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BLOCKCHAIN ENABLING ITTRANSFORMATION
Dahab ShafikAssociate Sales Engineer AnalystDell [email protected]
Ahmed AbdelaalAssociate Sales Engineer AnalystDell [email protected]
Mohamed SohailAdvisor, Delivery SpecialistDell [email protected]
Abdelrahman ElnakeebAssociate Sales Engineer AnalystDell [email protected]
Knowledge Sharing Article © 2018 Dell Inc. or its subsidiaries.
2018 Dell EMC Proven Professional Knowledge Sharing 2
Table of Contents
Why is Blockchain a Big Deal? .............................................................................................. 3
Blockchain Enabling IT Transformation in Banking ............................................................... 5
How can Blockchain Be of Use? ........................................................................................ 6
Blockchain is Much Cheaper .......................................................................................... 7
Blockchain Transactions are Much Faster ...................................................................... 7
Blockchain Enabling IT Transformation in FinTechs .............................................................. 8
Blockchain Enabling IT Transformation in Supply Chain Management ................................ 11
Traditional Supply Chain Management ............................................................................ 12
How can Blockchain Be of Use? ...................................................................................... 13
How Blockchain Can Revolutionize Supply Chain Management .................................. 14
Blockchain, Supply Chain and IoT……The Perfect Trio ................................................... 17
Blockchain Enabling IT Transformation in Cloud Computing ............................................... 19
How can Blockchain be of use?……Cloud Storage ......................................................... 19
How can Blockchain be of use?……Cloud Consumption ................................................. 23
References ......................................................................................................................... 26
Table of Figures
Figure 1 How a transaction is created in Blockchain (Bagley, n.d.) ....................................... 4
Figure 2 MAIN SERVICES OFFERED BY BANKS (SILVA, 2017) ........................................ 5
Figure 3 Blockchain is way cheaper and way faster .............................................................. 6
Figure 4 Current State Vs Blockchain enabled in Securities (CCN, 2016) ............................. 9
Figure 5 DIGITIZED SECURITIES SOLUTION USING BLOCKCHAIN (CAPGEMINI, 2016) 9
Figure 6 TRADITIONAL CONTRACTS VS SMART CONTRACTS (CCN, 2016) ................. 10
Figure 7 How can Blockchain Revolutionize Supply Chain management (Fintech Futures,
2017) .................................................................................................................................. 14
Figure 8 Traditional Supply Chain Vs Supply Chain using blockchian (Christidis &
Devetsikiotis, 2016) ............................................................................................................. 15
Figure 9 Overview of Blockchain's Application in supply chain industry (Abeyratn &
Monfared, 2016) .................................................................................................................. 16
Figure 10 Overview of Blockchain Implementation used by Maersk (IBM, 2016) ................. 18
Figure 11 YOU CAN'T CHEAT ON THE BLOCKCHAIN (ETHEREUNM OFFICIAL
WEBSITE, N.D.) ................................................................................................................. 20
Figure 12 Storj vs Amazon vs Azure ................................................................................... 22
Figure 13 Finding the right KPI ............................................................................................ 23
Figure 14 Reputation Calculation Flow ................................................................................ 25
Disclaimer: The views, processes or methodologies published in this article are those of the
authors. They do not necessarily reflect Dell EMC’s views, processes or methodologies.
2018 Dell EMC Proven Professional Knowledge Sharing 3
Blockchain – a shared bookkeeping system or ledger that allows all the participants
connected to a network to have access to all its records and history – is making a gradually
transformative impact across many industries. Around 25% of Earth’s population are talking
about blockchain and already billions of dollars have been invested in blockchain-based
technologies. Like any disruptive innovation, blockchain is met by many naysayers. Do you
recall what the former CEO of Blockbuster said about Netflix back in 2008? “Neither RedBox
nor Netflix are even on the radar screen in terms of competition. It’s more Wal-Mart and
Apple.” We all know the rest of that story. Of course we’re not talking about on-demand
movies, we’re talking about a major technology. However, if we can learn anything from
history, blockchain is worth taking the time to listen to the argument of how it can completely
revolutionize and transform some industries. After all, no one wants to end up like
Blockbuster.
IT transformation is imperative for all businesses, from the small to the enterprise. That
message comes through loud and clear from seemingly every keynote, panel discussion,
article, or study related to how businesses can remain competitive and relevant as the world
becomes increasingly digital. Since we are among the firm believers that blockchain is the
biggest technology since the internet, and to convert you to our side, this article examines
how blockchain can enable and fast forward IT transformation in three major industries;
Finance, Supply Chain Management and Cloud Storage & Consumption.
