Blockchain in supply chain
Block-chain and supply chain okay so
what I think is useful to actually
understand is that there is a lot of potential
for the technology and every technology
goes through its ups and downs right .So
if we look at it from a perspective of how technology has changed our lives and block-chain is one such technology
which has tremendous potential .we are in a
bit of a block-chain but actually what I'm going to talk about is the potential of the
technology .If you look at what neutral sources claim 10% of the global GDP will be stored on block-chain there's a block-chain in the database, so you
know block-chain databases will store 10%
of global GDP as per world economic
forum and other sources got nerve which
says that the value add from block-chain
will accelerate to 175 billion and three point one trillion now
these numbers could be way off the mark
but the point is you know we are talking
of that kind of potential of this business block-chain will not be a technology band-aid it will actually replace
the existing process in various
industries .One in five banks have actually implemented a block-chain pilot so
there have been some pilots that have been there but really it's not really
been a whole lot most of the pilots have
been happening in US and China the overall size of the block-chain
market as per markets and markets they're a neutral market research firm has you know just twenty 3.3 billion these are very small numbers .So ,why
is this important there is a concept
called exponential technologies. I don't
know whether any of you actually have
heard. A few years the growth is almost stagnant or zero and therefore you believe that something doesn't have potential because you know you don't
see it growing or expanding rapidly and
then suddenly , when there is the movement
from the early adopters to the early
majority. it's called crossing the
chasm ,I mean we've all read the book that's where suddenly, it gets into network effects and the technology starts you know kind of pretty much
you know getting to a critical mass and
so that's where we believe that maybe the market actually will be in that phase where it's actually Stagnant growth early-stage innovators -
early adopters and that's a very very
small percentage of the market. But from
early adopters to early majority that is
where the market will explode and so most
of you would know what is block-chain .So, I
just wanted to mention that you know
there is a lot of confusion around
distributed and decentralized actually
decentralized a subset of distributed systems
which may be any computer science person
will tell you. But block-chain is a
distributed ledger .What that means is that the ledger can be operated by multiple
nodes anywhere they are located .it's
actually distributed computing by the nodes. It's decentralized in the sense that each node can
actually decide whether they have the ability
to create a block I'll come to that but both these are actually meaning the
same thing so there's no real confusion
of all these terms .It's distributed computing and decentralization of decisions .So ,what that means is essentially block-chain is a set of blocks particular set of
transactions creates a cryptographic hash. It's a
hash created by the content any small
digit or number you change and that the
hash changes. So if you have to basically tamper with anything then the link
to the previous block will get lost
because the hash changes so that's why the technology is powerful and there are very few nodes .
Provenance
So provenance is how block-chain enables you to prove that you know this was how this came through similarly cold chains you know you want to ensure that the temperature remained within the zone and it didn't get spoiled because some part of the chain you know did not adhere to the temperature limitations all this is stamped on to the block-chain in supply chain and you can actually measure all this so IOT and block-chain is a big area .Where you know both the IOT sensor data and block-chain as the repository of that data and transactions work in tandem to ensure sanctity of this of you know the product and you know give comfort to the customer right and one example of that when you look at Bitcoin it's helium all these kind of ripple these are all public permission-less so there is also a variant of public block-chain .Which is permission so ethereum for instance has both the permission lists and a permission block- chain then you come to permission-less and you look at you know let's say neutral nodes voting they have to be incentivized and that incentivization has to come through Bitcoin or some token where they get you know payment for voting right it's like Board of Directors if you call the directors for this you have to pay sitting fees to the Board of Directors right same way for the nodes because they are not party to the transaction they are validating a transaction. They have to be compensated and that is through a token so what you will actually find there is that financial services health care are really the places where the impact is the highest and what we are talking about block-chain and supply chain is really the second last category called transport and logistics it's really from a cost-saving perspective that bloc-kchain is being used. So what it essentially does is that if you really look at in supply chain what is the biggest pain point the biggest pain point is documents right so if some if I'm trying to export you know from India to us I have a packing list of a bill of lading I have you know prepaid invoice all kinds of documents .Which are coming together at one point and then I have the custom clearance documents which is coming from the customer authorities all that I have to staple together send it with the ship and the container and then at each point .It will get an additional document and by the time it reaches the you know the port on the other side you will have a four inch thick set of documents which have to be managed managing this is at a huge cost right I'm not even talking about you know the let's say that the things which are not related to the transactions so so they're I think what we find is that if you have something where you digitize all these documents and you don't really need to print out paper and you kind of have a central store where every party to that transaction has access to the same set of documents that would lead the true digital digitization of the documents the second thing is related to float so when importer bank pays the exporter bank the importer and exporter Bank is actually playing with the float okay so they you know the exporter bank will keep telling his client which is the exporter money is not received and you know it's taking time because cross-border and the importer bank is holding onto the money till he's forced to remit . A payment and you have importer and exporter banks trying to play with float means I have money on my account which actually belongs to the customer but I'm not transferring it to you know whoever he owes it to so I'm playing with that interest you know so interest cost because I have that money right so float can be as high as 21 days in a export transaction and what block-chain does is it reduces it to worst case two days I mean it could be instantaneous as well so so if I have that ability reduce float I have a ability to kind of make the documentation seamless .I mean just imagine the kind of cost saving that applies in the sector right and what we actually really need here is that we need that true consensus mechanism which brings in part of the permission-less systems into what is essentially a permission network trade lens is block-chain which has been created by Maersk and IBM biggest challenge that this platform faced was adoption by shipping lines and why was that this was because musk was a computer and the largest player in the segment so if you actually have a person who s 21 percent market share who kind of understands what is the rates that happen .Today the challenge and block-chain adoption is that technology is hard. I mean the benefits are there to see and obviously you have to have faith in it and as you know what said earlier you have to believe in it for two to three years to actually see it.
