April 2020 - Blockchain Guide for Everyone

Blockchain-powered Smart Supply Chain Management -Auto Parts Business case study

The automotive supply chain is a highly complex and broad ecosystem with participants ranging from parts suppliers, manufacturers, sellers to aftermarket suppliers. All parts come with certain life expectancy, specific requirements and maintenance attributes. With thousands of spare parts, hundreds of parameters, and the number of manufactures distributed regionally or globally, the SCM team need to deal with a very large amount of data.

The two most common challenges are the need to keep inventories well-stocked but not overstocked, and the need to deal with the sheer amount of recalls. In addition, the industry is also facing a mirage of issues including tracking of parts, theft, counterfeit products, and data fraud.

Currently, centralized and siloed IT systems have been used to handle the issues but failed in many aspects. On the contrary, decentralized blockchain inherent features could offer perfect solutions to overcome the automotive parts supply chain issues.

All participants share a common data
Everyone has access to a single source of truth
Reducing intermediaries
Improved transparency
Trust is embedded in the system
Tamperproof due to its immutability

Blockchain technology can improve transparency across the supply chain and significantly reduces the cost and complexity of doing business with multiple parties. For automakers and suppliers, blockchain technology offers unique benefits starting with protecting their brands from counterfeit products to enhancing their brand experience by creating customer-centric business models.

Possible benefits of Blockchain usage in SCM

Identification and Tracking of Automotive Spare Parts

Counterfeit Protection -Verifying Authenticity and Origin

Counterfeit products are a significant issue for automotive manufacturers / suppliers and the counterfeit spare parts market is currently estimated at several billion dollars. Counterfeit spare parts are often of low quality and thus more likely to fail. This leads to dissatisfied customers and trust in the brand .

The Blockchain technology offers significant advantages over existing solutions where spare parts can be uniquely identified and digitally represented. The digital identification of these parts can be shared transparently to multiple parties in the blockchain business network.

Mutual collaboration is facilitated within the parties knowing that sensitive business information remains confidential. Confidentiality is enforced through blockchain cryptographic methods, hence protect integrity of the data not only from manipulators within the business network but also externally from attackers.

Spare parts service centers can accurately verify the authenticity of parts during replacement. The immutability of blockchain provides for a tamper-proof solution and offers a single source of truth. This will enhance the trust relationship between customers and the manufacturer.

Protection of Aftermarket Business

The global aftermarket business was valued at over 800 billion USD in 2018 and expected to grow to over a trillion USD over the next 10 years. Over 50% of this market consists of the sale of vehicle spare parts and business is split across OEM (Original Equipment Manufacturer) and IAM (Independent Aftermarket) Suppliers.

As each product or part is uniquely represented on the blockchain, the technology can be applied to enforce business terms related to the exact production volume and timing. This level of enforcement can also be applied for manufacturers working with more than one supplier as part of their dual sourcing strategy.

Spare Parts Liability Resolution

In case a spare part needs to be replaced due to failure, liability needs to be established and this requires tracing the part back to the manufacturer. If parts are identified and digitally represented on the blockchain, it offers an accurate way to trace the origin. Liability is thus clearly established and is transparent to all parties in the blockchain. Any liability disputes can be resolved much faster and resources can be focused on customer engagement.

Vehicle Recall Optimization

Many of the recalls involve product defects that are life-threatening and automakers are exposed to a huge liability. With blockchain technology , the car and the individually assembled parts can be uniquely represented on the blockchain. If automakers can accurately identify which defective parts were installed in which cars, then the scope of the recall can be precisely executed thus result in massive cost savings.

Optimizing the Supply Chain Process

Inbound Logistics and Smart Manufacturing

Efficient planning of production capacity requires the manufacturing plant to coordinate between multitier suppliers, 3rd party logistics and transportation companies. Tracking and tracing individual parts across the inbound supply chain is complex and error-prone. Accurate, real-time information is not available and information is spread across individual databases.

By using a distributed immutable blockchain ledger across all parties, an accurate view of the status, quantity and location of the individual parts can be established. This can improve real-time logistics and plant production capacity.

