Blockchain in Supplychain National Conference, IMPACT-2018 Computer Society of India Visakhapatnam Chapter  Blockchain in Supplychain N. Viswanadham Computer Science and Automation Indian Institute of Science, Bangalore, January 6, 2018 N. Viswanadham

Contents New Technologies Changing Our Lives Crypto Currency- Bitcoin Distributed Ledger BlockChain How Bitcoin’s Technology Could Make Food Supply Chains More Transparent Conclusions N. Viswanadham

New Technologies Changing Our Lives N. Viswanadham

Changes in the Business Environment New technologies New Business Models Rise of Startups Shared Services Political and Economic Changes Societal Concerns

N.Viswanadham

Crypto Currency- Bitcoin

Cryptographic Currency Digital currencies ( Crypto-Currencies) are traded over the internet, allowing instantaneous and borderless transfer of ownership unlike traditional banknotes & coins. Digital cash is infinitely copiable and there is no way to confirm that a certain digital cash had not already been spent without a intermediary like financial regulators & banks. Alice hands Bob a physical token. Bob has one token & Alice has zero. In digital transactions, Alice sends Bob a digital token — via email. Bob now has the digital token, and Alice should not have any. What if Alice makes “forgeries” of the digital token or Alice puts the same digital token online for all to download?

What is a “ledger”? To Secure Digital Transactions,  a ledger is used to tracks the asset : digital tokens. When Alice gives Bob the token, ledger records the transaction: Bob has the token, and Alice has none. A ledger (Oxford Dictionary) is “a book or collection of financial accounts”. Ledgers existed for thousands of years to keep records of trading transactions for goods and services. Conventional ledger is a centralised system maintained by a 3rd party. A familiar “ledger” is a bank account, in which every debit or credit transaction of the customer is maintained. Customers trust banks to keep their banking records safely and securely.

How to Secure Digital Transactions ? Who holds the ledger? Alice can’t hold the ledger because she might erase the transaction and say that she still owns the token. Bob can also alter the transactions that Alice gave him two tokens. A trusted third party (Intermediary) holds & updates the ledger. What if the 3rd party charges a fee that neither Alice or Bob want to pay? What if Alice bribes 3rd party to erase her transaction? What if the 3rd party keeps the token for himself & adds a transaction to the ledger in order to embezzle it, saying that Bob gave him the token? What if Alice and Bob cannot trust the trusted third party?

Distributed Ledger

What is a “distributed ledger”? A “distributed ledger” is collectively maintained by all the participants of the system, than by one central party (Bank). Each participant is a “node” of the distributed ledger. The nodes are the computers of the participants & each contains a complete set of transaction records. Together, the nodes build and maintain the distributed ledger. “Local” copy of the same ledger is maintained and developed in each node (instead of being centrally controlled and administered by a 3rd party)

If a simple majority of participants agree that the transaction is valid (e.g. confirm that Alice actually owns the token she wants to send), it gets added to the ledger. Alice and Bob distribute the ledger to all their trusted friends. Because the ledger is digital, all copies of the ledger could sync together.

Security Problems with Digital Currency Double Spending Problem: Since digital assets can be duplicated easily, A can “spend” the same digital asset twice to B & C. Who is the true owner of the digital token?  Sybil Attack: A Single user can pretend or have many fake identities creating multiple accounts from different IP addresses and fill the network with his clients. Users are more likely connect to these nodes.  Byzantine Generals Problem: Several divisions of the Byzantine army, each commanded by a general are attacking an enemy city. They must decide upon a common plan of action by communicating through a messenger. Some of the generals may be traitors try to prevent loyal generals reaching an agreement.

BlockChain

What is a BlockChain? Blockchain is a global distributed ledger or database running on millions of devices and open to anyone. Money, titles, deeds, music, art, scientific discoveries, IP & votes – can be moved and stored securely and privately. While many users may access, inspect, or add to the data, they can’t change or delete it. The original information stays put, leaving a permanent and public information trail, or chain, of transactions Blockchain is a distributed database that holds records of digital data or events in a tamper-resistant way.

Blockchain 1.0, 2.0 and 3.0 Blockchain 1.0 is currency and refers to the deployment of cryptocurrencies in digital payments and remittance such as Bitcoin and over two hundred cryptocurrencies. Blockchain 2.0 is contracts and refers to all the financial applications such as stock or bond transactions and mortgages. This is where most attention goes to at the moment. Blockchain 3.0 refers to a very diverse set of use cases such as health care, markets, legal etc.

