In our last post, we introduced the senior advisor on DLT and blockchain at aXedras, Kathrin Wolff, and explained the fundamentals of blockchain technology, including how it works and how it can be used to facilitate peer-to-peer transactions. In her lecture to EU students and alumni, Kathrin talked about how blockchain eliminates the need for the middleman, and makes investing more accessible to people without a bank account.
In today’s follow up article, we’ll answer the question, “why blockchain?”, share some of the biggest challenges and risks associated with the technology, and demonstrate how blockchain can change your business. aXedras is portrayed as an example of a digital supply chain platform.
In order to answer this question, you first need to ask yourself, “What do I want to achieve?”. Blockchain has many benefits, but they don’t outweigh the need for strategy. Think about what challenges you are trying to solve, who your target audience is, how your supply chain operates, etc.
Then, once you have a solid business plan, find out whether blockchain can help you by asking yourself:
- Are there multiple parties involved in your supply chain or product?
- Do you have one or more middlemen in your supply chain taking a chunk of your margins?
- Is there a bond of trust between you and the other parties?
- What is the value of your product? Blockchain is ideal for high-value products where an original must be verified.
- If tracking of ownership is essential: who owns the product and when?
- Is fraudulent activity occurring within your organization?
- How transparent is your industry? Is monopolization present?
- Do industry regulations require you to validate, oversee and control the flow of papers and transactions?
Blockchain ensures the transparency of a supply chain, from sourcing and production to delivery and sales. If, reading these questions, you see a need for greater transparency and validation in your supply chain, you should certainly think about implementing blockchain technology.
But the considerations don’t stop there.
There are hundreds of different platforms for blockchain, all of which have been adapted for different use cases. You’ve probably heard of Bitcoin, but what about Ethereum, Hyperledger and Ripple Net? Explore your options carefully, and pay attention to things like the UX, security provisions, and how much energy different platforms use to find out which one is best for your business.
Case study: aXedras
Blockchain is set to influence many industries. And even if your industry is not directly involved with blockchain technology, you may well work in an affiliated sector. Cryptoassets (also called “cryptocurrencies”) are one way for transactions to take place between companies working in different sectors.
Kathrin provided us with multiple use cases for blockchain across various industries, including in the areas of finance, technology, energy and sustainability, the public sector, healthcare, law, real estate, retail and sports.
However, we want to focus on how it’s transforming the supply chain and take a closer look at how blockchain technology works for Katrin’s company, aXedras – a Swiss software company that’s digitizing the precious metal value chain using DLT.
She explained how given the nature of the supply chain, that a lot of the time you can’t see where your products are. But digital track and trace using blockchain makes monitoring shipments easier.
At aXedras, they have identified challenges at all stages of the supply chain, from sourcing to distribution.
The aspects of the supply chain that are unique to the high-value asset industry are:
- No data standards.
- Everyone is working from their own systems. Assets get lost in the paper trail.
- Not very efficient.
- Has to follow ESG regulations for sustainable sourcing.
How has blockchain made a difference?
- Blockchain has allowed the company to connect the value chain on the digital ledger. Their data standards are clear, and they can communicate directly with numerous stakeholders, including suppliers, refiners, dealers, investors, etc.
- They’ve digitized physical products on the DLT.
- Blockchain means they can include provenance data in the Integrity Certificates, which then get uploaded to digital trading platforms. Each unique aXedras ID means there’s no possibility of counterfeit. They’re also looking into tokenization and fractionalization for their assets.
- They can update the chain of custody and keep track of where all their assets are in real time.
The struggles, challenges and risks of blockchain
- Rules and regulations – Switzerland was the first country to issue a DLT law; cryptocurrency has been banned in China.
- Connecting on the same blockchain or DLT – All parties have to agree to join the same network, otherwise operations are rendered incompatible.
- Common standards – All parties must agree to common standards; it’s important to establish the governance of the blockchain from the outset.
- Energy consumption – Open and public networks use up a lot of energy, which is highly unsustainable.
All of these aspects present clear challenges to companies that are looking into implementing blockchain technology. You have to make sure you are trading within the laws of your region, and it’s important for you and your partners to be on the same page. But in Kathrin’s mind, there is an even bigger challenge facing blockchain at present, and that is us, the users.
Creating a suitable and sustainable blockchain strategy takes time. Do we have what it takes to accept that, and adapt to a new way of doing things? And are we ready, as she says, to give up the middleman entirely? Well, that’s something we have to decide.
The future of blockchain is ours to shape, and people are researching alternatives that consume less energy. Bitcoin miners, for example, have turned to renewable energy sources and opt to work during off-peak energy consumption hours.
Considering a career in Blockchain? Check out the MBA in Blockchain Management from EU Business School. Our course has been specifically designed to give postgraduate students an in-depth understanding of the fundamentals of blockchain, and the skills to critically examine how transparent technologies are changing the way we do business.