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Blockchain for transparency: Part 1

All brands big and small face the demand of being part of a transparent supply chain. Driven by end consumers wanting the ability to trace a product back to its origin, companies are looking at various technologies that could provide transparency solutions. Experts in the dietary supplement and nutraceutical space are actively looking at blockchain. But few businesses have a clear understanding of the technology and how to apply blockchain to improve their supply chain. In a series of Q&A articles, Troy Norcross, co-founder of Blockchain Rookies, provides an overview of how blockchain can be used for business solutions across the industry from start-ups to SMEs to CPG giants.

Q: How and in what capacity could blockchain be implemented across the nutraceutical supply chain?

A: Blockchain can be used to support supply chains across a variety of industries and nutraceuticals are just one of those. There are a couple of areas where it’s interesting from a sustainability perspective. The first is the sustainable creation of your root or origin product. To do that, you need individual producers or growers certified as operating sustainably. There are two components of which you can record on a blockchain. The first component is certification, meaning an outside company verifying and certifying a specific producer as sustainable in relative terms. A unique quality of information written into a blockchain is that it’s easy to audit and check, and it’s tamper-resistant. You can’t come up with a fake certificate that states a producer is sustainably accredited if they’re not, because there is no supporting record on the blockchain.

Secondly, once those producers create their goods and enter the supply chain—at the very beginning before they go through refinement and distribution—they are then attached to an accredited producer. This means that you can’t have outside goods that are not coming from sustainable sources introduced into the supply chain. With blockchain, it is easy to audit and identify authentic products from producers who are certified as sustainable.

In summary, blockchain provides solutions to:

1. Accreditation: Managing credentials of certified sustainable producers.

2. Providing provenance: What is the real source of the product?

3. Preventing fraud: Hurdles in place to stop unsustainably-produced products from entering the supply chain.

In blockchain, you’re building trust through transparency by operating with multiple parties working together.

Q: This is good news for a lot of companies looking to ensure they have valid ingredients and products, as information on origin and source is often unclear. When it comes to the types and sizes of companies that can implement this, brands often wonder if blockchain is a technology that is only implementable by industry giants. However, more established companies usually have legacy systems in place that can pose migration challenges. What are the realities of introducing blockchain technology to companies of all sizes?

A: The technology is the easy part, and it’s relatively low cost. If you look at blockchain protocols like Ethereum or Hyperledger Fabric, these are open-source blockchain protocols. Anyone can download a copy of Hyperledger Fabric and start using it today for free. The technology and the licensing of the technology are not the same as having a considerable database cost or software cost, as well as a management cost. The open-source nature of blockchain makes it accessible to enterprises of all sizes.

What gets interesting and more challenging is aligning all of the different participants who are going to join the blockchain network. By participants, we mean the producers, the accreditors, the distributors, transport and logistics, wholesale and retail companies. Members of the network must agree to work together. Cooperation requires a governance model for the network. Furthermore, the members need to agree to a set of standards concerning the information written onto the blockchain. The challenge with blockchain is not the technology. The problem is getting a group of companies to work together and align on governance and standards. All the technology that sits underneath is the less complicated part.

In part two, we look at the challenges associated with migrating to blockchain, and connecting legacy systems to new technology. Troy Norcross provides a framework for understanding where blockchain will be successful as a solution and where potential pitfalls may lie.

Visit Blockchain Rookies for expertise on how blockchain will disrupt both industry and business—and how to prepare for this disruption with new business models, data strategies and partnerships.

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