Blockchain in action

As you find out more about blockchain, you may discover ways it’s already impacting the diamond industry. Certain applications of blockchain may seem obvious to you as solutions for addressing current challenges. However, if you’re uncertain of whether blockchain has a place in the diamond industry or your business, ask yourself the following questions:

Does my business network need to manage contractual relationships?

Do we need to track transactions that involve more than two parties?

Is the current system overly complex or costly, possibly due to the need for intermediaries or a central point of control?

Can the network benefit from increased trust, transparency and accountability in record-keeping?

Would my business benefit from transaction resolution in minutes rather than days or weeks?

Is the current system prone to errors due to manual processes or duplication of effort?

Is the current transaction system vulnerable to fraud, cyberattack and human error?

If the answer to any or all of these is yes, blockchain can provide solutions. The next question is what steps you need to take to implement it.

Identifying speed bumps

Start by examining your current business processes for inefficiencies, particularly steps that are prone to delays, frustration, errors, and duplication of effort. (You may already have some idea based on your answers to the questions above.) More generally, you can ask yourself: “What challenges do I currently face in my security system or business transaction networks?”

Next, consider specific attributes of blockchain that can address those challenges. For example, if a lack of trust is causing friction, blockchain’s shared ledger can provide increased visibility of transaction and asset histories, which can improve trust. If business agreements or rules cause delays, you may benefit from smart contracts — agreements or sets of rules governing business transactions, stored on the blockchain and executed automatically as part of the transaction process.

Where to implement it

When choosing where to apply blockchain in your business, make sure it’s a good fit for what you’re trying to accomplish — an area where it adds real value, as opposed to something you could achieve just as well using a traditional database. The use you choose should pass the following four acid tests:

Consensus: Is it beneficial to have the option of network-wide agreement on the validity of each transaction?

Provenance: Is maintenance of a complete audit trail important?

Immutability: Is it important that the train of transactions be tamper-evident?

Finality: Is there a need for an agreed “system of record” across the business network?

Choosing a provider and platform

Once you’ve determined the where and how of integrating blockchain, you’ll need to decide which provider and platform best fit your industry and business needs. Here are some things to consider:

Do you require a permissioned network (i.e., one in which it’s possible to restrict users’ participation on an individual basis)?

Do you need to know the identities in your business network — for example, to adhere to regulations such as anti-money laundering (AML) or Know Your Customer (KYC)?

Do you have frequent exchanges with others that could be automated and pre-programmed, freeing up valuable time and resources?

Trade finance

Small and medium-sized enterprises (SMEs) are the engine of emerging markets, providing jobs and contributing significantly to national income globally. But over half of those SMEs lack access to formal credit because banks can’t adequately assess their creditworthiness. One project by IBM Blockchain is bringing together nine regional European banks — many of them fierce competitors — on one platform, with the aim of simplifying domestic and cross-border trade while increasing overall trade transparency and reducing risk.

Benefits:

New sources of finance, and therefore the prospect of new revenue streams, for the SME community.

The development of new trading relationships among SMEs.

Fostering overall trade and economic growth.

Cross-border bureaucracy

When moving goods across borders, businesses need a way to streamline the process of obtaining approvals from multiple legal entities (customs, port authorities, trucking or rail transportation firms, and so on). The blockchain lets these legal entities sign all approvals, keeping all parties informed of the approval status, the arrival of goods, and the transfer of payment from the importer’s bank to the exporter’s.

Benefits:

Complex processes simplified into a single process, with each party accessing a copy of the same ledger.

Increased access to capital, because it’s not caught up in long settlement times, errors, or disputes.

Increased trust and accountability among enterprises, regulators and consumers.

Trusted Digital Identity

Headlines in recent years have been grim for digital privacy. Outdated and broken identity systems have exposed all of us to fraud and digital-identity theft.

IBM Blockchain client SecureKey has developed a service to help Canadian consumers conveniently and privately assert identity information. By authenticating their identities through trusted providers like banks, governments and telecommunications companies, they can connect to various online services with a single digital credential and control which information they share.

Benefits:

User access to services that customers want, faster.

A reduction in fraud and in the need for anti-hacking decoys such as centralized honeypots of data.

Triple-blinded transactions to preserve users’ privacy.

Supply-chain management

Blockchain is delivering significant value to complex supply chains around the world, eliminating traditional friction points and providing entirely new degrees of transparency and trust. More than $4 trillion in goods are shipped each year, with the ocean shipping industry carrying 80% of those, an IBM press release stated in January.

Yet the cost of processing trade documents is estimated to be as much as one-fifth of the physical transportation costs, according to the World Economic Forum, because different supply-chain participants — manufacturers, shippers, insurers, banks, customs and border agents, and others — rely on vastly different systems to do that processing. This inconsistency can often slow or completely stop the movement of goods — an issue IBM’s joint venture with shipping company Maersk aims to resolve.

Benefits:

Fast, secure access to end-to-end supply chain information.

Verifiable authenticity and immutability of digital documents.

Trustworthy, secure transfer of information between organizations.

Better risk-assessments, and fewer interventions such as inspection of documents at the border.

Far lower administrative expenses, including elimination of the exorbitant processing costs for the paperwork that comes with international shipping.

Article from the Rapaport Magazine - December 2018. To subscribe click here.