Types of Blockchains Public Blockchain, is a decentralized framework that allows anyone to add themselves to the network, read transactions, transfer assets and participate in the consensus process. Bitcoin and Ethereum are popular examples. Private Blockchain, is a centralized and strictly permissioned, allowing only a pre-approved set of members to read and send transactions and participate in the consensus process. Banking, Healthcare, Supply chains where participants are selected based on trust which they are obligated to maintain.

Generation of Blockchain-1 Blockchain is a bunch of blocks strung together as a chain. Each block is numbered in ascending order starting with zero, the number is at the “top” of the block. A block only directly links to the one preceding it, all data stored within the block is read-only and can’t be changed – making it tamper-proof. Each block represents a set of transactions (or events) that happened over a particular period.

Generation of Blockchain-2 Data is distributed to all nodes. Hacking the Blockchain is difficult as the hacker has to bring down every single node to destroy the entire system. With a distributed ledger, everyone knows the exact location of all assets at all times.

Achieving Distributed Consensus Validation of each transaction: The nodes together determine if new entries in a transaction block are legitimate & can be admitted to the ledger. They verify if sender of transaction is the true owner of the asset. If transactions is a contract execution instruction, validating nodes will execute the instruction & confirm it by consensus . Consensus Broadcast : The validating node broadcasts information about the new block to the other validating nodes who may have also validated the same set or different sets of transactions. The consensus process allows them to communicate among themselves and agree on the set of validated transactions to be added to the ledger.

BlockChain in operation Blockchain technology allows two parties to transact. The buyer can show he has sufficient funds to purchase the required goods and display the criteria to be met before the payment will be executed. The seller can see that the buyer has the funds and the criteria he needs to meet in order to receive payment. As soon as the criteria are met, the funds are transferred automatically and unconditionally from the buyer to the seller. Certain criteria, like tracking goods via their GPS location can be met automatically. Other criteria, like checking the quality of goods, can be done by a human. Meeting of the criteria and executing the payment is called Smart Contract.

Consensus A transaction is valid, if all participants agree on its validity. In a business network where participants are known and trusted, transactions can be verified and committed to the ledger through Proof of stake: To validate transactions, valuators must hold a certain percentage of the network’s total value. Proof-of-stake provides protection from malicious attack by reducing incentives for attack and making it very expensive to execute attacks. Proof of work : The network challenges every machine that stores a copy of the ledger to solve a complex puzzle . Machines with identical copies of the ledger “team up” to solve the puzzle. The first team to solve the puzzle wins, and all other machines update their ledgers to match that of the winning team.

Smart Contracts​ Normally assets are transferred only on meeting certain conditions which require Lawyers and Banks to create and execute a contract. These can be replaced by Smart Contracts. Smart contracts are computer programs that can automatically execute the terms of a contract. it’s stored on the blockchain and is executed automatically as part of a transaction. When a pre-configured condition in a smart contract among participating entities is met then the parties involved in a contractual agreement can be automatically made payments as per the contract in a transparent manner.

Bitcoin Bitcoin is a crypto currency without control by trusted third party. Anyone bitcoin can send and receive bitcoins Bitcoin is not backed by a central authority, but by automated consensus among networked users through algorithmic self-policing rejecting attempts to defraud the system. Bitcoin uses a cryptographic protocol called a proof-of-work and the transactions are recorded in a public ledger called a blockchain. All the transactions are registered in a ledger every party can hold a copy of the ledger. The ledger is trustless & transparent. Bitcoin is decentralized from governance view point and centralized from a data standpoint

Blockchain a new B2B Logistics Operating System? Ware house Freight forwarding Customs clearance Airlines/ Shiplines Buyers Sellers Information E-Capacity E-Inventory E-Visibility Distributed Ledger IS Smart Contract Deconstruct 100106 N.Viswanadham

Inter- Company Data Integration Distributed Ledger 100106 N.Viswanadham

Blockchain Advantages Blockchain increases the level of trust among network participants. Because every transaction builds on every other transaction, corruption is readily apparent & everyone is made aware of it. Self-policing by the community of participants can mitigate the need to depend on legal or government safe-guards & sanctions to monitor and control the flow of business transactions.