Outbound Logistics Planning

The outbound supply chain in the automotive sector consists of a complex network of manufacturers, distributors, importers, and dealers. Like the inbound supply chain, participants in the outbound supply chain do not have a common data-sharing model.

Having a shared blockchain based system across the different participants will offer transparency and visibility. This will ensure faster transactions by lowering settlement periods.

Business Model Innovation

Car Personalization and Customer Engagement

The driver profile along with car customization preferences can be saved in a personal blockchain wallet. Shared or lease cars will authenticate the driver using the wallet and the car settings are personalized based on the driver profile. Automakers and mobility operators can thus create new business models focusing on individual preferences

Dynamic Pricing Models in Automotive Insurance and Leasing

A driver profile including miles covered, economical usage of vehicle and accident history is securely stored on the blockchain. Users share this data with providers offering insurance and leasing products based on their personal driving profile. The advantage that blockchain technology brings here is that the driver profile and historic events are immutably stored on the blockchain providing a single source of truth.

Digital Car Wallet

Ownership history, maintenance, and repairs can be transparently, and verifiably stored in a blockchain-based car wallet. Ownership record and fair price assessment of second-hand cars can be quickly established and transferring ownership can be done faster.

As vehicles are uniquely identified on the blockchain, stolen cars can be easily tracked and traced. Lack of trust and business friction arising in the transfer of ownership is hugely reduced. If repairs and parts replacements are verifiably tracked on the blockchain, warranty claims will be transparent for all parties.

M2M Transactions

Blockchain technology offers a unique way to automate transactions between machines and enable the future of M2M commerce. Cars in the future will be equipped with blockchain-based wallets and transactions with toll booths, park stations, and electric charging outlets will be automated without manual intervention.

The Solution-Hyperledger

Hyperledger is an open source effort created to advance cross-industry blockchain technologies hosted by The Linux Foundation. Hyperledger is a group of open source projects focused around cross-industry distributed ledger technologies. Hosted by The Linux Foundation, collaborators include industry leaders in technology, finance, banking, supply chain management, manufacturing, and IoT.

The Hyperledger project has been a collaboration of players from various industries and organizations in technology, finance, banking, supply chain management, manufacturing, IoT and more. Since its inception in December 2015, it has managed to enlist many prominent members that include IBM, Intel, NEC, Cisco, J.P Morgan, AMN AMRO, ANZ Bank, Wells Fargo, Accenture, SAP and more.

This image has an empty alt attribute; its file name is image.png — The Hyperledger Framework

Hyperledger Fabric

Hyperledger Fabric is the first blockchain project developed and hosted by the Linux Foundation. According to the Linux Foundation , it was Intended as a foundation for developing DLT applications or solutions with a modular architecture.

Hyperledger Fabric is an open-source enterprise-grade permissioned distributed ledger technology (DLT) platform, designed for use in developing enterprise applications. It features some key differentiating capabilities over other popular distributed ledger or blockchain platforms.

Hyperledger Fabric is a blockchain framework that runs smart contracts called chaincode, which are written in Go. You can create a private network with Hyperledger Fabric, limiting the peers that can connect to and participate in the network. This private network can be hosted on AWS or other web service provider such as Microsoft Azure , Oracle or IBM.

One special feature of Hyperledger Fabric is that it allows components, such as consensus and membership services, to be plug-and-play. Besides that, Hyperledger Fabric uses container technology to host smart contracts called chaincode that comprises the application logic of the system.

The AWS Blockchain Template for Hyperledger Fabric creates an EC2 instance with Docker and launches a Hyperledger Fabric network using containers on that instance.

The network includes one order service and three organizations, each with one peer service. The template also launches a Hyperledger Explorer container, which allows you to browse blockchain data. A PostgreSQL server container is launched to support Hyperledger Explorer.

Channels are another unique feature of Hyperledger Fabric. They allow transactions to be private between two actors, while still being verified and committed to the blockchain.

Hyperledger Fabric Architecture

Hyperledger Fabric has a highly modular and configurable architecture. Therefore, enterprises can make use of its versatility to develop innovative business applications. Besides that, it can be used to optimize the applications. Indeed, Hyperledger Fabric is well suited to develop a broad range of industry use cases including banking, finance, insurance, healthcare, human resources, supply chain and even digital music delivery.