By the end of this article, readers will have an overview of how blockchain can enable IT
transformation within:
Finance, with a focus on banking, private securities and smart contracts
Supply Chain Management, with a focus on products’ life cycle and how IoT
fits in the picture
Cloud Storage & Consumption, with a focus on choosing a cloud service
provider and security on the cloud
For each of the above points, we will discuss the status quo of the industry and how
integrating blockchain can lead each industry to a more efficient and faster process. As
proof, we highlight success stories in these industries along with some obvious future
directions and plans.
Why is Blockchain a Big Deal?
Essentially, the blockchain can be applied to any digital asset transaction exchanged online;
a digital fingerprint can be created for any physical or nonphysical asset and be placed in a
transaction. Figure 1 represents how a transaction in the blockchain is requested and
confirmed. The transaction is sent over the p2p network and is sent for validation by a miner
on the network using a known algorithm. Once the transaction is verified it is placed in a pool
of ungrouped transactions. These transactions are combined to form a block that is added to
the blockchain and a confirmation status is set; with every new block, an extra confirmation
is added to the transaction and to completely verify a transaction a minimum of six
confirmations is required. The blockchain is then updated on all peers on the network to
have an identical view of the history provided by the network.
2018 Dell EMC Proven Professional Knowledge Sharing 4
How is this a good thing?
The blockchain offers a set of advantages, some of which include a decentralized network;
no central system to control the flow of transactions or set restrictions. A distributed ledger;
a copy of the ledger is available on every peer on the network and everyone can see the
history of transactions created. Distributed consensus; an agreement is set across the
whole network agreed upon by all the peers in the network in order to prevent events such
as double spending. Blockchain also offers a tamper-proof feature; transactions are digitally
signed by owners to prevent identity theft of the transaction and creation of fake
transactions. Transparency; all transactions are created and transmitted in a way that
cannot be traced back to the source as well as to maintain anonymity of the transactions.
FIGURE 1 HOW A TRANSACTION IS CREATED IN BLOCKCHAIN (BAGLEY, N.D.)
2018 Dell EMC Proven Professional Knowledge Sharing 5
Blockchain Enabling IT Transformation in Banking
“Blockchain will do to banks what the internet did to media” (Harvard Business Review). As
of 2016, almost 60% of financial institutions and banks were using blockchain for various
aspects of their process and specifically for international money transfer. Blockchain-based
solutions are used for security clearing and settlements, anti-money laundering services and
Know Your Customer (KYC) regulations (Ito, Narula, & Ali, 2017).
Banks offer four main services as shown in Figure 2:
1. Value Transfer – Payments
2. Value Storage – Deposits
3. Value Provision – Lending/Investing
4. Value Protection – Derivatives/ Insurance
Providing advisory services for the above mentioned services is sometimes a fifth function
that are offered by banks. To be able to constantly provide the above mentioned services
and with the quality expected by the banks, there are 3 main frictions that are obviously
pushing on banks that are concurrently raising their costs and lowering their efficiency
(Mason, 2017).
5. Expensive Transactions
6. Uncertain Regulatory Environments (can change every 12 minutes (Skinner, 2017)
7. Digital Disruption
Mason has also highlighted that these three forces will cost banks around $300 billion
by 2021. Adding to the financial burden are their ancient processes for international
payments and keeping up with KYC regulations (Mason, 2017). Financial Institutes
sent around $150 to $300 trillion in payments across borders annually (Silva, 2017).
Around 10% of these transactions are paid in fees with transactions taking from two
to five business days to get through. On the same discouraging note, financial
institutions are currently spending $60 to $500 million keeping up with KYC
regulations.
FIGURE 2 MAIN SERVICES OFFERED BY BANKS (SILVA, 2017)
2018 Dell EMC Proven Professional Knowledge Sharing 6
How can Blockchain Be of Use?
The above mentioned issues are just a few of many that face the banking industry today. So,
can Blockchain technology be of any help here?
“Blockchain is undoubtedly one of the most talked about technologies in banking services
today” according to John Mclean, CTO, VP Global Blockchain Team, IBM Systems. At
SWIFT’s Sibos conference in Singapore in October 2015, “it was almost impossible to have
a conversation without the ‘b-word’ being mentioned, and it was very clear that blockchain
had made the transition from being a technology discussed by the few people ‘in the know’
to being a mainstream preoccupation.” (Finextra, 2016)
Blockchain has the chance to revolutionize the banking industry for two main reasons
(Mason, 2017):
1) It’s much cheaper
2) Transactions are much faster
FIGURE 3 BLOCKCHAIN IS MUCH CHEAPER AND MUCH FASTER
2018 Dell EMC Proven Professional Knowledge Sharing 7
Blockchain is Much Cheaper
According to a report published by PwC, “Blockchain systems could be far cheaper than
existing platforms because they remove an entire layer of overhead dedicated to confirming
authenticity. In a distributed ledger system, confirmation is effectively performed by everyone
on the network, simultaneously.” (PwC, 2017). For the four main services mentioned above
offered by the banks, Blockchain can reduce friction and make transfers and settlements in
seconds and at a fraction of the current fees by digitizing any asset or currency.
