Blockchain Technology

Blockchain

A database in the form of a distributed ledger that uses cryptography to secure any kind of information

Centralized Ledgers

Ledgers managed by a single trusted authority.

Distributed Ledgers

Ledgers without a central authority, using consensus because as transactions are added, they are verified using a consensus protocol such as Proof of Work

Consensus Protocols

Methods for achieving agreement about the state of data in the ledger. The consensus protocol runs each time a new transaction is added.

Proof of Work

The original consensus approach but requires an intensive energy and competition among miners.

Proof of Stake

Validators are selected randomly to confirm transactions and validate block information, consuming far less energy.

Hash

Mathematical function condensing data into fixed size and length

Immutable

Unchangeable nature of data in blockchain.

Non-Fungible Token (NFT)

Unique digital identifier certifying ownership of digital files - artworks, photos, videos and audio.

Fungible Assets

Assets that are interchangeable and identical.

Digital Twin

Digital representation/ version of a physical artwork - high-resolution photograph or scan that is then minted as an NFT on a blockchain platform

Ledger

A record of transactions in blockchain.

Robotic Process Automation (RPA)

Technology for automating repetitive tasks.

Artificial Intelligence (AI)

Simulation of human intelligence in machines.

Data Analytics

Process of analyzing data to extract insights.

Data Visualization

Graphical representation of data for easier understanding.

Internet of Things (IoT)

Network of interconnected devices communicating data.

App Design

Process of creating user-friendly applications.

Enterprise IT

Information technology solutions for business operations.

Big Data

Large volumes of data analyzed for patterns.

Cybersecurity

Protection of systems from digital attacks.

Blockchain Applications

Software built on blockchain for various uses.

Hyperledger Fabric

Permissioned blockchain created by the Hyperledger Consortium to help develop DLT for a variety of business applications.

NFT

Non-fungible token representing unique digital assets.

Unique Identifiers

Tags like QR codes linking art to NFTs, providing a way to verify the connection between the physical piece and its digital counterpart.

Smart Contracts

Automated agreements detailing ownership and royalties - processes such as pmts, order fulfillment, and inventory management, reducing the need for intermediaries and speeding up transactions

Unlockable Content

Additional benefits provided with certain NFTs - certificate of authenticity/ claim code through each transaction.

Third-Party Verification

Authentication services linking art and NFTs.

Public Blockchain

Open ledger accessible to anyone for transactions.

Permissioned Blockchain

Blockchain controlled by a central authority with restricted access

Supply Chain Challenges

Issues in traditional supply chains like inefficiency.

End-to-End Visibility

Complete tracking of products throughout the supply chain.

Auditability

Immutable transaction records for verification purposes.

Cost Savings

Reduced expenses from eliminating intermediaries.

Controlled Access

Limited blockchain access to authorized participants.

Data Security

Protection against unauthorized access in blockchains.

Governance

Rules controlling participant actions in the network.

Customizable Permissions

Tailored access levels for different blockchain users.

IBM Food Trust

Blockchain platform enhancing food supply chain transparency.

End-to-End Traceability

Tracking food products from origin to consumer.

Food Safety

Improved safety through transparent supply chain records.

Reduced Food Waste

Optimized inventory management minimizing waste.

Consumer Trust

Increased confidence through accessible product information.

Regulatory Compliance

Meeting legal requirements with verifiable records.

Pharmaceutical Supply Chain

Tracking drug production to prevent counterfeiting.

Temperature Assurance Packaging

Packaging ensuring safe temperature for pharmaceuticals.

Collaboration

Secure data sharing among supply chain participants.

Counterfeiting Prevention

Transparent records prevent counterfeit drugs.

Operational Efficiency

Automation reduces delays and errors.

Farm Data Recording

Farmers log growth, fertilizer, and harvest details.

Coffee Processing Data

Includes processing methods and fermentation details.

Manufacturer Information

Records packaging and production details.

Government Certification

Tracks certificate numbers and issue dates.

Retailer Data

Logs arrival dates, product types, and transactions.

End Consumer Access

Consumers view traceability via web/mobile apps.

TradeLens

Blockchain project for global shipping revolution.

Everledger

Tracks diamond provenance for ethical sourcing.

Aura Blockchain Consortium

Permissioned Blockchain that is secured by ConsenSys Technology that provides a secure and transparent way to track luxury goods for authenticity and sustainability.

Digital Product Passport

Provides product authenticity and lifecycle info.

NFC Chips

Enable contactless communication for product tracking.

UHF RFID

Types of radio technology for tracking goods over distances.

Stakeholders

Participants motivated by shared interests in blockchain.

Traceability Benefits

Proof of authenticity and responsible sourcing.

Transaction Fee History

Records fees associated with blockchain transactions.

Energy Usage Risks

High energy consumption in proof-of-work systems.

Collusion Risk

51% attack can manipulate blockchain ledgers.

Permanence of Transactions

Difficult to correct errors in immutable ledgers.

Transparency Issues

Anonymity can facilitate illicit activities.

Regulatory Concerns

Uncertainty about blockchain technology regulations.

FTX Bankruptcy

Highlighted failures in corporate controls and transparency.

Blockchain Job Opportunities

Non-technical roles needed for strategic guidance.

Public vs Permissioned Blockchains

Choice depends on intended application.

Blockchain and IoT

Synergistic potential in supply chain applications.

