Blockchain to the Global Supply Chain Rescue
ONE OF MANY BENEFITS
Removing the need for trust
by each individual party, and
dividing the responsibility
and security among several
interested entities, is just one
benefit that blockchain provides
to a supply chain.
INTRODUCTION
One of the most compelling use cases for blockchain is supply chain. Traditionally,
supply chain processes are slow and disjointed, but blockchain provides multiple
benefits for these complex processes.
In a supply chain, there typically is no common infrastructure or database.
People have to rely on other parties in the chain for their information, and each
party has to trust others to make it work.
To address the need for trust across a decentralized network, blockchain has
pioneered a “trustless system.” In a trustless system, transactions are validated by
a larger number of people rather than a centralized company, removing the need
for trust by a single entity and dividing the responsibility and security between
several interested parties. Relieving each individual party from trust is just one
benefit that blockchain provides to a supply chain.
In this paper, and in the webinar “Blockchain to the Supply Chain Rescue,” we
will outline this and other benefits that blockchain can give to a supply chain, and
how TIBCO can help you achieve a successful blockchain implementation.
BENEFITS OF BLOCKCHAIN IN SUPPLY CHAIN
BETTER TRACKING
Because disparate parties in a supply chain use disparate systems, it’s nearly
impossible to track goods from origination to destination.
One property of blockchain is immutability. When you add an entry into the
blockchain ledger, it’s almost impossible to change. To change it, you would first
need consensus from everyone on the chain, then you would have to potentially
change many blocks in that blockchain, which is possibly thousands of entries.
The result then, if everyone is using the same system/ledger, is that you can
easily track all the goods in that supply chain end-to-end in an immutable fashion.
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TAMPERPROOF
Everyone in a blockchain has the exact same copy of the blockchain ledger.
Therefore, it’s extremely difficult to make changes without everyone knowing
about it, making tampering almost impossible.

FRAUD AND ERROR ELIMINATED

Because parties in a supply chain are so disparate, there is a high chance of
fraud and error. However, once the data is in a blockchain, it’s immutable. A third
party can’t easily hack an entry, putting an end to fraud and error. If you’ve heard
of blockchain hacks in the news, they are misnomers; the hacks are actually
happening before the data makes it into the blockchain or through related issues
such as people exposing their private keys.

INCREASED CUSTOMER AND PARTNER TRUST

Because all transactions are immutable, trust is built into the system. And because
the blockchain removes the need to trust transaction partners, in effect it actually
increases trust between parties. Before, you needed to know each person in the
process; now, you can just rely on the system.

IMPROVED INVENTORY MANAGEMENT

When you have a clear, traceable, ordered list of items viewable end-to-end,
inventory management becomes a breeze. You know exactly how many of an item
you have and how many you need at any time.

EASIER INVESTIGATION AND ACCOUNTABILITY OF ILLICIT ACTIVITIES

This benefit is geared towards regulators. You can essentially make a regulator a
node in a blockchain, as a listener or even as part of decision-making consensus,
to prevent illicit activities. This essentially makes the job of regulation easier
because it reduces the need to monitor for rule breaking, and rather, promotes
prevention, or catching noncompliance in the act.

GREATER SCALABILITY
In a supply chain, smaller or more disorganized players might become
bottlenecks. However, in a blockchain, everyone is using the same distributed,
decentralized system, so there is no one person who can hold up a process. For
example, if you need multiple parties to approve the same document, it can be
done in parallel.

MULTI-PARTY SIGNATURE SMART CONTRACTS

Smart contracts are the business logic behind blockchains. The logic controls
whether an item is going to be added to the chain by determining whether the
item meets the smart contract’s requirements. In addition, in order for something
to be added to the chain, you might want multiple parties to agree on the change,
making multi-party signatures a handy feature.

ENHANCED TRANSPARENCY
If parties in a supply chain can trace all their items back from where they came,
there is more transparency among parties, which will improve relationships.

CREATION OF A COMMON MARKETPLACE

Theoretically, you could embed an economy within a blockchain itself. With your
supply chain operating within the blockchain, you could add elements needed
to support an economy, supplying a common marketplace for the entire supply
chain. This would eliminate the need for separation of goods, services, and billing,
which could save time and money and increase transparency.
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WHAT BLOCKCHAIN OPTIONS ARE THERE?

