Choosing blockchain technology for supply chain management solutions
The complexities of modern supply chains necessitate the implementation of robust solutions capable of handling the numerous challenges encountered in the field of supply chain management. The rise of information technology and the growing sophistication of software development provided the means to build complex ERP (enterprise resource planning) solutions capable of addressing the problem. Yet, there is still plenty of room for improvement, especially in relation to eliminating inefficiencies and ERP integration across separate organizations.
Enter blockchain. We’ve already explored how blockchain supply chain solutions can transform the sector in our “Blockchain for supply chain management” piece. In short, the technology can help streamline SCM processes making them more cost-effective, increase transparency across a supply chain, ensure secure storage of records, combat counterfeiting, and other fraudulent activities.
An important thing to consider here is that blockchain is not a singular technology. There are many blockchain protocols and while they are largely built on similar underpinning principles, they usually shine in different areas. The goal of this article is to help you choose the right distributed ledger technology for your blockchain supply chain solution.
Public or private?
The first thing to consider is whether to use a public or a private blockchain. Both models have distinct sets of advantages and disadvantages. For example, the technology’s biggest strengths are on full display in public blockchain protocols. Public blockchains like Ethereum offer a high level of decentralization, trustlessness, and transparency and use sophisticated hash algorithms to ensure maximum security. However, this doesn’t mean that they are the optimal blockchain technology and supply chain solution for every case. Their transparency, for example, can be an issue for businesses as they usually deal with sensitive data and don’t want to reveal their trade secrets.
Meanwhile, private protocols allow companies to take advantage of many of blockchain’s properties without the risk of public exposure of sensitive information. In addition, since private blockchain networks typically consist of verified members, they can use simplified hash and consensus algorithms which allows for greater speed. Naturally, the tradeoff here is that private protocols become less secure than their public counterparts. Also, private networks require a certain level of trust to be maintained between stakeholders.
Below we’ll be focusing on private blockchains, as despite their shortcomings, they seem to be better suited for building solutions to connect a limited number of supply chain partners than public protocols. However, we’ll also take a look at how we can combine the two approaches and utilize their distinct advantages.
While public protocols have been hogging the spotlight for years with flashy applications like cryptocurrencies and token offerings, the private blockchain space has been working on delivering practical enterprise-grade solutions. This has led to the development of a number of private protocols, each coming with its own set of goals, strengths, and limitations. Some are tailored to the needs of specific industries, while others seek to accommodate a broader range of applications. Here are two of the best private protocol options for building blockchain supply chain solutions:
One of the most prominent projects in the private blockchain sector, Hyperledger Fabric aims to provide a solid foundation for developing applications or solutions. The platform’s modular design enables unmatched flexibility when developing an application or solution. Developers can choose from a wide range of integrations and plug-and-play components like consensus, privacy and membership services. Having so many options on offer makes Hyperledger Fabric perfect for addressing a large variety of use cases.
While it’s developed under the same umbrella project as Fabric, Hyperledger Besu is an entirely different beast. Besu is an Ethereum client designed to support the development of both public and private permissioned network solutions. This means that development is similar to that on the Ethereum mainnet, but companies have the ability to restrict access to their networks, thanks to the platform’s comprehensive permissioning schemes.
One big advantage of this approach is that private networks developed on Besu can benefit from concepts and mechanisms that have been tested and established on Ethereum. As an example, if a private supply chain solution is deemed to need its own token, developers can utilize one of the three standards already established on Ethereum.
Private blockchain protocols are great for building enterprise solutions that ensure data privacy, but as we mentioned above, smaller networks cannot preserve some of blockchain technology’s key strengths. Immutability and trustlessness, for example, are among the traits that make the technology so useful in supply chain management. And those two characteristics are most pronounced in public networks. So isn’t there a way to combine the best of both worlds? The short answer is yes. Now for the longer version.
One way to do so is to utilize the so-called hybrid approach, where most of the supply chain management is handled on a private network connecting the various stakeholders in a particular supply chain. At the same time, a public blockchain protocol acts as a frame of reference, storing encrypted proof of all the work that has been done on the private network. This way, companies can utilize public networks’ immutability without exposing their sensitive data to external parties.
Even more interesting is the Baseline Protocol, an open-source project that aims to enable private solutions on the public Ethereum mainnet. The protocol utilizes various cryptographic techniques and instruments like zero-knowledge proofs and signatures, as well as peer-to-peer messaging protocols, to synchronize private business processes via the public blockchain while preserving confidentiality, privacy, and data security. This essentially removes the need for trust between stakeholders, as it ensures that every organization involved in a particular supply chain adheres to the same rules set by the Ethereum mainnet.
In the end, your choice of technology will be determined by your needs and preferences, as well as the needs and preferences of your supply chain partners. If you want to taste the benefits of public blockchains, but without compromising your data, perhaps Baseline will be the solution for you. If your goal is to develop versatile and highly customizable private solutions, Hyperledger Fabric is probably your best bet. And if you want private supply chain solutions that benefit from the years of research and development done on Ethereum, Hyperledger Besu deserves to be on your radar.