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Blockchain for Supply Chain Management
Arjeh van Oijen, co-founder and CEO Unchain.io
The origin of trade documents & contracts
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5,000 years ago
The origin of blockchain
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• Trustless network
• Mining
• 21 million coins
• Litecoin, Ripple, Ether
• Bubble?
Currency
“Satoshi Nakamoto”
2008
• Blockchain
• “Distributed shared ledger”
• Cryptograhy (SHA-256, PKI)
• Consensus model
• Smart contract
Technology
Traditional point-to-point collaboration & data exchange across
business networks
3
Logistics
providerStorage
provider
Customs Bank
Supplier
Buyer
Single point of
security vulnerability
Ledger
Ledger
Ledger
Ledger
Ledger
Ledger
Single point of
security vulnerability
Point-to-point integration
Complex – Inefficient – Expensive – Error sensitive – Vulnerable - Slow
Blockchain based collaboration & information exchange in
business networks
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Logistics
providerStorage
provider
Customs Bank
Supplier
Buyer
Ledger
Ledger
Ledger
Ledger
Ledger
Ledger
Simple – Secure – Consistent – Fast – Efficient – Resilient
4 key elements of blockchain technology
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Shared distributed ledger Cryptography
Consensus Smart contracts
Shared Distributed Ledger
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• Network of multiple servers or nodes
• Data is synchronized across all nodes
• Nodes do not need to hold all transactions
• Nodes can have different roles in network (depending on version)
• Orderer (co-ordinator)
• Validating peer (validator)
• Non-validating peer (holds only transactions)
• Transactions are grouped in blocks for processing
• Breach or failure of a node does not affect the network
Permissionless vs. permissioned blockchain networks
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Permissionless blockchain networks
Any party can join the network to participate in the consensus process. Trust is achieved by ‘Proof-
of-Work’ (mining) or ‘Proof-of-Stake’ that make it non-rewardable to mislead the rest of the network.
Permissioned blockchain networks
Only a restricted group of (permissioned) parties participate in the consensus process. Trust is
achieved by a pre-validation of the participating parties.
Cryptography
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• Based on cryptographic mechanisms 30+ years old
• Based on public key algorithms
• 3 cryptographic elements
• Hashing – Integrity of data
• Encryption – Confidentiality of data
• Symmetric keys
• Asymmetric keys
• Digital signature – Proof of origin of data
Cryptography used in blockchain
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Sample sentence to explain how SHA256 works
Sample sentence to explainhow SHA256 works.
79e8a584005254f7717547b5829fd01fa6c6831bd92a2d28c93305636c71b499
c19617618972f1dc643b2bb7075c7cacac3aea970581ca5c6ec30aee59a74c07
Extra dot
Input data (any size)
Hash value(32 bytes)
Hashing Hashing
Hashing
Input data (any size)
Hash value(32 bytes)
Cryptography used in blockchain
10
Symmetric Encryption
Confidential text to be secured by encryption a66b311c9b158c1e55d4e6cc555016d2e554ac….
Symmetric Encryption
Confidential text to be secured by encryption
Symmetric Decryption
Key sender = Key receiver Key sender = Key receiver
Sender Receiver
Clear text Clear textEncrypted text
Cryptography used in blockchain
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Public key generation
Random number or input string
Public keyPrivate key
Generate key pair
Cryptography used in blockchain
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Asymmetric Encryption
Confidential text to be secured by encryption a66b311c9b158c1e55d4e6cc555016d2e554ac….
Asymmetric Encryption
Confidential text to be secured by encryption
Symetric Decryption
Public key receiver Private key receiver
Sender Receiver
Clear text Clear textEncrypted text
Cryptography used in blockchain
13
Combination of Symmetric and Asymmetric Encryption
Confidential text to be secured by encryption a66b311c9b158c1e55d4e6cc555016d2e554ac….