How Bitcoin’s Technology Could Make Food Supply Chains More Transparent

The Agriculture and Food Value Chain

The Plough-Plate Food Supply Chain The supply chain involves farmers, seed producers, fertilizer factories, financial institutions, millers, government, warehouses, fair price shops, retail shops, railways, truck transport companies, etc. The relationship among the actors is adhoc

Who makes sure our products are safe, authentic and secure? How much do we know about the products we use each day? Do we know where they come from, or how many hands are touched on their journey to us between manufacturers, distributors and retailers? Their journeys are not transparent leading to counterfeit, contamination, substandard & low quality parts, fake goods, unethical labour and false Sustainability standards and certifications Consumers are always concerned with the origin of products, the authenticity of goods and transparency of their transactions People die, fall ill in all countries. Foodborne contamination causes 48M Americans to fall ill, 128,000  hospitalizations, and 3,000 deaths every year. Many more in India and China.

Product Tracking and Recalls Food companies can attach connected IoT tags to shipments, with each shipment assigned a unique identification number. These IDs will be tied to products’ origins, processing data, storage temperatures, expiration dates, and other information. At each stage in the supply chain, employees can simply “check in” the product using its ID number, and the blockchain will securely track the product over time across checkpoints. Blockchains can create a formal registry to identify individual goods, and track possession of a good through different points in a supply chain. Using blockchain, food companies can more quickly trace outbreaks back to specific sources and quicken product recalls. IBM & Walmart along with ten of other CPG and food companies is pioneering use of blockchain for food safety.

Tracking Cattle from Birth To Slaughter house Traceability N.Viswanadham

Artificial Intelligence and Future of Food Algorithmic menus: Food decisions could become simple confirmations of health-algorithm derived recommendations, hyper-personalized based on data from our DNA, stress levels picked up by sensors, and observed interactions with various foods and personal favourites Robot Cooks and Servers: AI powered robots could become our most common interface with food: cooking, serving, delivering, and stocking it on store shelves for us. Image recognition with its product Im2Calories to estimate the nutritional content of a meal from a photo Popular startups are for Restaurant discovery, online food ordering, food delivery etc. None of these food tech startups had anything to do with food. No ‘tech’ in the food tech

Blockchain Based Food Startups Provenance, serves over 200 food businesses with product traceability software.  Works with grocers to bring shoppers produce data and with seafood companies to highlight fair treatment of their workers,... Partners with Unilever, Sainsbury’s and others to track social sustainability and financial efficiency across supply chains. Arc-Net & PwC Netherlands target food fraud (the intentional substitution, addition, tampering, or misrepresentation of food, ingredients, or packaging), costs $40B per year globally. Tech leaders (like IBM) are using blockchain tools developed for other industries to food businesses .

N.Viswanadham

Blockchain Future There is lot of interest in Industry. Lots of startups in the area. Banks, Healthcare , ports etc are in the run Blockchain technology can help Platform companies to be more efficient Can a blockchain provide a transparent platform to link peer2 peer riders Can Blockchain technology could get rid of Uber, Netflix, and every flight-insurance provider on the market. Can blockchain replace intermediaries such as Banks and Orchestrators (Olam or Li & Fung) Still in infancy but has lot of future particularly in creating temper resistant business processes

A Foodtech Startup Idea

Processed Food Products Mineral& Diary Products Smart Tech Food Security Network CVP: Provide Nutritious Food not Grains Skill Training for Food SMEs, Chefs, Cooks, Delivery, Restaurants, Data Analysts Consumers Mid Day Meals Food Outlets Hawkers Processed Food Products Mineral& Diary Products Farms Distribution Center Kitchen Cloud (UID database, Mobile apps, GPS, Smart contracts, Blockchain, Recommender systems)

Digital Nutritious Food Delivery Platform Smart food network of Food manufacturers, Farms, food outlets, distributers , hawkers & kitchens, etc is formed A smart contract is agreed and orchestrated Ration card holders get discount on selected food items. Hawkers & Food they carry can be traced through mobile apps. Money paid through mobile valets. IOT connected equipment such as shipping vans, storage coolers, Kitchens, etc can monitor the food they’re housing and tag them with conditions like temperature or location Cloud keeps track of the customers, consumption patterns , finances and food traceability though blockchain and implement smart contracts