How software giants are pushing blockchain into logistics
Hardly a day goes by without the term blockchain being mentioned in the world of enterprise software, so much so that this buzzword has entered our collective consciousness almost overnight. Since the first stirrings of bitcoin and other crypto-currencies, many other potential business scenarios (some very real) for the use of blockchain have been discussed and unveiled.
IBM has been actively working in the blockchain field with a number of companies (e.g. Everledger for asset provenance, and SecureKey for consumer digital identity) to create an enterprise-ready blockchain. Sectors that could benefit from the use of authenticated blockchain networks include: financial services, logistics, the Internet of Things (IoT), risk management, digital rights management, carbon asset management and healthcare (preventing counterfeiting and drug tampering, for example).
Blockchain: definition and operation
Blockchain is essentially a distributed digital database that can be used to drive business processes involving multiple parties, while promoting greater visibility and trust. Take the recent example of Siemens and New York startup LO3 Energy, who are collaborating together on innovative microgrids that enable blockchain-based local energy trading (owners of solar-panel-equipped rooftops in Brooklyn can sell their surplus electricity to the local utility).
Here, speed, security and transparency of transactions are fundamental principles: transactions between the actors involved are visible to all, but each can remain anonymous until they decide to make themselves known. What's more, whatever the type of transaction, certain sensitive areas can be made visible only to certain people (for example, a special price for a particular deal between a buyer and a seller), but without preventing all the other parties involved from being aware of the rest of the transaction's details. Watch this video to find out more:
The capabilities highlighted in this video (including much higher scalability potential) are specific to Hyperledger Fabric v1.0, and, for the record, other blockchain offerings (Bitcoin, Ethereum, etc.) still don't have them.
The Hyperledger open-source blockchain project
The security of blockchain networks is matched only by that of the infrastructures to which they connect, as security should already be built in from the hardware upwards before being extended to all software. Recently announced at the IBM InterConnect 2017 conference dedicated to software in the cloud, the arrival of IBM Blockchain means the creation of an enterprise-ready blockchain service (capable of handling more than 1,000 transactions per second) based on version 1.0 of the Linux Foundation's Hyperledger Fabric. The open source Hyperledger project is currently being developed by around 120 members of the Hyperledger consortium (IBM, SAP, Fujitsu and Accenture being among the leading members) alongside other open source blockchain technologies.
IBM considers its Hyperledger commercial network to be the leading offering in the blockchain security sector.
The Hyperledger consortium's Technical Steering Committee recently upgraded Fabric from a project in gestation to an active product, and the solution is expected to be available in the near future. Hyperledger's Fabric service enables developers to rapidly create and host secure blockchain production networks in IBM Cloud, even before the IBM LinuxONE infrastructure.
For their part, blockchain administration tools are used to configure blockchains into networks and assign roles and visibility levels from a single dashboard. They can help network members define rules, manage new memberships and enforce network compliance once the network is up and running. A controllable operating environment with comprehensive traceability data that takes into account IT forensics, audits and compliance is a must.
Once its configuration has been decided, the members of the blockchain define its rules and reserve the right to veto applications from new members. In addition, the deployment tool assigns each network a trust score ranging from 1 to 100, which new members can consult before joining, enabling them to assess their level of trust and decide whether or not to participate. Companies can also take steps to improve their trust scores before going into production.
Blockchain in supply chain domains
IBM has blockchain projects in the pipeline with Everledger, Walmart and Maersk. The first blockchainapplications for purchasing and supply chainsdiscussed by SAP Ariba at its recent SAP Ariba LIVE 2017 conference (a conference that took place on the same dates and in the same city - Las Vegas - as IBM's conference) involved tracking and tracing critical goods. To extend its capabilities on the Ariba network, the expense management software vendor has partnered with Everledger, a London-based financial technology company.
Everledger is a global digital transaction registry that, among other things, tracks and protects diamonds and other valuables throughout their life. It provides insurance companies, banks and many links in supply chains with an accurate history to ensure a product's authenticity, existence and ownership (see figure 1). Founded in April 2015 by Australian entrepreneur Leanne Kemp, Everledger has digitally secured over a million diamonds on the blockchain and extended its platform technology to other refined product categories, such as wine and art.
Using Hyperledger Fabric on IBM Cloud, Everledger securely collects a product's fundamental characteristics, history and ownership to create a permanent record on the blockchain network. This digital footprint of an asset (including historical aspects, transportation, movements and ownership) can be used by all participants in the value chain to determine its origin and ensure its authenticity.