Hyperledger Fabric is a permissioned blockchain network that provides ledger services to application clients and administrators. It allows multiple organizations to collaborate as a consortium to form the network. The permissions to join the network are determined by a set of policies that are agreed to by the consortium when the network is configured.

Hyperledger Fabric Network

The Hyperledger Fabric network comprises the following components:

Ledger
Peers
Ordering service Chaincode (aka smart contract)
Channels
Membership service provider

The Hyperledger ecosystem also consists of the client applications that allow users to interact with the network. Moreover, The Hyperledger Fabric application SDK provides a powerful API for developers to program applications to interact with the blockchain network on behalf of the users.

Channels are data partitioning mechanisms that allow transaction visibility for stakeholders only. Each channel is an independent chain of transaction blocks containing only transactions for that channel.

The chaincode (Smart Contracts) encapsulates both the asset definitions and the business logic (or transactions) for modifying those assets. Transaction invocations result in changes to the ledger.

The ledger contains the current world state of the network and a chain of transaction invocations. A shared, permissioned ledger is an append-only system of records and serves as a single source of truth.

The network is the collection of data processing peers that form a blockchain network. The network is responsible for maintaining a consistently replicated ledger.

The ordering service is a collection of nodes that orders transactions into a block. The world state reflects the current data about all the assets in the network. This data is stored in a database for efficient access. Currently, supported databases are LevelDB and CouchDB.

The membership service provider (MSP) manages identity and permissioned access for clients and peers.

Channels partition the Fabric network in such a way that only the stakeholders can view the transactions. In this way, organizations can utilize the same network while maintaining separation between multiple blockchains. The mechanism works by delegating transactions to different ledgers. Members of a channel can communicate and transact privately. Other members of the network cannot see the transactions on that channel.

References

Security Token Offering

Recently, Security Token Offering (STO) has emerged as a new option in fundraising in the blockchain/crypto space after ICOs have been banned or heavily regulated in many countries. ICO projects were banned because many of the projects were scams. In China, they called such coins “Air Coins” and in the west, they called them “S**t coins”.

In contrast to ICO tokens which are mostly utility tokens, security tokens are backed by underlying tangible assets aka RWA(Real World Asset) that have monetary value, such as stocks, bonds, funds, bank reserves, properties, minerals and more. In fact, Security Token Offering (STO) can be considered a hybrid model between initial Public Offering (IPO) and ICOs.

A security token represents the ownership of a tokenized underlying asset that is stored on the blockchain. Security tokens holders are entitled to an array of rights including equity, dividends, profit sharing, voting rights and more. These rights are written into smart contracts and traded freely as digitized tokens.

Tokenization is a method that converts rights to an asset into a digital token. Thus, we can take an asset, tokenize it and create its digital representation that lives on Blockchain. Blockchain guarantees that the ownership information is immutable. Tokens created in this way are also known as crypto tokens or security tokens. The benefits of tokenization include the ability to fragmentize large assets and expensive assets, achieve greater liquidity, achieve lower insurance costs and higher market efficiency.

For example, you can tokenize an asset such as a book that you authored. The book is kept somewhere while the book token is uploaded to the blockchain network. The book crypto token is a representation of the book ownership. You can specify how many tokens need to be transferred to your crypto wallet before you can transfer the book ownership to a buyer by means of a smart contract.

Cryptokitties is a brilliant example of the crypto token that allows users to acquire an adorable collectible by transferring some cryptocurrencies to the owner. The owner will then transfer the digital collectible to the buyer. The transaction occurs automatically via the smart contract.

STOs are usually more acceptable to the regulatory bodies as they are asset-backed and comply with regulatory governance. They are seen as a more legitimate method of fundraising. Compared to ICO, It is much more difficult to launch an STO, as it is governed by strict securities law.

Therefore, STO projects will have to conduct due diligence work to make sure they comply with the relevant regulations that are usually imposed by the security commission of a country. They would typically only be able to raise funds from accredited investors who need to pass stringent whitelisting and KYC processes. In addition, the financial cost of launching an STO is higher compared to ICO, though it is cheaper than the traditional IPO.