Symmetric Encryption
Confidential text to be secured by encryption
Symmetric Decryption
Public key receiver Private key receiver
83efaa248bc736ced7a5b82cca47ec63fa6e14e…Asymmetric Encryption Asymmetric Encryption
Generation symmetric encryption key
Clear text Encrypted text
Encrypted symmetric encryption key
Clear text
Sender Receiver
Cryptography used in blockchain
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Digital Signature
Text of which the origin must be verified by the receiving party
Private key sender Public key sender
83efaa248bc736ced7a5b82cca47ec63fa6e14e…Asymmetric Encryption(= generate digital signature)
79e8a584005254f7717547b5829fd01fa6c6831bd92a2d28c93305636c71b499
Asymmetric Decryption
Generate hash
79e8a584005254f7717547b5829fd01fa6c6831bd92a2d28c93305636c71b499
Generate hash and compare
Plain document
Sender Receiver
Confidentiality of data in blockchain
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• Selective synchronization of data to peer nodes (via ‘channels’)
• Encryption of data that is stored on the blockchain
• Data is exchanged / stored outside the blockchain network (nodes)
Bitcoin is not anonymous
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Blockchain.info
Consensus
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• Mechanism that is used to come to an acceptance of transactions
submitted by participants to the network
• A certain percentage of validating nodes must have approved block
with transactions (e.g. 51%)
• Validations
• Signatures
• Double spend
• Smart contract validations
• Different types of consensus
• Proof-of-Work (based on amount of effort)
• Proof-of-Stake (based on stake in network based on deposit)
• Proof-of-Authority (based on trusted nodes in permissioned blockchain
network)
Smart contracts
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• Business logic that can be placed on blockchain network to
• Validate transactions
• Verify conditions
• Define next actions based
• Submit events to participants to inform on next action
• Possibility to assign one or more approvers to smart contract before it
becomes active (or can be modified)
• Ability to facilitate ‘escrow’ services between participants
Samples of smart contracts – Ethereum / Solidity
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Business smart contract authoring
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Processing of a blockchain transaction
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1. Party A submits a transaction to a node
of the blockchain network.
2. The transaction is digitally signed with
private key of party A.
3. A node places transactions that have been received from clients in a block, executes proof-of-
work (if applicable) and submits the block to the other nodes for verification and approval.
4. The other nodes verify the block with transactions and return the result to the node that
submitted the block.
5. If more than a certain percentage of the nodes has approved the block, it is officially accepted
by the network and irrevocable.
6. The official status of the block and underlying transactions is replicated to all other nodes of
the network.
7. Party B is informed about the new (or updated)
transaction that has been accepted by the network.
In order to access the transaction data, party B
needs to identify itself with its private key.1
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3
4
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6
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Party A
Party B
Blockchain client
Blockchain client
Not just one blockchain technology
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Differences between technologies
• Open source or proprietary
• Types of nodes
• Consensus model
• Storage technology
• Smart contract language
• Access control and confidentiality
• Extensibility
• Interfaces (APIs)
• Performance
‘Mother’ of all blockchain technologies
Most applied blockchain technologies
Other blockchain technologies
Comparison Ethereum, Hyperledger and Corda
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Layers of a blockchain eco-system
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Internet(tcp/ip, http, html, Javascript)
Blockchain(Hyperledger, Ethereum, Corda, …)
Applications(Message & Smart Contract standards)
Dev Frameworks(IDEs, modelling, configuration)
Value of blockchain for business networks
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Reduced complexity and costs Identity & trust Reduction of errors
Resilience & continuity Speed Auditability
Areas for which blockchain is suited and for which it isn’t
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Suited Not suited
• Exchange of data and assets between organisations/actors
• Situations where sharing of data and single point of truth is
essential
• Situations where trust is essential (identity, authenticity,
integrity, non-repudiation, confidentiality)
• Situations where auditability and transparency is essential
• Situations where orchestration and control of processes
across multiple parties is essential
• Exchange of data within one organisation
• Situations where trust is not relevant
