The Blockchain Advantage
Blockchain can be a powerful enabler for businesses with benefits for consumers too
By Kalpana B
Blockchain has the potential to impact businesses and society by providing a secure, direct way to exchange something of value, such as money, intellectual property and other assets, without any intermediaries. The technology has been adopted and leveraged by the D2C sector to improve existing processes and curate unique experiences for their customers.
While the industry has seen a profound impact on both – business and customer-centric issues, blockchain in particular shows tremendous promise to improve the supply chain economy by increasing efficiency, value and transparency. It can also act as a single source of truth for customers, empowering them to ensure that the products they buy are actually what they claim to be.
The global blockchain retail market size was valued at $83 million in 2018 and is projected to reach $11.18 billion by 2026, registering a CAGR of 84.6% from 2019 to 2026. There have been several factors driving and restraining the blockchain boom . While improved transaction transparency and improved customer and identity management have managed to generate interest among stakeholders, a lack of understanding of the technology and associated cyber threats still raises questions.
Blockchain simplified
Let’s try to understand blockchain with the help of a short story.
A group of friends, Tom, Harry, Sam, Jack and Peter meet for dinner. After the meal, Tom pays the bill and everyone agrees to split the bill. The next day, when Harry sends his share to Tom via an online money transfer, the transaction goes through without a hitch. However, when Sam, Jack and Peter send their respective shares to Tom, their transactions do not go through. This may be due to technical problems such as an unsecured payment gateway or a transfer limit being exceeded.
The mistake in transferring money created an unnecessary misunderstanding among the friends. To solve this and to avoid such misunderstandings in the future, the friends resort to maintaining a smart ledger system where everyone will record their respective records. Whenever they spent money, each would track it in their respective ledgers. In case of discrepancies, they cross-check all ledgers and select the most common entry as correct.
Blockchain works just like the Smart Ledger system, except that the records are stored digitally in a decentralized system, which refers to the transfer of authority and decision-making from a centralized entity (person, organization or group thereof) to a distributed network.
The mechanics of blockchain can be further divided into:
TRANSACTION: It takes place in digital form among the parties in the network.
CONFIRMATION: Depending on the network’s configuration, the transactions are verified.
STRUCTURE: Each of the blocks is identified with a unique hash number. It contains a header, a reference to the previous block’s hash, and a group of transactions. The sequence of linked hashes creates a secure, interdependent chain.
VALIDATION: The blocks are validated to be added to the blockchain. It is performed through proof of work.
BLOCKCHAIN MINING: In order for blocks to be validated and added to the blockchain, miners solve a complex mathematical problem called “proof of work”.
THE CHAIN: After the block is validated, it is distributed through the network.
BUILT-IN DEFENSE: Every time a malicious miner tries to submit an altered block, the hash function of that block, and the following blocks, is changed. The other nodes detect these changes and reject the block, preventing corruption.
Blockchain in retail
Many retail and D2C brands have leveraged blockchain to improve existing processes, create unique experiences, increase brand awareness, encourage interaction, and create interest and exclusivity for their brands and products. Nike has patented a system of blockchain-compatible sneakers called CryptoKicks, where when a customer buys a pair of CryptoKicks, he/she will also receive a digital asset linked to a unique identifier for it.
shoe; and thus creates digital scarcity. If a customer sells the shoe to another person, ownership of the digital asset may also be transferred to that person.
DeBeers uses blockchain to track the source and progress of each natural diamond they mine, helping them address consumer concerns about the ethical sourcing of gemstones.
Ikea creates blockchain solutions to democratize renewable energy. Ikea’s innovation lab plans to develop a blockchain-powered solar microgrid.
Although examples can be many, the use cases can be broadly classified into business and customer centric.
Business-centric use cases
Traceability and visibility in supply chains: Manufacturers can sell, buy, track and pay for their products.
Product delivery: Retail D2C brands can monitor deliveries to customers across the supply chain.
The authenticity of digital advertising: Accurate verification of a campaign’s execution and client involvement is made possible through data transparency.
Product development and innovation: Businesses can create innovative, customized tools and apps that are fast, secure and reliable.
Product authenticity and origin: Every transaction along the supply chain, be it from a supplier or a manufacturer, can be added as a valid and verifiable record in an item’s pedigree.
Fraudulent financial transactions: Smart contracts can be used to authenticate financial transactions, and eliminate fraud.
Automated record keeping: Organizations can improve their inventory management by storing and analyzing relevant data about their products and supply chains.
Recall of products: Companies can identify products that are unsafe or have defective parts and issue targeted recalls.
Product Safety: By tracking genuine items and separating counterfeits, companies can guarantee the safety of their products.
Supply chain trade and finance: By streamlining financial transactions, accelerating workflows and reducing the costs and risks associated with intermediaries, business-to-business payments can be made faster, safer and easier.
Consumer-centric use cases
Access product information: Consumers can have constant access to comprehensive product information.
Consumer payment: By using secure networks, consumers can make fast and secure payments.
Access to aftercare services: Customers can choose between established contracts and agreements for guarantees and aftercare services.
Smart loyalty programs: As firms collect and monitor consumer data, consumers can participate in customized loyalty rewards programs.
Consumer Protection: On blockchain-enabled systems, digital records of customer information and purchases are secure, or less likely to be compromised, than those stored on
local platforms.
Blockchain for supply chain
The core principles of blockchain technology and the core requirements of the supply chain industry fit together perfectly like a puzzle. Apart from helping to improve transparency in supply chains, blockchain has the potential to increase a business’s profitability by reducing the associated administrative costs and optimizing working capital. As a result, many key players in the supply chain industry are reorganizing their setups to integrate them with blockchain technology.
According to analysis conducted by Research Dive, the global blockchain in supply chain market is expected to achieve a revenue of USD 1.4 billion at a CAGR of 57.4% between 2021 and 2028.
To better understand the use of blockchain, let’s see how it can be used in the textile industry.
Blockchain can be used to record purchase orders and shipment information of each unit in the textile value chain, to achieve transparency in operations. The details of all the units that contribute to the production of a garment can be seen using an audit trail graph and geolocation details on a global map. The visual representation of the full end-to-end traceability can be accessed via a QR code that displays information related to the source of the raw material, buyer, seller and product details, and the raw materials consumed in the production of the requested product.
Blockchain’s intervention and traceability of end-to-end transactions ensure:
Real-time audit trail of the material movement through QR codes. Material movement is recorded on a blockchain network.
Supply chain actors must take the necessary measures on deviations found against industry standards due to chain storage.
End B2B customers can easily monitor order timelines and address delays and discrepancies in real time.
Users get an overview of the raw material stock that is available for production.
From a consumer’s point of view, blockchains can allow them to find out exactly whether the products are actually what they claim to be. This end-to-end tracking channel can also be used to monitor fashion trends and help brands better anticipate and predict changing customer tastes and preferences.
Blockchain for transparency
Blockchain is a potential solution to many of the challenges facing consumer product companies and the biggest impact blockchain will have in the short term will be traceability in the supply chain. But blockchain not only benefits companies from an operational point of view, it also has direct consumer applications.
It has the potential to change the way we shop and pay for products, offer alternative payment platforms and drive superior loyalty programs. It has also come to the fore due to the rise of the conscious consumer.
To use blockchain technology, organizations can experiment with smaller applications to gain experience and better insights, but successful implementation throughout the supply chain can be challenging. It requires significant investment and cooperation from the entire industry.
While the market is nascent and a clear recipe for success has yet to emerge, companies can decide whether to invest in blockchain by focusing on specific use cases and their market position.