What Proofs are needed in Public Blockchains?

Proof of Work and Proof of State

What proof is needed in Permissioned Blockchains?

Consensus Protocol - Reached through various planned processes involving a pre-selected set of validators - consumes far less energy.

How does Blockchain Technology Work?

1. A user requests for a transaction

2. The transaction is broadcasted to a peer to peer (P2P) network that consists of Computers (nodes)

3. The Network of Nodes uses known algorithms to validate the transaction & Users’ status

4. A verified transaction can involve Cryptocurrency, Contracts, Records, or other information

5. The transaction is combined with other transactions and after verification, it creates a new Block of data for the ledger

6. The new Block is added to the existing Blockchain which is added to existing blockchain which is permanent and unalterable.

7. The transaction gets verified & executed.

When is it useful to use a Blockchain

1. The need to share data

2. Multiple Writers

3. Absence of Trust

4. Transaction based interaction

5. Disintermediation creates value

Proof of Authority

Proof of Authority (PoA) is a blockchain consensus mechanism where a small group of trusted and verified entities (validators) are given the authority to validate transactions and create new blocks in permissioned blockchains

Common use of NFTs

Recording ownership of unique digital assets such as artworks, music, videos, and collectibles. NFTs serve as proof of authenticity and ownership on the blockchain, allowing creators to monetize their work. They can also include royalties for future sales, ensuring that artists receive compensation over time.

Consideration for Public Blockchain

Popular for Public Use where transparency and immutability are priority

Consideration for Permissioned Blockchain

Popular for enterprise, consortium, and supply chain use where privacy and efficiency is a priority

Control for Public Blockchain

Decentralized where no central authority controls the network.

Authority

A company or group of companies acting together (consortium)

Immutability/ Security for Public Blockchain

Strong Immutability designed to be highly immutable. Once data is added to the blockchain, it is extremely difficult to alter because it would require a consensus from a majority (51%) of network participants.

Immutability/ Security for Permissioned Blockchain

Controlled Immutability where the level of immutability can be controlled by the organization/ consortium managing the blockchain — authorized participants might have the ability to modify or delete data if necessary

Transparency vs. Data Privacy for Public Blockchain

Full Transparency/Low Privacy where all transactions are visible to anyone

Transparency vs. Data Privacy for Permissioned Blockchain

Controlled Transparency & Privacy where only authorized participants can view and verify transactions. The level of transparency can be tailored to meet the needs of the organization - certain data might be visible only to specific participants, while other data might be accessible to a broader group. In a supply chain blockchain, only the companies involved in the supply chain might have access to the transaction details, while the public might only see aggregated data.

Participant Privacy - Public Blockchain

High – participants are anonymous, using a generic ID

Participant Privacy - Permissioned Blockchain

Low – participants are permissioned and more likely to be known

Efficiency - Public Blockchain

Low efficiency where consensus validation  can consume lots of energy (especially for proof of work) and take several or more minutes.

Efficiency - Permissioned Blockchain

High efficiency where participant-agreed-to validation approaches can reduce energy and time requirements

Use Cases - Public Blockchain

Applications where trade on a public blockchain platforms ensures a wide audience, market liquidity, and greater trust e.g., Cryptocurrency and publicly traded NFTs (i.e., most NFTs)

Use Cases - Permissioned Blockchain

Applications where all or some data must be kept private (accessible by only authorized parties) for competitive or regulatory reasons e.g., Supply Chain, Healthcare/HIPPA, Government, and certain banking applications.

How does NFTs ensure authenticity and traceability of physical artwork? (6 reasons)

1. Digital Representation

2. Unique Identifiers

3. Smart Contracts

4. Unlockable Content

5. Third-Party Verification

Conventional Supply Chain Challenges

Typically designed for information exchange & visibility between two parties vs. all parties. This approach:

• introduces blind spots for all parties

• creates inefficiencies

• Is error-prone

• Is non-secure platform

Supply Chain Benefits - Blockchain General Benefits

1. Efficiency and Automation:

• Smart Contracts: Automate processes such as payments, order fulfillment, and inventory management, reducing the need for intermediaries and speeding up transactions.

• Streamlined Operations: By providing a single source of truth, permissioned blockchains reduce the likelihood of errors and discrepancies, leading to more efficient operations.

2. Improved Traceability and Transparency:

• End-to-End Visibility: Track products from origin to destination, ensuring that all steps in the supply chain are visible and verifiable by authorized participants.

• Auditability: Maintain an immutable record of all transactions, making it easier to audit and verify the supply chain processes.

3. Cost Savings:

• Reduced Intermediaries: Lower transaction costs by eliminating the need for intermediaries.

• Efficient Inventory Management: Better visibility and traceability can lead to more efficient inventory management, reducing waste and overstocking.

Supply Chain Benefits - Permissioned Blockchain Specific Benefits

1. Privacy and Confidentiality:

• Controlled Access: Only authorized participants can access the blockchain, ensuring that sensitive information, such as pricing and supplier details, remains confidential.

• Data Security: Permissioned blockchains provide a secure environment where data is protected from unauthorized access and tampering.

2. Enhanced Control:

• Governance: Organizations can establish governance rules to control who can join the network and what actions they can perform. This ensures that only trusted parties are involved.

• Customizable Permissions: Different levels of access can be granted to different participants, allowing for tailored data visibility and interaction.