• Situations where high throughput and low latency is essential
Application areas of blockchain (not limitative)
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Financial Services
• Payments
• Securities registration & processing
• Lending
Property
• Real estate
• Intellectual property
• Cars
Governmental services
• Voting
• Registrations (passports, driving license)
• Permits
Identification & Security
• Party/device authentication
• Self sovereign identity
• Digital signatures
Trade & Supply Chain
• Document exchange
• Provenance
• Trade agreements
Internet of Things (IoT)
• Autonomous devices, such as
▪ Cars
▪ Drones
▪ Sensors
Application areas of blockchain for supply chains (not limitative)
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• Supplier and product catalogue data management & distribution
• Logistics management, monitoring and control
• Custody and declarations
• Quality assurance
• Provenance and compliancy
• Freight insurance
• Payments and trade finance
• Supply chain financing
Blueprint for applying blockchain in supply chains
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Source &
ProcureOrder
Delivery &
Shipment
Invoicing &
Financing
Payment Reconcile
Blockchain Network
Data exchange, contracts, process orchestration, traceability, matching, identity & security
Buyer Supplier Logistics service providersInspection
agenciesAuthorities
Banks /
Financing
Advantage blockchain vs. ‘traditional’ technology
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• Out-of-the-box and standardised technology
• Secure and validated by development community
• Everyone can continue working with own system (ERP, logistics, QA, etc.)
• Vendor independent (open source) → acceptance by stakeholders in business network
• Deployable across multiple different data center providers (distribution of trust)
“Blockchain is an operating system
for business networks”
IoT, Blockchain and AI : A deal made in heaven
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IoT Blockchain Artificial Intelligence
• Automated collection of data
• Smart/autonomous devices
• Secure and trustful exchange of data
• Shared data repository for all
participants
• Orchestration of supply chain
processes
• Interpretation of data
• Automated decision
making/preparation
• Determining next actions
Attention points for setup and implementation of blockchain networks
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Organisation • Consortium organisation and governance
• Scheme specification, processes, roles, responsibilities
• Legal structure and financing
Technology • Blockchain and other technology related choices
• Blockchain network setup (consensus model, node deployment, scalability)
• Standardisation, APIs and interoperability
Roll-out • Onboarding of participants (incl. identity & key management)
• Integration with business applications and devices of network participants
• Blockchain network interoperability and integration
Integration ‘existing world’ with blockchain networks
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Application /
Device
Application /
DeviceApplication /
Device
• Complex point-to-point integrations
• Hard to manage and operate
• Dependent of scarce blockchain experts
• No secure storage of keys
Unchain.io blockchain integration gateway
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Application /
Device
Application /
DeviceApplication /
Device
• Any application/device to any blockchain network
• Easy, fast and secure integration
• No dependency of blockchain experts
• Low cost
Case : Distribution of medicines in Africa
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Winners blockchain hackathon 2018
Case : Distribution of medicines in Africa
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Case : Distribution of medicines in Africa
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Case : Distribution of medicines in Africa
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Mobile App for medicine verification and dispatch registration
Case : Distribution of medicines in Africa
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Control Tower front-end
Case : Distribution of medicines in Africa
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Unchain.io Blockchain GatewayConfiguration
Browser App Gateway FO
Blockchain Network + Application
Medical professionals
NFC sensor
Gateway Adapter(s)
Mobile AppERP
Control Toweroperators
Use of fiat currencies on blockchain networks
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Bank issues digital fiat currency and places it in its account on blockchain network. Digital currency has 1:1 rate with fiat currency.
Company Y submits a transaction on network for Bank to request a certain amount digital currency .
Bank debits Company Y’s bank account and submits transaction to network to transfer digital currency.
Company Y submits a transaction to network to transfer an amount in digital currency to company Z.
Company Z sends an transaction to network to transfer a certain amount to bank in exchange for credit on company Z’s bank account.
Bank processes request and credits Company Z’s bank account.
