Eurobsit: We’ve heard plenty about blockchain, but what exactly is it?
Matthieu Hug: People began talking about blockchain when it was used for the first time in Bitcoin, from 2009. But blockchain belongs to the ‘distributed ledger technologies’ family, which goes back quite a bit further. IT researchers have been studying it for around twenty years.
There is quite a lot of confusion over the two terms. But it’s important to stress the distinction between the underlying technology (blockchain) and where it is used, for instance for Bitcoin and Ethereum, which are just two examples of cryptocurrencies.
A blockchain is a data network consisting of a database and a protocol. Operators feed the database with information that they cannot subsequently modify. The protocol can replicate this database or duplicate the information for various third parties at once.
For example, actor A enters information into the blockchain and it is copied to B, C and D in real time. If A then modifies the information, it would invalidate their copy of the database and the protocol would immediately flag this to B, C and D.
This feature can operate in a ‘public’ or ‘private’ environment. In practice, ‘public’ means the aforementioned actors are not pre-selected so anyone can take part. ‘Private’ by contrast means pre-selected, pre-authorized actors. In both instances, questions of governance are crucial to this common good, to this shared database which can operate both in ‘public’ and ‘private’ modes.
E: So blockchain is much more than the technology behind Bitcoin?
M.H: The perceived value of blockchain has often been confined to cryptocurrencies, but there is far more than that. There are two general types of usage at the present time.
The first way of using it has tended to take second place. It involves gathering auditable information, a so-called ‘certification of information’. Data is saved over time in a distributed environment, with technology verifying that no one has changed its contents after the event. For example, it could be useful for safeguarding the traceability of an industrial supply chain or a land registry history.
There is also ‘digital asset’ management, which is typically cryptocurrencies. The heart of the problem here is ‘duplicate expenditure’. This happens if I not only transfer one of my assets to you, but I’m quick enough to give it to someone else without the network picking up on it, which creates a duplicate. If every transaction can be consulted in a blockchain you have a detailed history, a ‘certification’ of every transaction. With this, it’s easy to ensure that no assets are ever created out of nowhere. This is typically the safeguard that the Bitcoin network provides.
Starting out from these two basic usages, one can derive a range of approaches and business models.
E.: Are we to understand that this technology is going to take roots in the business world, little by little?
M.H: Indeed. An example I know well, for good reason, is supply chains. Today’s businesses need to master every stage. But with the constant increase in the number of supply chain stakeholders, there is the risk of unreliable third parties slipping into the process. This is even a proven risk, given the scale of illicit trade in the world (counterfeiting, parallel imports, primary materials obtained from child labour, and the funding of criminal groups). Businesses are feeling the impact of this loss of control. It’s the case for example during transportation: in what conditions are goods transported? Is the cold chain respected? Can we be sure that the temperatures logged in the containers have not been tampered with?
Of course every problem or scandal has a direct impact not only on a brand’s image, but also on the whole industry in question. And scandals don’t go away just like that!
And trust is a genuine way to stand out: to win it back, product traceability and transparency are crucial. They offer the consumer ways to make an informed, critical choice… to vote for products and ultimately for the world he or she wants to live in, to coin Emmanuel Faber, CEO of Danone. I’m convinced that traceability is becoming the best way to stand out on the market. It’s particularly noticeable in the agri-food industry, and it’s going to be the case for any brand.
E.: Can you give us an example of a flagship business project that uses blockchain?
M.H: For now, a lot of companies are developing PoCs (Proofs of Concept) that have blockchain, but there has been little solid progress. To tell the truth, although a lot of PoC have been launched, notably in the food industry, very few have been rolled out on an industrial scale. For one thing, there are some serious technological issues, which few have managed to resolve, in terms of safeguarding the supply chain. And too many of these PoCs are just using blockchain to tackle specific problems to their trade, whereas it’s a technological building block that should span the entire supply chain. If they’re used in isolation, these projects don’t solve anything.
For example, there’s a lot of ambiguity over the idea that blockchain technology fosters ‘trust’. It’s a nice idea but too often naïve. We have to understand that for businesses, blockchain alone can’t safeguard the ‘trustworthiness’ of the information inputted into the information system. This technology safeguards the ‘authenticity’ of the information – who said what and when – and thus empowers each and every operator. From there, if an inconsistency is detected once the information has been analysed from end to end, it will be possible to pinpoint it and see how to correct the anomaly. It’s the provable authenticity of the data the global information analysis supplies that allows for a positive ‘feedback loop’ that safeguards the supply chain from start to finish.
The most significant use – which has had its own public announcement – has been in the diamond industry, with jeweller De Beers adopting a solution proposed by the British startup Everledger. This project was set up to foster greater traceability for stones right from the point they are mined and to fight the use of blood diamonds, particularly from Africa. Every diamond is as such micro-engraved with a unique serial number, which is then saved onto the blockchain. At every stage of a products’ lifespan, its origin, authenticity and processing steps can be verified.
“There’s a lot of ambiguity over the idea that blockchain technology fosters ‘trust’. It’s a nice idea but too often naïve. We have to understand that for businesses, blockchain alone can’t safeguard the ‘trustworthiness’ of the information inputted into the information system.”
E.: And tomorrow? How might blockchain be used to fight counterfeiting?
M.H: For the time being, it’s early days for using blockchain. But by 2019, much larger projects spanning tens of millions of units a year are going to emerge. They are already in the pipeline.
As far as I’m concerned, safeguarding the supply chain, which is a preliminary step in fighting counterfeiting, concerns every industry. But there is particularly high demand in the agro-food industry, where safeguarding is a key challenge; it’s also an industry with many stakeholders who care about their impact on society and the environment… despite the idealized image sometimes gets. In western Europe we are quite sheltered, but on the global scale, counterfeiting problems are much worse. Think for example of the case of the Chinese milk that was contaminated by melamine. All in all, tens of thousands of babies were hospitalised after ingesting it!
Tilkal is meanwhile working on a project to optimise the traceability of medicines. It is aiming to improve the traceability of healthcare products, especially food supplements for children in sub-Saharan Africa, which are indispensable for preventing and curing certain deadly, highly widespread forms of diarrhea. The challenge is to gain visibility all along every transit phase, right down to the local dispensaries. Indeed, it’s not unusual for pharmaceutical product supply chains in these zones to be hit by theft, embezzlement and the introduction of counterfeits. These mean traceability and transparency have become genuine public health issues.