The role of blockchain in the future SAP Ariba platform
Any blockchain focuses above all on the verification and authentication of business transactions, assets and associated documents (registers), and this is what SAP Ariba is all about. But we have to admit that SAP has little to say on the subject in a planning context that doesn't really lend itself to transactions. On the Ariba network, buyers and suppliers from companies with sales in excess of 2.5 million and from 190 countries can discover new opportunities, participate in transactions and develop their relationships. It's a dynamic digital marketplace that generates over a billion dollars in transactions every year.
Today, many transactions are still sealed by a handshake, a piece of paper scribbled on a corner of a table, or a promise to pay. By integrating its blockchain into SAP Ariba's applications and network, the company will make its supply chains smarter, faster and more transparent, right from the supplier selection phase through to final settlement. The SAP Ariba platform (and probably also the SAP Cloud cloud platform) will soon have a Hyperledger component so that all members of the Ariba network (see figure 2) can access its blockchain.
In short, blockchain seems ideal for digitally formalizing contractual relationships and obligations between multiple parties (bankers, insurers, sellers, buyers, etc.), and doing so securely, quickly and transparently. Indeed, it is almost impossible to pirate, since to do so would require attacking all (or at least a majority) of the links in a single, synchronized attempt (because, thanks to date and other encryption systems, if you pirate just one link, the other links in the chain know that the pirated link is no longer intact). But it's worth noting here that the blockchain you use can make all the difference. While IBM Blockchain has never been hacked, BitCoin and Ethereum have.
The IBM High Security Business network has a number of exclusive features. In addition to encrypted membership cards, there are several filters to protect against attacks from the inside (à la Snowden). The security center can protect the blockchain code with a virtual application, allowing even privileged users to be denied access. And to protect the encrypted data used to store the cryptographic keys, we could even use ultra-sensitive physical security devices, as IBM does in its offering.
Amplifying blockchain with Smart Apps
For some, blockchain can be compared to a kind of harmless dopant applied to an EDI (electronic data interchange) system, making relationships both stronger and more harmonious thanks to the value chain automation it injects. The difference, in addition to the security mentioned above, is that EDI is proprietary, expensive and not easily extensible, whereas Hyperledger is an open source consortium. A key differentiating factor is that, while EDI enables the exchange of data or documents between two companies, blockchain enables all parties to a transaction or workflow to see the same information at the same time, including regulators.
To make it easier for developers to translate business needs from concept to final code, IBM Blockchain is using a new open source development tool for Hyperledger Fabric called Fabric Composer. It enables the modeling of business networks, the creation of application programming interfaces (APIs) that integrate with the blockchain network and existing systems of record, and the rapid creation of a user interface (UI). SAP is likely to follow suit with its Hyperledger blockchain development tools.
Some believe that in the future, many software startups will develop applications on a blockchain basis. But for which business scenarios? Nothing has been decided yet. Certainly, all blockchain transactions represent a treasure trove of big data that can be analyzed with the cognitive and artificial intelligence (AI) of applications to discover trends, habits and useful recommendations. For example, we could imagine smart contracts that would always remain compliant, thanks to their constant adaptation to changes in business data and regulations, and analyze patterns to suggest blockchain contract updates. On the flip side, agents could then focus more on criminal activity, detect potential procurement risks, provide analysis of entity spend, and much more.
In reality, blockchain alone can't monitor physical hardware items; it needs radio frequency identification (RFID) or other software or hardware tools such as the Internet of Things (IoT) to be able to track them (which is how SAP Ariba introduced SIGFOX as its IoT partner at the conference). That's why, while no one would want to keep track of unnecessary paperwork or office supplies, technically, there's nothing negative about the idea of recording their movements in a blockchain (and then using AI applications to study this data for interesting spend analysis).
Today, some customers could use the IBM Watson IoT platform to obtain information from radio frequency identification (RFID) devices, scanned barcodes or data extracted from electronic devices for use with the IBM Blockchain. The devices are able to communicate with the registers generated by the blockchain to update or validate smart contracts.
In addition, blockchain would help SAP Ariba to capture transactions and track them even with those who are not yet members of the Ariba network, such as carriers (direct or intermediaries), banks or insurers. Freightos, an online network that connects goods suppliers with their customers, has automated its flows and quotations, and has been touted as a possible tracking and logistics partner alongside Everlegder and SIGFOX.
Conclusion
While IBM appears to be the pioneer, with many real-world blockchain applications already in the pipeline, SAP's Ariba blockchain is still only at the idea and concept stage, and probably has at least another year to go before it materializes. But we can expect SAP to catch up fairly quickly (we'll also include its SAP Leonardo IoT platform), and with the arrival of Hyperledger 2.0 and its future offshoots, the use of blockchain will quickly become mainstream. Once blockchain is launched, and after a few initial usage adjustments, it's a safe bet that others will follow suit too, such as Infor GT, Coupa, Descartes and other transaction-generating business networks.
Article translated from French