Company Y Company Z
Bank
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2
3
4
5
6
1
2
3
4
5
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B
Y Z
3
4
5
Financial settlement within a supply chain
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Container supply chain process executed over supply chain blockchain Network (N). At the moment the container needs to be handed over from harbour to truck the supplier wants to have certainty of payment needs to take place. The buyer does not want to transfer the funds to the supplier as long as the container has officially not been handed over. Therefore an account of the supply chain network is used as an escrow/deposit.
Buyer submits a transaction to payment blockchain network to transfer the funds from its account to the account of the supply chain network.
Payment network informs supply chain network about receipt of payment.
Supply chain network informs Harbour and Truck company that container can be handed over.
After confirmation of hand-over, the supply chain network submits an instruction to payment network to transfer funds from its account to sBank debits Company A’s bank account and submits transaction to network to transfer digital currency.
Buyer (B)Supplier (S)
Bank
3
2
1 1
1
2
3
4
5
Supply Chain Blockchain Network
(N)
S N B
Harbour Truck company
1 14 4
5
25
Network interoperability securities post-trade processing
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Securities Post-Trade Blockchain Network
A. Buyer C. SellerB. Stock Exchange
PaymentsBlockchain Network
Securities DepositoryBlockchain Network
D
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23 3
5 5
67 7
Securities deal between buyer and seller
Exchange submits post-trade smart contract to network
Buyer and seller send money and securities transfer instructions
Transfer of money and securities to blockchain accounts of exchange
Transfers are confirmed to post-trade network
Smart contract is updated on basis of confirmations
Smart contract instructs transfer of money and securities to seller/buyer
Transfer of money and securities to seller/buyer
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3
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A B C4 8 C B A4 8
Origination of blockchain networks
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Existing network organisations New consortia One initiating organisation
Reducing document processing costs in maritime logistics
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“Blockchain could save
$300 per container in
terms of labour and
processing associated
documents.”
Streamlining data exchange for ocean shipping
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Benefits
• Reduces data entry by up to 80%
• Simplifies data amendments
• Streamlines the data exchange
• Single point of truth
• Reduces incompliancy risks (and penalties)
AB InBev, Accenture, APL and Kuehne + Nagel
successfully test blockchain for Ocean Shipping
Better control on risks in marine insurance
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Maersk, MS Amlin, XL Catlin to incorporate
blockchain into marine insurance
More efficient and faster trade finance
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Group of banks found We.Trade to create the first
blockchain-based trade finance platform
• Deutsche Bank
• KBC
• Rabobank
• HSBC
• Natixis
• Nordea
• Unicredit
• Santander
• Society General
BITA – Blockchain in Transport Alliance
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BLOCKCHAIN IN TRANSPORT ALLIANCE
A STANDARDS ORGANIZATION
700+ members and counting
• Fleets, 3PLs, and Shippers
• Technology Companies, OEMS, Suppliers, and Service Vendors
• Startups and Investors
• Consultants, Advisors, Universities, and Trade Associations
Topics covered (not limitative)
• Freight tendering and contracting
• Freight payment
• Asset ownership and transfer
• Gray trailer pools
• Freight custody
Faster Bill of Lading document exchange with reduced costs
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Improve transparency and reduce waste in food chain
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• Transparency to consumer
• Fair trade & sustainability
• Reduce waste
• Optimisation of production & supply chains
End-to-end traceability and fair trade
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Provenance and sustainability in food supply chains
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Stopping the spread of conflict diamonds
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Busting counterfeit and reduce waste in medicine supply chain
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Boosting agriculture growth in Africa
56
by Cellulant
Agrikore is a block-chain based platform that
ensures that everyone in agriculture can do
business with each other in a trusted environment
- Identity management
- Secure data exchange
- Supply chain management
- Payments
- Financing
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Thank you!
Arjeh van Oijen
CEO/Co-founder unchain
Mob: +31 6 5121 9946
Mail : [email protected]
Web: unchain.io