One of the main decisions to be made is whether to join a permissionless (public)
blockchain like Ethereum or a permissioned (private) consortium blockchain
using something like Hyperledger. There are tradeoffs with each of these, and
the differences are sometimes difficult to understand because it requires
deep knowledge of architectures. Following are some of the benefits and
challenges of joining an already formed consortium of business partners using a
permissioned blockchain:

PERMISSIONED VS. PERMISSIONLESS BLOCKCHAIN

The best way to understand blockchain is to envision it as a set of technologies
that solve a traditionally difficult problem by maintaining a distributed ledger
among parties that don’t trust each other. The ledger provides a common set of
rules that cannot be violated (for example tampering and double spending). The
first well-known use case of blockchain was bitcoin, a decentralized peer-to-peer
electronic cash system.
When talking about permissionless (public) blockchains, the main set of
technologies are:
•  Merkle trees (also known as hash trees), the data structure used to store a
blockchain’s data. Merkle proofs ensure immutability.
•  Cryptography techniques, such as hashing (used within Merkle trees to chain
blocks together), and Public Key Cryptography to create identities and sign
blockchain transactions.
•  Consensus algorithms that allow for all the participant parties to agree on a
change to be included in the ledger, even if some of the parties are malicious.
•  Peer-to-peer networks that broadcast the transactions and blocks in a
decentralized way.

In addition to these technologies, there are important fields of research that need
to be understood and implemented correctly for a successful blockchain:
•  Financial incentives that compel participants to validate and broadcast to nodes.
•  Governance that decides how and when to make changes to smart contracts,
add new business logic, or address bugs in the system.
•  Social networking that creates a community that will evolve and own
the blockchain.
•  Game theory that makes sure incentives and power are balanced according to
participant strategies.

Permissioned (private) blockchains are an adaptation of permissionless (public)

blockchains. A permissioned blockchain is typically a group of businesses
that creates its own blockchain. It may or may not use all the technologies
commonly found in a permissionless blockchain. Some private blockchains will
use techniques like Merkle trees, cryptography, and peer-to-peer networks. Other
technologies are optional, such as Byzantine fault tolerant consensus; non-
byzantine is also an option when parties know each other.
Regarding financial incentives, governance, and game theory, the models are
completely different, and more traditional systems apply.
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WHY JOIN A PERMISSIONED SUPPLY CHAIN BLOCKCHAIN?

Joining a permissioned supply chain blockchain is much cheaper than creating
and deploying a whole new blockchain from scratch. Because there is no
infrastructure to build by yourself, as is the case with traditional systems, all
you have to do is focus on adding your own business logic to the chain. In a
permissioned supply chain blockchain, you can also share libraries and apps.
Because you are all in the same line of business, much of the logic and technical
resources will be the same, which saves you from having to create all your own
libraries and apps.

REQUIREMENTS TO JOINING A PERMISSIONED SUPPLY

CHAIN BLOCKCHAIN
To integrate into a permissioned supply chain blockchain, you must meet certain
requirements, and they can be quite challenging. Of course, there are differences
depending on what type of blockchain you are joining, but here are a few
examples to give you an idea:

KNOW BLOCKCHAIN PRIMITIVES

It is imperative that you have a deep understanding of how blockchain works.
Before blockchain, you owned your database and all of the information in it. With
blockchain, everything is shared. What you add to the blockchain can typically be
seen and traced by everyone in the blockchain, so your mistakes become more
important. For example, cryptography is one of the most important (and most
difficult) blockchain primitives. Because it is used so heavily in blockchain, your
knowledge of it has to be top notch. And, if you don’t know it, we recommend
you increase your knowledge or hire a cryptography expert.

RUN YOUR OWN BLOCKCHAIN NODE

You might also have to add this to your skillset. Every participant has the option
to run their own node if they want to participate in the blockchain consensus or
perform data validation. Opting to do this creates new requirements for how a
server is run.

UNDERSTAND YOUR LEGACY APPS AND HOW TO REPLACE THEM

Every time you bring a new technology into your infrastructure, you need to
understand how it impacts your legacy systems. Your legacy systems may not
have been touched for years, and the people that designed and implemented
them may be long gone. When integrating a blockchain, you have to understand
how to replace your legacy systems, and what kind of business logic can be
replaced by the blockchain.

CHALLENGES TO JOINING A PERMISSIONED SUPPLY

CHAIN BLOCKCHAIN
BRAND NEW TECHNOLOGY
Since blockchain is a relatively new technology, it’s immature with respect to the
challenges that a new technology brings. You need to be aware and adaptable.

STEEP LEARNING CURVE

Blockchain introduces new terminology and design patterns that are still evolving.
It’s basically like learning a new language.
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REDEFINED BUSINESS LOGIC

Because things are done in a slightly different way on blockchain, you have to
commit to redefining some of your business logic to make it work. The good news
is that in the process you usually change it for the better and improve what you
are doing, but that doesn’t take away the pain of having to change it.

