  • Do you need a distributed ledger because your data are at risk for unauthorized modification by someone inside or outside your organization?

  • What kind of data audit capabilities do you have, or would you like to have

  • If others don’t have access to the raw data, would you not trust the timestamps associated with each write (database commit)?

  • Who needs access to the information — internal, upstream, downstream — and how do you want to grant and track access?

At TraceGains, we love blockchain and distributed ledger technologies (all blockchains are distributed ledgers, but not all distributed ledgers are blockchains), and we’re eagerly following their developments. Blockchain is incredible across the supply chain for tracking and tracing containers, discrete bulk packages, or finished goods SKUs. It is fantastic for lights-out manufacturing, warehouses, and distribution centers that generate unalterable records. And it’s best when the data are computer or machine-generated. But blockchain is not a panacea; it can’t prevent bioterrorism, greed, or simple mistakes that could harm your brand.