If we focus on KYC regulations within a Blockchain, an Accenture representitive stated “We
think identity could be big. Financial experts can easily see how you could move [Blockchain]
to the massive area of ‘know your client’ and anti-money laundering, where the costs are
high for banks and the costs of messing it up are also huge” (FInancial Times, 2017)
If we then move our focus to identity fraud, in 2017 alone, victims were affected to the tune
of $16 billion. However, Blockchain case save banks $20 billion annually in infrastructure
costs alone (Silva, 2017). Such extraordinary results, make banks easily attracted to
Blockchain-based solutions; it is estimated that investing in blockchain technologies will soar
to $400 million by 2019 (PwC, 2017)
Blockchain Transactions are Much Faster
According to Charley Cooper, Managing Director of R3 “Trade finance is an obvious area for
Blockchain technology. It is so old it's done with fax machines and you need a physical
stamp on a piece of paper” (CCN, 2016)
In 2016, a test was run by the New York-based blockchain company Axoni to test the
effciency of a transaction running on blockchain in terms of time. Axoni CEO Ger Schvey
stated, “The testing included over a million active trade contracts inserted, with hundreds of
thousands of new trades and updates and it ran in one minute” (CCN, 2016) The test
included banks such as JP Morgan, Citi, Credit Suisse and Barclays.
In a further proof of conccept of how fast a Blockchain transaction can be, SAP, ATB
Financial and Ripple united to send the first ever international across the border blockchain
payment from Alberta, Canada to ReiseBank in Germany. The results as published by
DigitalList Magazine:
“The CAD 1000 (€667 EUR) blockchain payment, which would typically have taken from two
to six business days to process was completed in about 20 seconds. The proof of concept
has since been enhanced, and we are able to complete the transactions in just 10 seconds.”
Other success stories that stood out about the technology in different parts of the world:
1. The Middle East: NBAD (National Bank of Abu-Dhuabi) is currently the first and only
bank in the Middle East to introduce to its costumers real time cross the borders
payments on a blockchain network. They have teamed up with the USA-based startup
Ripple to create this new channel of transactions that is to cut speed and cost of
payments (DubaiEye, 2017). Emirates NBD is another bank that have introduced its
use case at “Keynote 2017”, an annual blockchain technology event held at Burj Al
2018 Dell EMC Proven Professional Knowledge Sharing 8
Arab. The bank is currently working on a pilot blockchain-based software that is aimed
at eliminating check fraud (Rizzo, 2017). Naimish Shah, Emirates NBD VP of
Enterprise Architecture explained that the software would mark checks with QR code
embedded with data linked to a blockchain. When given to a beneficiary, the code can
be scanned with the aid of a self-service channel to check the integrity of this check.
This software is estimated to save roughly 25m AED (6.8m USD) (Rizzo, 2017)
2. India: on October 2017, ICICI Bank was the Indian pioneer that carried the first
international transaction using Blockchain. Shortly after, YES Bank, Kotak Mahindra
Bank and Axis Bank also started to invest in creating their own Blockchain-based
solutions (D'Cunha, 2017).
Embracing blockchain technology can save the banking industry a significant amount of
money, effort and time on a daily basis. In a banking report published by IBM, they surveyed
200 banks in 16 countries on their experience and expectations regarding the advancements
and implementations of blockchain. The results showed that 91% of the surveyed 200 – the
Trailblazers – are expected to have blockchain in commercial production (IBM, 2016) by
2018.
Blockchain Enabling IT Transformation in FinTechs
IT transformation has been quite obvious in the last few years within the financial sector
causing the emergence of the FinTech field where numerous technological advancements
have been made to enhance financial processes. In order for the financial sector to move to
a technology-based process, current documents have to be digitized such as shares,
contracts, agreements, and asset ownership. All these documents can be converted into
smart contracts. This was when the FinTech sector started to realize that adopting
blockchain can further enhance some of the most basic yet extremely time and staff-
consuming processes.
Using the above mentioned technology, the applications mentioned in the next section were
made possible.
