One of the areas of industry that Blockchain technology is quietly revolutionizing is Supply Chain Management (SCM). Although it rarely makes the headlines, given the infrastructural nature of Supply Chains, real advances are being made in integrating Blockchain technology into global logistics networks. This article will focus on one of Blocklab’s key projects that is doing just that: the Electronic Bill of Lading (eBoL) project.
Before explaining Blocklab’s contribution to bringing Blockchain into the Supply Chain stack, it would best to explain exactly what a Bill of Lading (BoL) actually is. A BoL is “[…] a document of title, a receipt for shipped goods, and a contract between a carrier and shipper.”[1]. In other words, a BoL is a document that contains information pertaining to the goods being transported between a buyer and seller via a specified carrier, as well as a receipt that the goods have been loaded to be transported between the buyer and seller. Most importantly, a BoL acts as a ‘proof of ownership’ of the goods that are being transported, and must be transferred to the buyer on arrival of the goods at their destination.
From one perspective, this method of authenticating some of the benchmarks in the overall process of shipping a good from one party to another seems to be an example of the ‘if its not broken don’t fix it’ school of thought: precursors of today’s BoLs arose in the 17th Century, and performed a similar function to the forms still in use today — to provide “tangible evidence to the parties entitled for receiving goods at the destination”[2]. The overall process of the creation and transfer of a BoL is as follows:
The driving force behind requiring such a document is one that will be also common to Blockchain practitioners: the issue of trust (or the lack thereof). What is the protocol for each of the parties involved in any transfer of goods and money to transact, given that neither of the parties necessarily trusts the other? As shown in the above graphic, the protocol in place involves the creation of the BoL by the carrier and agreeing that this document counts as ‘proof of ownership’. In Blockchain terms, the carrier becomes the Trusted-Third Party (TTP). Note that the negotiating bank and the issuing bank take on a role as TTP as well in this process; for example, the issuing bank relies on the negotiating bank to forward the documents, instead of obtaining them straight from the seller. This trust stems from the fact that the negotiating bank has local information about the shipment of the goods and is therefore able to check the authenticity of the documents and the underlying transactions.
There are, however, several obvious issues with this system, many of which arise from the development of increasingly complex international supply chains over the last several hundred years. The above graphic is only an abstract representation of the use of TTPs within SCM; the reality of modern logistics is far more complex, with transactions often involving multiple intermediaries at every level of the transaction. Whilst entire books could be written about this (and indeed have[3]) the issue focused on herein — the issue that the eBoL aims to solve — is perhaps the most mundane: the necessity for human managers in each of these intermediaries to manually validate and sign off on the transaction at every level prior to its moving along the chain. The key issue here is not that this process merely takes time: the issue is that whilst “a container takes approximately 36 hours to physically get from Singapore to Jakarta, Indonesia […] information and financial settlement can take up to 7 days.”[4]. This can cause significant knock on issues for the rest of the Supply Chain, such as ships being held in docks waiting for their respective BoLs to arrive, causing backlogs to form.
Removing this asynchronicity, among other things is what the eBoL seeks to achieve. The project involves taking a BoL and digitizing it, converting it to JavaScript Object Notation (JSON), and then hashing this data. This data is then stored as data in an ERC721 token on the Ethereum blockchain. This allows for the transferral of a digitized BoL within a cryptography secure environment that is able to be automatically verified. This is far more secure (from a computational / game-theoretic perspective) than having a paper document travel hundred (or thousands) of miles via numerous intermediaries. Moreover, the ownership of this document at any given time is traceable, as the token containing the document can only be owned by one Ethereum address at a given time. Security aside, the aforementioned issue regarding the asymmetry between shipping delivery times and the time taken for a BoL to be validated is removed by utilizing this tokenized eBoL. Although transaction times on the Ethereum blockchain can swing wildly[5], even in situations where the network is incredibly bloated the eBoL will be passed along far faster than the time taken for the physical shipping of goods.
The reason for using ERC721 tokens is simple: tokens that adhere to the ERC721 standard, contrary to the more commonly utilized ERC20 tokens, are non-fungible: they are unique. This makes them perfect as a medium with which to denote and facilitate the ownership and ownership transferral of something like a hashed eBoL. One of the first examples of ERC721 tokens ‘in the wild’ is a somewhat frivolous example, but one that nicely outlines their properties. CryptoKitties is a project that involves collecting and breeding cats. Each ‘Kitty’ is unique, and has its particular attributes stored as ‘genes’ data inside the linked ERC721 token. Instead of the ‘genes’ in the token linked to a CryptoKitty, the eBoL involves a hashed BoL document being stored in the data field of the ERC721 token.
One thing to be noted on a technical level about eBoL is that Blockchain technology makes up only one slim part of the technology stack being used. In terms of the application’s user flow, prior to storing the hash of the BoL in an ERC721 token, the methods used are those that have existed in the tried and tested method of digital document signing since 1989. Conceptually, on the other hand, something to note — specifically regarding an enterprise use of Blockchain in general — is that these methods have been used by businesses in enterprise software as standard for a long time. Since the project does not involve tokenizing assets or using cryptocurrencies as a medium of exchange, it provides an example of what an enterprise-grade Blockchain solution looks like, or at least provides an example of one. Extra legitimacy is leant to the project by its use of Trade Trust[6], an open-source product for document verification developed by the Singapore government.
As with all Blockchain projects, the wider technical and legal integration into existing Supply Chain infrastructure is still very much in-progress. With the eBoL, this pertains particularly to the aforementioned questions concerning ownership and identity regulations within a commercial context. Ownership in the sense outlined by a Blockchain is very different from the concept of ownership outlined by centuries of commercial legislation: ‘ownership’ of some asset held on a Blockchain is wholly reliant on a very strict set of conditions: the access and mechanical permissions to view and use a private and public keypair. The nature of these mechanics, however, is mechanically and historically individualistic, which is not entirely suited to large corporate environments.
Furthermore, and on a more concrete level, identity management on a Blockchain is again something which is not entirely suited to the form of regulatory environment large corporates currently operate within. Given that identities on the Ethereum blockchain are pseudonymous, one immediate question that arises when tokenized assets (or tokenized representations of ownership) are concerned is identity management. However, future integration of the project into existing institutions is in development, with plans to match keypairs and addresses with existing legal entities, and integrate the workings of the project into the protocols of existing institutions such as national Chambers of Commerce.
The need for these developments prior to immediately scaling the project were, of course, to be expected. Within the bounds available to Blockchain-powered technology solutions, eBoL is in an advanced stage at the time of writing, with a demo happening in the immediate future. For updates concerning the eBoL and all of Blocklab’s other projects, make sure to follow us here on Medium, as well as Twitter and LinkedIn.
[1] https://www.investopedia.com/terms/b/billoflading.asp
[2] https://www.freightwaves.com/news/2017/12/8/can-blockchain-revolutionize-the-bill-of-lading
[3] See ‘Blockchain and the Supply Chain: Concepts, Strategies and Practical Applications 1st Edition’ by Nick Vyas, Aljosja Beije, Bhaskar Krishnamachari
[4] ibid.
[5] The most memorable example of which being when crypto-collectibles CryptoKitties became so popular that the entire Ethereum network was bloated to the point that several ICOs were postponed: https://coinjournal.net/cryptokitties-leads-serious-ethereum-congestion-icos-cant-launch/