FALSE OR WRONGLY ENTERED DATA

Just being in the blockchain does not mean that the information you have is
correct. You need to set up your external processes to take care of accuracy
before data touches the blockchain. The blockchain does have properties to
minimize mistakes, but if you get hacked before the data is entered, things can
get hairy.

SECURITY
One of the benefits of being on a blockchain is that you share all of your information,
it’s traceable, and everyone sees the same thing. But, if you have confidential
information that you only want two or three parties to see, you may be out of luck.
There are solutions being implemented to solve this, but it’s still a challenge.

COMPLIANCE WITH OUTDATED DATA PROTECTIONS AND OTHER REGULATIONS

Most data protections and regulations were designed for older systems, so it’s a
challenge to ensure that you are complying with them when using a blockchain.
One possible solution is making regulators part of the blockchain, and instead
of enforcing regulations after the fact, they can be proactive and aware of the
transaction as it is happening and step in if needed.

GOVERNANCE ISSUES
This is an intrinsic problem of blockchains. Who owns the blockchain if everyone
does? How are upgrades deployed? Who maintains it?

PARTICIPANTS IN DIFFERENT BLOCKCHAINS

You can participate in different blockchains. How do you deal with that challenge?
Interoperability between blockchains is a very active field of research, but there is
no robust solution just yet.

BLOCKCHAIN LIGHT-CLIENT SECURITY AND IMPLEMENTATION

One of the requirements for a blockchain as it exists today is full blockchain
preservation so that its entire history can be validated as a guard against
tampering. One of the problems with this is that smaller devices such as phones
can’t hold the entire blockchain. Light clients were developed that do not require
the full chain, but the trade-off is full security.

MULTIPLE TECH CHOICES

As with any new technology, most projects diverge in approaches until standards
are created. No standards exist yet for blockchain, making the choice of
technology and architecture a real challenge.
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HOW CAN TIBCO HELP WITH THE INTEGRATION INTO A

PERMISSIONED SUPPLY CHAIN BLOCKCHAIN?
TIBCO can help with some of the challenges noted above as follows:
•  Allow interaction between enterprise systems and blockchain using known,
robust, and tested technologies.
•  Add visibility to blockchain transactions and derive analytics as if it were
another database via TIBCO Spotfire® visual analytics. Visual analytics is very
useful for validation, auditing, data mining, etc.
•  Reduce the friction of adopting blockchain and enhance your blockchain
experience by allowing existing apps to call your blockchain nodes via TIBCO
Cloud™ Integration platform as a service.
•  Make your business processes talk to blockchains seamlessly with TIBCO
Cloud™ Live Apps self-service creation of business applications.
•  Bring blockchain and edge devices closer together by using the TIBCO Flogo®
browser based flow designer and lightweight execution engine. With it, you
can build and deploy bi-directional, event-driven communication between the
blockchain, off-chain capabilities, and IoT devices.

BLOCKCHAIN VS. DISTRIBUTED DATABASE

One of the biggest questions about blockchain is: What can I do with a
permissioned blockchain that I can’t achieve using a distributed database? To
answer this question, it’s good to distinguish between “blockchain as a pattern”
and “blockchain as a combination of new technologies.”
When you look at blockchain as a pattern, the line between it and a distributed
database blurs. The overlap is obvious. Blockchain can, however, provide an easier
and clearer architecture for forming distributed systems.
When you talk about “blockchain as a combination of new technologies,”
specifically smart contracts, multi-party consensus participation, and multi-
signing techniques, the separation between it and another technology becomes
much clearer. In this instance, the possible use cases today and into the future are
so numerous that we believe it will revolutionize the way software is built.
Also, let’s not forget that most blockchains use databases underneath, so in
reality blockchain is a type of distributed database with properties that allow
you to do things that were not possible before. In our opinion, blockchain takes
distributed databases to the next level. At its most basic form, blockchain allows
for shared data and verifiable logic by adding some cryptographic guaranties for
immutability and tamper-proof auditable logs.

CONCLUSION
We have discussed blockchain benefits, the requirements and challenges of
joining a permissioned supply chain blockchain, and how TIBCO’s tools can help
you with that transition.
We believe that blockchain is here to stay. We predict there will be many more
use cases like this one that will add great value to processes, and many more
created that have not been possible until now due to technical limitations. The
future of blockchain is exciting, and at TIBCO, we are taking steps to make sure
we will provide you with the right tools for leveraging this new technology.

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04/17/18