8. IT Transformation in Private Securities
It is very difficult for companies to go public. The process is prolonged due to the banks
creating a syndicate and work to underwrite a deal and attract investors to gain shares in
the company. Also, stock exchange agencies need to list the company to start trading
shares of the company as well as handle clearing and settlement of the shares in a secure
and timely manner. A number of parties are involved to license a private company to go
public. With more parties involved, the fees increase and a lot money is spent.
2018 Dell EMC Proven Professional Knowledge Sharing 9
Blockchain can help avoid all of this. By simply trading the shares of the company on a
secondary market utilizing the blockchain network, the company will be publicly registered
using a form of consensus and smart contracts (Crespigny, et al., 2016).
An excellent successful use case is Linq, Nasdaq’s Private Markets Blockchain Project.
Nasdaq is a leading provider of liquidity solutions for private securities trading, clearing,
exchange technology, listing, information and public company services across six continents.
It introduced by Nasdaq in 2015, Linq provides issuers and investors the ability to complete
and execute subscription documents online. It’s a first of its kind to successfully complete and
record a private securities transaction. In May 2017 and due to Linq’s success, Nasdaq and
Citi Bank announced a pioneering blockchain and global banking payment solution that
enables straight-through payment processing and automates reconciliation by using a
distributed ledger to record and transmit payment instructions. The partnership between Citi
and Nasdaq leverages Chain’s blockchain infrastructure platform and draws on core
FIGURE 4 CURRENT STATE VS BLOCKCHAIN ENABLED IN SECURITIES (CCN, 2016)
FIGURE 5 DIGITIZED SECURITIES SOLUTION USING BLOCKCHAIN (CAPGEMINI, 2016)
2018 Dell EMC Proven Professional Knowledge Sharing 10
competencies from industry leaders who are at the forefront of innovation in the global financial
sector. (Nasdaq, 2017)
9. IT Transformation in Smart Contracts
For an entity to ensure an asset, physical or non-physical, it will have to go through the process
of background checking and a thorough investigation on the asset. The standard contract
usually outlines the terms binding two or more parties in an agreement, while the concept of
smart contract enforces said agreement with a cryptographic code.
Smart contracts are only made possible by the emergence of the blockchain. A decentralized
network can handle such a process by registering assets with unique and difficult to forge
properties in order for it to be identified in the ledger. Transaction and ownership history of the
asset can easily be tracked and verified due to the high cryptographic security provided by the
blockchain. Smart contracts powered by the blockchain could provide insurers with the means
to manage claims in a transparent, responsive, and irrefutable manner. Contracts and claims
could be recorded onto a blockchain and validated by the network, ensuring only valid claims
are paid (Shelkovnikov, 2016). For example, the blockchain would reject multiple claims for
one accident because the network would know that a claim had already been made. Smart
contracts would also enforce the claims.
Smart contracts can be integrated as part of any agreement between parties such as digital
identity, loans, securities and many more. A great example implemented in the Middle East
and as part of His Highness Sheikh Mohammed bin Rashid Al Maktoum’s vision to achieve a
fully smart government running on a blockchain network by 2020, Dubai Customs, the
Emirate’s Customs office and Dubai Trade are partnering with IBM. This partnership aims to
test trade finance using blockchain (Higgins, 2017). The public-private initiative is utilizing the
Hyperledger Fabric blockchain protocol as part of a solution aimed at harmonizing the trade
finance lifecycle within a single platform. The solution being tested incorporates device-driven
data collection which is aligned with Dubai’s current intention of testing blockchain as a part
of a broader digitization drive focused on smart governance (Higgins, 2017)
FIGURE 6 TRADITIONAL CONTRACTS VS SMART CONTRACTS (CCN, 2016)
2018 Dell EMC Proven Professional Knowledge Sharing 11
It is worthy to note that smart contracts as a concept goes beyond FinTechs; it can be involved
in Life Sciences and Healthcare when it comes to tracking medical records or granting medical
researches access to certain medical information. Smart contracts can also be used in cross-
industry transactions, public sector record keeping or even voting.
Blockchain Enabling IT Transformation in Supply Chain Management
In 2017 an article was published in Bitcoin Magazine titled “Innovation Percolates When
Coffee Meets the Blockchain” (Scott, 2017). While you may wonder how it is possible for coffee
and blockchain to meet and why innovation would percolate in this case, this title actually
addresses a very important development. Which is that blockchain has recently been
transforming and enabling IT transformation within the area of supply chain management.
