Project Empower – Part 1: Designing to make a real difference

As we get ready to finalise Project Empower, and introduce it to our community of stakeholders, we thought it would be useful to set the stage for those who’ve been following and supporting our journey, as well as bring others up to speed.

There’s a bit of ground to cover, so we’ve broken things down into a few parts. This post is Part 1.

Setting the Scene

Project Empower is a capstone over a series of Ecosystem Projects we’ve been working on. These are:

1. Project Kratos;
2. Project Demos;
3. Project Revelation; and
4. Project Fiducia.

We’ll describe these Projects separately in future posts. For now, in this overview, we introduce the fundamental problem definition, design philosophy and some of the key results.

Defining the problems

We began BeefLedger because of two major problems in all sorts of supply chains, with a particular focus on that for beef:

1. A collapse in trust when it came to credence claims – both by business and consumers let’s call this a basic diminution of trust in the authenticity claims from existing chains, their dominant actors and authorities (often made worse by bad actors exploiting circumstances); and
2. Costly finance along the supply chain, making it both expensive and , risky and difficult, for especially new entrants and independent producers wanting to ‘reach out beyond the mainstream’ structures and channels and ‘do things differently’. This is stifling innovation.

We saw an opportunity to address both these problems at the same time. That’s because at the heart of the solution lies the broader community of citizens who consume the products and ultimately give the supply chain its value. We wanted these people to have the opportunity to be actively involved.

Opening up supply chains to the community of consumers, so that ordinary people can be involved and benefit from supporting credential claims and ultimately providing supply chain finance, underpinned our design philosophy.

Designing Solutions

Our design solutions are anchored in two principles:

1. Build from and go beyond ‘track and trace’; and
2. Invite the consumer community in.

Beyond track and trace

We saw an opportunity to go beyond ‘track and trace’ (which is essentially a backward looking exercise) and incentivise going forward. That’s what mechanism design makes possible.

We’ve designed a socio-economic ecosystem utilising blockchain technology as its base, so as to reward the pursuit of excellence and open up the pathway for communities to become increasingly involved in the credence value creation of supply chains; and also the financing of these supply chains.

Asset tracking is important, of course, especially from the point of view of financing the supply chain. That’s why we developed the Decentralised Asset Identification Certificate (DAI-Cert) using ERC721 non-fungible token protocols as the basis. We’ll expand on this initiative in the future in more detail.

But tracking assets using decentralised cryptographically driven systems can do so much more. For us, effective credence claims must be anchored by the economics of authenticity for both products and actors involved. (We will discuss this in more detail in a separate post as part of this series.)

Inviting the Consuming Community in

The collapse in consumer trust towards supply chains and associated institutions of authority meant that just reasserting old systems under the guise of new technology was unlikely to be enough. That’s a broken record approach with a bit of added gloss.

The demand for transparency is a direct response to the collapse in trust.

But transparency isn’t the ‘be all and end all’. The promise of blockchain technology is much more than simply enabling dominant incumbents in supply chains to just say, “trust me now, it’s on our corporate blockchain”.

The Five Commons

BeefLedger Chairman Warwick Powell has previously talked about the ‘Five Commons’ of data supply chains. In all systems of information, there are five core activities or functions:

1. Data collection;
2. Data manufacturing;
3. Data Validation;
4. Data storage; and
5. Data dissemination.

In traditional supply chains, buyers (the community of consumers) are usually excluded from all but the very last of these, and only as ‘passive’ consumers of information. Information and product claims were asserted by supply-side actors, with periodic oversight from regulatory authorities, with varying degrees of success.

Addressing Data Cartel Risks

Sometimes, these structures work better than others. (In the Australian context, the track record is pretty good.) But inherent to this system of information production and validation is what we’ve described elsewhere as the risk of ‘data cartels’.

These days, opportunities for consumers to provide comments, feedback and ratings has improved and activated consumers a little more. But there remain real limitations and a fundamental lack of equity in the information systems that dominate the supply chain landscape. Consumers’ data is monetised by corporate platforms and suppliers. The value created by consumer data is largely captured by others. The consumer has to make do with a bit of ‘trickle down economics’.

We believe that consumers deserve much more than this.

Indeed, we believe supply chains are at their strongest and most resilient when communities of consumer are invited into each stage of the data supply chain. And that’s how we have designed our data validation protocols.

As a first step, we have embedded an organic multi-sig protocol to support all data state update proposals. We’re now testing a Community Attestation option that will soon be deployed as a choice that’s available for network members. These are all part of Project Kratos, which is underpinned by the idea that passive observation (via transparency) is only a first step, and mechanisms that create the possibility of more active engagement is a necessity.

