The role of blockchain in data driven and regulated economy

What is the "last mile" challenge, and how can Blockchain help to solve it? Two interpretations of the "last mile" are relevant to Blockchain.

Consider the logistics challenge of delivering a parcel to a customer's home. A global shipping organisation such as DHL will effectively move goods between its distribution centres. However, it faces a challenge in moving the parcel from its distribution centre at the last mile to the final destination.

We can also consider the "last mile" challenge of making a trustworthy link between a digital record and a physical object. In commerce, this may be a gold bar or an item of equipment. Both need to be irrefutably linked with a digital recorder so they can be traded and tracked.

Here we look at the role of Blockchain in a data-driven and regulated economy, how it can help with the "last mile" challenge in logistics and how it can help businesses operate more efficiently.

The value of Blockchain in logistics

There are two clear winners in the battle between the High Street and online shopping. First, we can see that online giants such as Amazon have successfully disrupted the retail sector, but parcel delivery has also had to keep pace.

Logistics organisations have grown to meet the demand, but to stay competitive, they must keep innovating. One area of innovation is distributed ledger technology that allows logistics organisations to interact with partners.

Global shipping organisations need to work with local delivery partners to achieve the "last mile" of delivery. Delivery is an issue in cities, where delivery vans have to cope with traffic, especially in remote countryside areas or the developing world. It's estimated that the last mile accounts for 50% of delivery costs.

Blockchain technology allows business partners to communicate in a peer-to-peer arrangement:

• Services can be contracted to multiple partners using cryptocurrency tokens, with the fees saved in escrow until the package has been delivered.
• Collateral payments can be agreed upon in advance in case of non-delivery, also saved in escrow.
• Businesses can exchange data safely and securely.
• Commercial arrangements can be made using smart contracts. These execute automatically due to a particular event, such as a customer receipt notification.

Parcels can be identified with an RFID (Radio frequency) or BLE (Bluetooth) tag. It allows both parties to agree on the parcel's location. The location information is also available to the original supplier and the end customer.

Blockchain technology is especially suited to this tracking as it appears to all parties as an extensive distributed database, in particular:

• Everyone accesses the same data; access is transparent and open.
• Data is arranged in a consecutive chain that guarantees it is up to date and has not been altered or corrupted. In business, this value of immutability is precious.
• Data is protected using hashing cryptography.

Making a trustworthy link between a parcel and its digital record

While all parties can agree on a parcel's location and possession, there is no guarantee that the tag has been attached to the correct package. It is not a massive issue in B2C online retail. There are sufficient safeguards in place in the warehouse, and ultimately the customer will reject the wrong item.

It is much more of an issue in commerce and a regulated economy. Businesses need to establish a trustworthy link between a digital record and the physical asset it represents. It relies on a human to match the two and requires both honesty and accuracy.

In commerce, Blockchain relies on tokenisation. Before it can be traded, an asset is associated with tokens that give it a digital representation. This must be done financially and legally. In most countries, financial institutions must use a bank to secure physical assets. However, there is no such arrangement for their digital tokens.

On a pure data level, Blockchain is highly attractive as it lowers the costs of business transactions. In addition, business partners can be confident that data has not been modified, which allows them to trade efficiently, with little need for verification.

Start-ups and agile businesses have the opportunity to innovate, using the technology to build new business propositions that would not have been possible otherwise.

Transactions are recorded securely and permanently, forming a verifiable transaction history. One value of the immutability of this data is being able to assess a regular supplier based upon their performance over time or to use it in arbitration disputes. It could also be used to determine the reputation of a new supplier or business partner.

• As it stands, Blockchain does not satisfy regulatory needs. Regulation needs to be developed to fulfil these four objectives:
• Standards for linking digital and physical assets
• Standards for interoperability
• Protection for end-users
• Governance to protect end-users against negligence, fraud and mismanagement

Blockchain needs to "go the last mile."

Blockchain is helping to solve logistics challenges. Its immutability and openness allow businesses to work together efficiently and with mutual trust.

In the regulated economy, however, Blockchain still needs further innovation and regulation to protect end customers better and solve the challenge of linking digital and physical assets. At Gradeon, we provide different consulting services; talk to us to know more about how we can help you to achieve your business goal!