Questions arise in a multitude of aspects around supply chain management. A frequent query
pertains to whether it is possible to ensure coffee producers actually abided by fair-trade
regulations. Other often cited concerns are how to ascertain a diamond’s authenticity or how
to ensure that clothing manufacturers refrain from subjecting their employees to sweatshop-
like harsh labor conditions. Until the introduction of the blockchain, such questions regarding
products’ life-cycle in the supply chain were not easily answerable.
2018 Dell EMC Proven Professional Knowledge Sharing 12
Traditional Supply Chain Management
To understand the value added by blockchain to supply chain management, it is important to
understand how traditional supply chain worked and some of the issues prevalent in traditional
supply chains.
A supply chain is the management of the flow of products from raw materials to consumption.
However, it “is much more than trucks and logistics. It’s the way a product or service moves
from inception to consumption and describes all the steps a product takes in its sourcing,
manufacturing, and production before it ends up in the consumer’s hand (The supply chain,
2015). These systems contain many different key actors, processes, phases and most
importantly recorded information. It is often impossible to get an overview of all transactions
throughout the chain.
In the coffee example, the coffee is perhaps farmed and harvested by a farmer before
undergoing quality control by an auditor (point A), then it might get transported via road to a
port (point B), where it then gets shipped by boat to a distributor’s warehouse (point C), before
appearing on the shelves of a grocery store (point D) (Christidis & Devetsikiotis, 2016). In each
phase, there is information recorded by the key actors, for example, the farmer may keep
information about the product’s location, temperature, and humidity. This information is
sometimes based on inputs from other actors in the chain, for example, retailers will include
quality control information based on information passed on down the chain by the quality
control auditors, which could have been altered.
With increasing complexity of supply chain systems nowadays not all information is cascaded
down the supply chain, which is why this whole process is often nontransparent to the end-
user. Despite the fact that many of supply chain processes have been streamlined and IT has
played a major role in transforming supply chain management, it still has many shortcomings
that lead to inefficiencies and incurred losses (McDermott, 2017). Moreover, with the data
being separately stored by each party in multiple locations there is no way to ensure the
authenticity of data. And even if it was established that data has been tampered with at a
certain phase, it would be impossible to pinpoint, who is responsible for this alteration and
when it occurred. Due to the lack of transparency in traditional supply chain systems,
transactions down the supply chain are based on trust between entities in the system.
Based on the current state of traditional supply chain there has been a need for transparency
and traceability. There are billions of manufactured products in global complex supply chains,
but there is a clear lack of data visibility. The issue is not just “complexity of supply chains but
the lack of management, transparency, and monitoring which is fundamental” (Managing
2018 Dell EMC Proven Professional Knowledge Sharing 13
Supply Chain Risk, 2017) . This lack of data visibility hinders an efficient supply chain and
results in supply chain fraud, which has been reported to be on the rise in 2017 reaching over
600 billion dollars (McDermott, 2017). Moreover, given the size of supply chains and the key
entities being unknown suppliers, customers and service providers there is also a lack of trust
and a need for a single version of the truth.
Trusted information is important for the manufacturers firstly to ensure no counterfeit items
have been entered into their supply chain in addition to ensuring regulatory compliance and
being able to act in a timely fashion in case any issues arise, leading to a reduction of their
liability as well as the number of losses incurred. Moreover trusted information about a
product’s provenance is important so the end-customer can regain trust in the company
knowing a product’s origin and the process that this product underwent from raw material to
end product.
How can Blockchain Be of Use?
To tackle these issues companies would have traditionally had to invest large amounts of
money and time. However, using blockchain it is possible to fulfill these needs and increase
the efficiency of supply chain management while saving time and money in the process.
Blockchain’s attributes allow it to enable supply chain transformation, which may be
something that is not recognized by those people not closely related to the supply chain
management field. Since blockchain is a decentralized ledger, it is not dependent on a single
actor as is the case in the traditional supply chain. All parties have access to the exact same
information, which ensures end-to-end reliable transparency. All actors in the supply chain
are able to check records of events in the life of a product from its origin.
2018 Dell EMC Proven Professional Knowledge Sharing 14
How Blockchain Can Revolutionize Supply Chain Management
1) It’s Transparent
2) Provides an untampered trail
Blockchain is Transparent
This kind of visibility helps prevent counterfeit and fraud as it is now possible to know exactly
where something came from and if it is coming from the correct supplier. This type of
application would help save hundreds of billions of dollars, which is the estimate of counterfeit
losses in the multi-billion supply chain industries (Associated Press, 2017).