So-called blockchain supply chain projects that are not – at their core – committed to opening up systems for community participation largely reinforce the existing trust problems of supply chains but with a ‘blockchain gloss’. In doing so, they miss the real opportunities to solve real problems at root.

Value Flow & Supply Chain Financing

With the possibility of community-wide involvement in all aspects of the supply chain of information, we were able to activate our design thinking around supply chain finance by fundamentally revisiting the question of risk and uncertainty. We did this within a framework of ‘value flow’.

Smart contracts and tackling information asymmetry

If the flow of money takes place when information conditions about things are satisfied then we could conceptualised how smart contracts could be designed to enable these information and value flow circuits to work with less friction, protected from capriciousness.

With the involvement of the wider community up-and-down the entire supply chain process, risks associated with ‘information asymmetry’ could readily be addressed.

Dysfunctional markets take place when there’s either hidden information or hidden action. By embedding transparency and opportunities for participation in all five stages of the data supply chain, core information-related risks associated with supply chain finance are tackled head-on. We can thus meaningfully open up supply chain finance opportunities to the wider community who are now in a position to scrutinize and be involved in the data processes that impact on the flow of goods or services (in one direction) and the flow or money (in the other direction).

A better deal with cryptocurrency

Cryptocurrency offered incredible opportunities for communities to develop and take on responsibilities for the tracking of value flows. As we aim to bring producer and consumer communities closer, there’s the opportunity to ‘shorten supply chains’ and reduce costs to end-consumers.

Data validation within our ecosystem requires less re-work. This is a cost efficiency dividend that should be harnessed by the participating community as a whole. This requires different actors to collaborate, with the benefits being reduced costs overall.

Cryptocurrencies provide the native means by which ecosystem value flows are managed. The ERC20 protocol underpins our approach, and together with cryptographically secured identities (via each person’s wallet – public-private key), our emerging ecosystem drives transactions in a transparent and secure manner. Transactions can be audited, along with the actors and signatories involved.

The use of blockchain-tracked cryptocurrencies also reduces transaction speed and cost, particularly in cross-jurisdictional environments. Our ecosystem design has been premised on the idea of moving towards increasing openness and plurality. We’ve done this in both the membership basis of the Proof of Authority network as well as on a commitment to deploying infrastructure to the Ethereum public network where possible. The POA network delivers some short-term benefits, such as reduced costs, which have been issues on the public network whilst awaiting the implementation of Ethereum 2.0 (Serenity). In our own way, the POA approach is our own version of a ‘layer 2’ solution.

All this aside, we believe that the possibilities of shortening the supply chain should become reality for the community by way of better value for money. So, when we deploy cryptocurrency in its most basic of functions – as a means of payment – the community must benefit by being able to access great products at great prices.

Key Infrastructure Elements

With this in mind, we proceeded to develop the first layers of the critical infrastructure that would be necessary to transform the promise of blockchain in supply chains into reality.

This infrastructure comprises the following:

1. An asset creation and tracking network, enabling community-wide involvement in the validation of credence claims and in approval event data state updates, and which delivers tools that strongly militate against asset identity fraud and transactions malfeasance;
2. A transactions engine enabling the mobilisation of asset tracking event state data as conditions precedent of transfers, with network-tracked cryptocurrencies being the objects of exchange;
3. An ability to ingest data about the analogue world into the blockchain in a manner that delivers enhanced confidence about actor identities and validity of asset and event data over and through time;
4. A marketplace that gives effect to delivering better value to buyers, and which supports the ‘shortening of supply chains’; and
5.  A bespoke cryptocurrency and digital assets exchange, delivering the liquidity, integrity, security and transparency that economic agents rightfully expect in any functional marketplace.

What’s at Stake

To our knowledge, BeefLedger is one of very few supply chain projects that has been designed from its very core from the perspective of the user community as a whole, whereby the technologies we are mobilising and developing are designed to open up the supply chain to wider public involvement.

For us, this is more than just opening up a limited range of information (credence claims), stored on a decentralised computer ledger, for post hoc visibility to the consuming audience. This would only be a modest improvement on the absence of transparency that prevails today.

Given the nature of the problems, however, a more comprehensive solution was not only needed but possible. And that is what we embarked upon.

What’s at stake is ultimately about whether the community of consumers are empowered together with independent producers and their support ecosystem to strive together towards new plateaus of excellence and value.

Part 2 will go into some of our design and development journey as we explored opportunities and challenges.

END