We asked Creative Director at Dupont & Dupond Interactive, Laurent Pataillot about his thoughts on the blockchain, and whether crypto currencies will ever become the new standards of exchange that they claim to be.
Though not directly related to my past or current activities (50% freelance, 50% working for archaic public organisations), I would rather use the opportunity of this blogpost to discuss matters of personal future interest: blockchain technologies.
Put aside the hype the very term “blockchain” is generating, this technological breakthrough offers an interesting case relating to trust, one of the topics covered during the last week of the course. Thomas himself, in an article he recently cowrote (Meqdadi, Johnsen & Johnsen, 2017), demonstrates that trust is an essential factor in supply chain sustainability.
Yet, somebody (or somebodies) hiding behind the moniker Satoshi Nakamoto concluded, in a seminal white paper released 10 years ago: “we have proposed a system for electronic transactions without relying on trust” (Nakamoto, 2008). Thus, Bitcoin was born, and, with it, cryptoanarchists, nonbelievers, cynics, wolves and sheep. Undeniably raised in a dark world of cybercrime (but there was, after all, no promise to “make the world a better place” in Nakamoto’s stone tablets, just a promise to get rid of bankers), blockchain technology still carries Silk Roadstigmata today. This partly explains why the corporate bandwagon – a latecomer to blockchain technology – stepped in very cautiously after finally realising there was some innovative potential in a distributed ledger. However, large organisations took some precautions to adopt this anarchistic technology by proclaiming “Blockchain, not Bitcoin”, a stance reflected by major consultancies in their reports on the subject, such as McKinsey’s (2017), in which permissioned (i.e. private) blockchains are seen as the commercial model most likely to succeed over public blockchains.
But aren’t private blockchains defeating the very purpose of blockchain ? The whole point of this system is to offer reliability and immutable records by consensus of multiple trustless parties, a point apparently brushed aside by supporters of private blockchains. Moreover, if not truly decentralised, as is logically the case when one single player controls access, permissioned blockchains are theoretically vulnerable to sybil (Chang & Wu, 2014) or 51% attacks (Bastiaan, 2015), both impossible – or only possible at a cost exceeding profits – on legacy blockchains, as demonstrated by Ethereum’s creator, Vitalik Buterin, in his 2013 white paper (Buterin, 2013).
Fast forward one year (remember crypto years are similar to cat years, a speed reflected in the volatility of cryptocurrencies)…
Despite his boastful announcement in a 2017 Forbes interview and his blatant disregard for Bitcoin, about which he “couldn’t care less” (Shin, 2017), IBM’s vice president of blockchain technologies Jerry Cuomo must be kicking himself today: in the wake of the much-heralded IBM & Maersk joint venture (IBM, 2018), private blockchains are tanking (pun intended). Ironically, the one factor stopping such an unstoppable endeavour as the IBM-Maersk initiative is, of all things, trust. “What is bred in the bone will come out in the flesh” has rarely been proven so true, as shipping giants step into an oxymoronic fight for centralised governance of a decentralised platform (Allison, 2018), led by CMA CGM general manager Peter Wolf. Moreover, passing around a bloated ledger is not exactly the best computational solution…so why not stick to databases, if blockchain is also slow and hard to scale ?
This is probably what Eric Piscini, Deloitte’s global blockchain lead, was thinking as he left the consulting giant to start his own company, Citizens Reserve (Castillo, 2018). Bridging a public blockchain (Ethereum) with a permissioned one (JPMorgan’s Quorum) through a virtual token backed by real assets to moderate speculation, Citizens Reserve is betting big on its decentralised supply chain solution: Suku.
This innovative option has yet to prove itself, but there could be a timely opening, as famous public blockchains are slowly unveiling their flaws: Bitcoin’s reigning consensus mechanism through Proof of Work (PoW) is both bad for the environment and prone to centralisation, since less and less “everyday” people can compete against specialised mining farms using Application-Specific Integrated Circuits (ASIC). Alternative governance solutions, such as Proof of stake (PoS), would lead back to a classic shareholder’s model (Saleh, 2017), the very arch-enemy Satoshi Nakomoto – whoever s/he may be – was seeking to topple.
In closing, trust could indeed be the major hurdle for a truly useful adoption of blockchain technology in supply chain management: in 2018, roughly one year after cryptocurrencies “went mainstream”, most people still ignore that there is more to blockchain than Bitcoin, and even less would know how to purchase or store any kind of digital crypto-asset. Until this entry-barrier is lowered, and the general public trusts these trustless technologies enough to adopt them, educated decisions about their best usage will keep being diluted in speculative sprees and copycat corporate attempts.
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Allison, I. (2018). IBM and Maersk Struggle to Sign Partners to Shipping Blockchain. CoinDesk. Available at: https://www.coindesk.com/ibm-blockchain-maersk-shipping-struggling/
Bastiaan, M. (2015). Preventing the 51%-attack: a stochastic analysis of two phase proof of work in Bitcoin. 22nd Twente Student Conference on IT.
Buterin, V. (2013). ethereum/wiki. [online] GitHub. Available at: https://github.com/ethereum/wiki/wiki/White-Paper
Chang, W., & Wu, J. (2014). Survey of Sybil Attacks in Networks. In Sensor Networks for Sustainable Development. CRC Press:497–534.
Castillo, M. (2018). Deloitte Blockchain Boss Departs To Build Ethereum Supply Chain. Forbes. Available at: https://www.forbes.com/sites/michaeldelcastillo/2018/05/14/deloitte-blockchain-boss-departs-to-build-ethereum-supply-chain/#4449ff203a02
IBM (2018). Maersk, IBM to Form Joint Venture to Digitize Supply Chains. IBM. Available at: https://www-03.ibm.com/press/us/en/pressrelease/53602.wss
Meqdadi, O., Johnsen, T. E., & Johnsen, R. E. (2017). The role of power and trust in spreading sustainability initiatives across supply networks: A case study in the bio-chemical industry. Industrial Marketing Management, 62:61–76.
Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. Available at: https://bitcoin.org/bitcoin.pdf
Saleh, F. (2017). Blockchain Without Waste: Proof-of-Stake. Working Paper.
Shin, L. (2017). IBM’s Jerry Cuomo On Everything From Blockchain Security To Hyperledger To The Internet Of Things. Forbes. Available at: https://www.forbes.com/sites/laurashin/2017/05/02/ibms-jerry-cuomo-on-everything-from-blockchain-security-to-hyperledger-to-the-internet-of-things/#57d0ae6b6c6d