FIGURE 7 HOW CAN BLOCKCHAIN REVOLUTIONIZE SUPPLY CHAIN MANAGEMENT
(FINTECH FUTURES, 2017)
2018 Dell EMC Proven Professional Knowledge Sharing 15
Several startups and companies have been deploying applications to track the provenance or
origin of a product across the supply chain by allowing different actors to transparently
communicate information to each other. This provides an audit trail that can track the
transformations throughout the supply chain and can be used for different purposes. For
example, an application that has been implemented in Walmart retail stores across the United
States is tracking the origin of fresh foods (Aitken, 2017). Knowing the origin of each item and
the phases it passed until it arrived on the store shelf helps maintain the quality of the produce
and increase food safety, an important issue that has resulted in annual losses estimated at
tens of billions of dollars in the United States alone (Kowitt, 2016). This also helps increase
customer satisfaction, since the end customer can now verify whether received products are
as advertised, thus leading to better buying choices. Furthermore, companies using these
applications can use the feedback and information from the supply chain for better strategic
decision making.
FIGURE 8 TRADITIONAL SUPPLY CHAIN VS SUPPLY CHAIN USING BLOCKCHIAN (CHRISTIDIS &
DEVETSIKIOTIS, 2016)
2018 Dell EMC Proven Professional Knowledge Sharing 16
Blockchain Provides an Untampered and Secure Trail
Moreover, blockchain technology creates secure and immutable records, which are
irreversible, thus guaranteeing authenticity and security and establishing confidence in the
information which is the single version of the truth. This leads to reducing opportunities for
fraud and data tampering. Now that trust can be established it will be easier to eliminate
fraudulent actors since it is now possible to pinpoint what changes have been made and by
whom, thus increasing the accountability in case of any arising issues. It is important to
highlight, however, that given the nature of an open share ledger, this does not mean that
there is no privacy or security. In order to connect to the blockchain, each user needs to be
identified and authenticated first and can access certain sets of data based on their access
privileges that cannot be altered unless broadcast and verified by the other entities in the
system. Based on access privileges the user only gets access to a predefined set of data, so
for example in order not to compromise competitive advantage of a manufacturer, information
about the specific location of a produce farm may not be visible to the end customer, but may
still be available on the blockchain network and available to other parties. The distribution of
nodes across the network eliminates any single point of failure and deters malicious access
since there is no longer a central IT infrastructure as in traditional supply chain technologies.
The fact that blockchain can be easily deployable on a supply chain network and the different
users only require authenticated access helps make the transactions more efficient by
FIGURE 9 OVERVIEW OF BLOCKCHAIN'S APPLICATION IN SUPPLY CHAIN INDUSTRY (ABEYRATN
& MONFARED, 2016)
2018 Dell EMC Proven Professional Knowledge Sharing 17
eliminating paperwork that used to be maintained separately in traditional supply chains. By
eliminating paperwork, costs and time are reduced.
Blockchain, Supply Chain and IoT……The Perfect Trio
As mentioned above, while blockchain has already made improvements to supply chain, it can
achieve more improvements and open the door for far more opportunities through “the
interplay between blockchain, smart contracts and the Internet of Things (IoT)” where that has
been “a significant development towards revolutionizing trade transactions that could deliver
considerable benefits throughout the global supply chain” (Eidel, 2016). IoT is a fast-growing
complex network of connected physical devices that are able to process and communicate
information. Smart contracts are contracts that embed logic to the process and are able to
execute automatically and correctly without the need for human intervention by enabling
automated transactions between devices across the blockchain thus ensuring process
integrity.
By using IoT with RFID devices one can track information regarding goods and services as
they are being moved through the different phases in the blockchain. Produce’s statistics can
be obtained using the IoT devices from the products throughout its cycle in the supply chain
and this information is updated in the shared ledger, where all other parties have access.
Using this information along with smart contracts, it is possible to add logic to the supply chain.
An implementation for such an example by shipping giant Maersk would be tracking
information such as position, arrival time and temperature of products as they are being
transported through the blockchain for quality assurance purposes (Gronholt-Pedersen,
2018). This is in addition to the benefit of all actors having the ability to track product
information as it is being moved in the supply chain. Whenever the environmental data of the
products deviate from the agreed-upon values, the IoT devices tracking these products would
propagate this information to all concerned parties including information of the party currently
responsible for the shipment and thus held accountable for the violation. In this case, the
benefits compared to the traditional supply chain are clear and most importantly the
transparency of the flowing information guarantees non-repudiation.
2018 Dell EMC Proven Professional Knowledge Sharing 18
To add to that, IoT devices can trigger actions such as sending an immediate alert prompting
the relevant party to take the necessary measures that could help mitigate or resolve the
situation if done in a timely fashion. Also, it will be easier to reject spoiled products improving
product safety as well as automatically penalizing parties responsible for not delivering the
products in the agreed upon quality, thus moving a step a further towards an autonomous
service system and supply chain.
