Blockchain Revisited - Getting Past the Hype

Just over a year ago, I wrote in this column on the potential for blockchain applications in the food and supplement universe. It’s 53 weeks later and a lot has happened.

Let’s take a small step back for a minute.

For those not yet familiar, blockchain is a platform technology that has been discussed as having the potential to disrupt or change many aspects of business information flow. It’s a distributed ledger system in that information instead of being exchanged computer to computer, is simultaneously exchanged across an entire network of computers. When combined with security and authentication of each transaction, and the fact that the detail of the transaction creates a block in the chain upon which the next block (transaction of data) is then built – it is easy to understand that it becomes next to impossible to change the record as that would mean changing all of the blocks dependent on it in the chain. For supply chain operations, it is becoming clear that blockchain has the potential to provide a measure of security that partners have not known before. And in a private blockchain environment, where only trusted partners are invited, it can lead to amazing transparency and reporting, even as it streamlines operations.

There are skeptics out there and some of the resistance is merited. It is unfortunate that the most visible and popular application of blockchain was the crypto-currency balloon. Not to say that this application has not and is not changing economies, but there is so much more to the platform. The hype and intensity though are strangely familiar. In general, it reminds me of the years 1996-1999. In those days, there was a disruptive force emerging for business and consumers, one that they said was going to change everything, create new economies, eliminate middlemen and all paper – it was called the Internet.

I remember in 1999 and 2000 having discussions with this very natural products industry. I recall hearing from media, associations, suppliers and brands that the technology was more hype than science, more fantasy than reality.

In many cases, the early Internet was not ready for prime time. When we launched NPIcenter, at that time seven other B2B and B2C community platforms were in play, some funded by Big 4 accounting firms, some representing major investments by media giants. At one point, it became a rallying cry that ‘just because you could, you should’ migrate everything online – supply chain, sourcing, product quality, compliance, communications – everything. I recall an early auction platform – truly a race to the bottom, further commoditizing and devaluing investment in ingredient science and branding.

I also remember Internet pundits predicting that the platform would challenge the value of tradeshows and conferences, and lead to the demise of print media. While that latter has largely (but not entirely) occurred, the former, tradeshows, continue to thrive in most markets. So much for wisdom.

Now too, pundits declare regularly that ‘the old days are dead’, and that blockchain must be embraced now in all aspects of the organization where trackability, traceability, security and integrity are paramount. While there is good reason to do early stage exploration, especially if your supply chain integrity is that important to you, for some, it’s just too early. The public blockchains are not yet able to handle the transaction loads that broad usage will demand, and so companies and providers are exploring private blockchains. Blockchain is not a reporting tool and so those looking to gain insights from the data capture are disappointed to learn they still need reporting tools to make sense of all the data now at their ‘fingertips’.

Supply chain integrity, security and transparency are not the only applications to watch. Smart contract application also bears investigation and employs private blockchains. Wikipedia defines a smart contract as ‘a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible.’

In this case, using the same secure, unimpeachable distributed information mechanism, transaction commitments are held in escrow until the terms of the contract are fulfilled. Once the completion of the contract is verified, the parties’ commitments are released. These commitments can be funds, inventory, the next phase of a project or process etc. Applications in our natural products space include payments for farmers, carbon credits and numerous other potential applications.

The above represent two possible longer-term applications of an emerging technology platform. Service companies are now working on the solutions that make platforms such as this ready for the ‘masses’, that is, broad enough uptake to change business relationships for mid-tier companies seeking an edge. Forward thinking companies in our industry should be watching these developments closely.

@lmon