An example of an IoT and blockchain application in supply chain is the use of blockchain in
tuna supply chain in Australia to combat illegal fishing. Whenever a fish is legally landed and
starts its journey from the sea to the plate it is assigned a QR code by the World Wildlife Fund
(WWF) (Visser & Hanich, 2018). This QR code is then used throughout the journey until it
reaches the consumer. The consumer can then scan the QR code to ensure this fish was not
illegally fished and the government can check that suppliers are not supplying illegally fished
fishes. While tracking fishing supply chains using QR codes is not a new concept, the fact that
it is now using blockchain ensuring the authenticity and transparency of information is the
major difference.
FIGURE 10 OVERVIEW OF BLOCKCHAIN IMPLEMENTATION USED BY MAERSK (IBM, 2016)
2018 Dell EMC Proven Professional Knowledge Sharing 19
Looking at the current state of supply chain we can say that it is already automated with things
such as sensor-based devices, location awareness, self-reporting and auto-correcting
features. With the prominence of IoT devices, it is starting to become a globally connected
network with interconnectivity through and increased interoperability between IoT devices.
Now using blockchain and IoT we can move to the next step and start making supply chains
more dynamic, robust, auto-executing and responsive and finally allow the next step of artificial
intelligence and machine learning to take place on top of blockchain in the supply chain
(Radocchia, 2017). Considering the amount of trusted data gathered, the idea is to build on
the ability to spot and learn trends yielding insights into how to boost efficiencies and reduce
costs and make better strategic decisions in the supply chain network. Rather than aiming for
transaction costs and time this would open the door for reshaping how to approach businesses
in an innovative way using supply chain. After all, innovation percolates when coffee meets
blockchain.
Blockchain Enabling IT Transformation in Cloud Computing
As most organizations are being transformed towards a way to consume cloud computing
products, the need to leverage blockchain to take a part of this journey emerged. One of the
main streams in this direction is the use of blockchain to choose the cloud service provider for
a specific cloud service. Here we are speaking about a novel way to consume the cloud service
based on concrete and neutral suggestion and service evaluation through blockchain.
Traditional cloud storage
When uploading data to the cloud the service provider saves the data in one of their
datacenters to an off-site storage system maintained by a third party instead of storing
information to a computer’s hard drive or other local storage devices. However, to access
the data, one must send a request to that data center to get their data which isn’t always
close to the physical location of the customer’s location.
To implement this, giant servers should be used which come with its own challenges. Running
them is expensive; they need to be temperature controlled, updated and strictly maintained.
Banks and corporations spend billions of dollars to protect and maintain their server
infrastructure while still experiencing leaks and virus attacks.
How can Blockchain be of use?……Cloud Storage
Blockchain eliminates the need for trusted third parties. Every transaction that happens is
logged and timestamped. It can’t be changed because every node across the network has a
full copy of the data. Constant verification keeps the records accurate. This leads to a peer-
to-peer system that’s almost impossible to hack.
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Blockchain cloud storage solutions allow storage to be decentralized – and therefore less
prone to attacks that can cause systemic damage and widespread data loss. On a
decentralized network, files are broken apart and spread across multiple nodes. Also, these
files are encrypted with a private key which makes it impossible for the node (participant in the
network) to look at any other node.
Blockchain technology has created the first opportunity to rethink cloud storage on a technical
as well as an economic level (Blockchain-Based Decentralized File Storage). Blockchain cloud
storage solutions allow storage to be decentralized, more secure, private, cheaper, faster,
censorship-resistant, and more distributed than existing cloud storage solutions. File loss
prevention is very high due to data redundancy caused by extra copies of data (this data can
be gathered from error in storing or transmission of data). Thus, also ensuring a significant
reduction in costs.
This is a great chance for companies to monetize their spare storage space by renting out
their unused hard drive space; a massive amount of storage space sits unused on people’s
hard drives around the world. Sia, Storj, SAFE network, Swarm and Filecoin grabbed the
opportunity to use Blockchain technology to decentralize data storage breaking up files into
many pieces, encrypting and sending them to people’s drives around the world.
FIGURE 11 YOU CAN'T CHEAT ON THE BLOCKCHAIN (ETHEREUNM OFFICIAL
WEBSITE, N.D.)
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Storj developed a decentralized, secure way to store data in the cloud without using sever
farms. It utilizes Ethereum blockchain which is a decentralized platform that runs contracts
applications that run exactly as programmed without any possibility of downtime, censorship,
fraud, or third-party interference (Storj Website, n.d.).
Sia is another blockchain project offering decentralized storage. The Sia team has been
explicit about its preference for proof-of-work (PoW) blockchains. Proof of Work provides a
cryptographic assurance that a certain amount of money needs to be spent to create an
alternate history. A block requires doing a ton of computation, and this type of computation is
inherently very expensive energy.
We know when we see a Bitcoin block, it took tens of thousands of dollars in electricity to
produce, even using the most sophisticated hardware in the world. A Bitcoin block costs tens
of thousands of dollars to produce, and a one block double-spend necessarily costs tens of
thousands of dollars. If people are pending 6 blocks to receive transaction confirmation, then
an attacker trying to execute a 6 block double-spend is going to need to spend over one
hundred thousand dollars executing their attack. This brings the price down considerably.
Storing 5 TB of data on the cloud with Sia will set you back about $10 a month. Amazon S3
charges $115 for the same amount of storage. The savings get even more considerable once
you start getting into the big numbers (and factor in things like requests and outbound traffic)
(Sia - Blog, n.d.).
Microsoft Azure is also one of the technology leaders and controls a large amount of the
world’s data. Microsoft brings the Blockchain to the company and implemented in Cloud with
the customers to improve shared business processes.
A lot of huge IT leaders, including Dell EMC and Oracle, worked with Microsoft on Azure cloud
platform to help their customers embrace cloud computing.
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FIGURE 12 STORJ VS AMAZON VS AZURE
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How can Blockchain be of use……Cloud Consumption
Tech giants are tending to accomplish such an approach based on a permissioned blockchain
{It is a blockchain that requires permission to read the information on the blockchain, that limit
the parties who can transact on the blockchain and that set who can serve the network by
writing new blocks into the chain}. This allows access to only invited and verified clouds –
cloud services – to evaluate the cloud provider’s service quality, and to automate the whole
cloud service process. It is based on P2P multi-cloud service automation platform for cloud
resources publishing/validation, cloud provider reputation proofing, and cloud service contract
execution.
Here we need to operate in the multi cloud environment with the agility of a start-up while
meeting the security and compliance needs of a major enterprise in order to accomplish the
above mentioned concept.
Such new service automation systems are established on blockchain networks across multiple
cloud “service providers”. The secure communications among the cloud providers are
achieved over on-chain ledger and smart contracts. Each cloud provider can be an endorsing
peer which validates and executes smart contracts.
We can speak a lot about all the aspects of automating the cloud provider selection but let me
focus on the reputation calculation metric.
FIGURE 13 FINDING THE RIGHT KPI
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The main purpose of the reputation system is to
choose cloud providers for quality of service based on
multiple factors “such as network latency, resource
and capacity verification”. In addition, the system
aims to guarantee the best quality of service (QoS) for
the cloud consumers. One important aspect of the
reputation system is maintaining an absolute fairness for cloud providers such that they are
not rewarded for the amount of the resources that they own or register but rather for the
fulfillment of their contracts’ terms, service level agreements and key performance indicators.
After the service execution is completed, the
monitoring metrics are collected and aggregated
into an execution report that has a summary for
the service resources allocation and performance
for the contract period. This execution report is
then sent to all the peers along with the contract
identification. When each peer receives the
execution report and the contract identification, it
would then do the following:
Compares each metric with its respective contract term and calculates the
percentage fulfilled.
Calculates a fulfillment score for the contract by giving each metric a weight and
calculating the weighted average for the contract.
Calculates an average of all previous contracts between the provider cloud and each
other cloud registered (contract fulfillment history).
Calculates an average of the averages between the provider cloud and every other
cloud
Stores the new contract fulfillment report along with its score in the ledger as part of
the history.
This enhanced version of an average algorithm tries to eliminate an exploitation of having two
clouds doing repeated contracts with one another with simple metrics; thus a provider would
keep getting high fulfillment scores which would then highly factor in to their final reputation
score.
FIGURE 13 MONITORING METRICS
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The diagram below illustrates the workflow if doing the calculation of the reputation and the
service scoring.
As demonstrated throughout this document, Blockchain has already integrated and
established its existence in some of the biggest industries: i.e. Cloud Computing, Supply Chain
Management and Banking. We are now living in what experts refer to as “The New Era” of
blockchain. Currently Blockchain is building momentum and industries are exploring with use
cases. We believe the next few years will focus on expansion of proofs of concepts followed
by commercial deployment on a much larger scale as the world starts embracing the new
technology.
FIGURE 14 REPUTATION CALCULATION FLOW
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