The process of launching an STO is nearly the same as IEO and ICO but drafting legal documents with the help of a qualified legal adviser is more important than the latter two. They may need to furnish a prospectus just like the IPO, depending on the amount of money they wish to raise and the jurisdiction of different countries.

Despite the additional legal restrictions and financial cost, STO campaigns have been fairly successful. For example, the blockchain venture capital firm Blockchain Capital was able to raise USD$10 million via its STO initiative in 2017. Nexo, a company that operates crypto-backed loans worldwide, successfully raised USD$52,500,000 in 2018.

The success of Polymath was even more phenomenal, its STO campaign managed to raise a total of USD $207,300,000 in 2018. Polymath is an interface between financial securities and the blockchain, helping issuers to overcome the complex technical and legal challenges related to issuing regulated securities on the blockchain. This cutting-edge blockchain platform offers a comprehensive tokenization process with decentralized protocol. Polymath allows a company to quickly and conveniently raise capital and mint security tokens.

Steps in conducting an STO

Step 1 Assemble A Formidable Team

In this era where information is instantly available, potential investors and Exchanges will know instantly the background of the project team members. If the project team comprises mostly inexperienced people, it will seriously affect the confidence of the investors and the Exchanges. Therefore, the project owner must assemble a formidable team that comprises experts in business, legal, technology, marketing, and other related disciplines. As most STO projects are blockchain-based, it is a must to hire blockchain experts.

Step 2 To Decide Whether STO is Suitable for the Company

Though STO might be easier and less costly than traditional IPOs, it is not necessarily more beneficial. Therefore, the project needs to analyze and evaluate the options before deciding to go ahead with STO.

Step 3 Decide on the types of Security Token

The project team needs to decide on what type of security token they wish to issue. The most common type is the equity token. Equity token means token holders become a shareholder of the company which allows them to receive periodic dividends and have voting rights.

Another type of token is the debt token (or bond token) which means holders are entitled to receive periodic interests based on the underlying digital assets they lend to the company. The token holder is a lender(the creditor) rather than a shareholder of the company.

Step 4 Decide on the Soft Cap and Hard Cap

Next, the project team must decide on the amount to raise in the STO campaign. Specifically, it means they have to decide on the soft cap and hard Cap. A hard cap is the upper limit of the STO’s goal whereas a soft cap is the lower limit, more like the actual amount the team is aiming to raise. Besides that, they have to determine the initial token price at the private sale stage, how many tokens to be minted and how will tokens are distributed.

Step 5 Writing the whitepaper

The whitepaper is a document that comprises a thorough description of the project, distribution of tokens, business model, tokenomics and more. It also includes information about the project team which usually comprises the board members, the marketing team, the technical team, the legal team, and the advisers.

Writing the whitepaper is a very important step in the IEO campaign. It is an important document that showcases the project. Whether the investors will be impressed and looking forward to investing in the project depends on how well the paper is written.

Step 6 Developing the Token

The token is an integral part of the STO project. Without a native token, what can you sell to the investors? Therefore, it is crucial to design the token from day 1, and start developing it as soon as possible.

Most tokens for STO projects are ERC20 tokens. The ERC20 standard is chosen because it can be easily designed and deployed to the Ethereum main net. However, if you want a customized token and your team has the expertise and programming skills, you can develop a different protocol from the Ethereum main net, or even develop your own blockchain system.

Step 7 Marketing

The project team must carry out an aggressive marketing campaign for its STO initiative in order to broadcast the news to as many investors as possible. However, they need to choose a jurisdiction that allows STO campaign, is crypto friendly and has less redtapes. I would recommend Malta as they are crypto friendly and intend to turn the country into an international STO hub.

The marketing campaign can be conducted through websites, blogs, as well as social media platforms such as Facebook, Twitter, WhatsApp, WeChat and more. They can also organize events and conferences to promote their token but they need to check whether these activities can be conducted in certain countries. For example, you cannot do so in Malaysia and China.

Step 8 Listing Your Security Token

Finally, the project team also must choose a crypto Exchange to list its STO. They need to conduct due diligence in searching for a trusted Exchange before deciding to engage one. A good guide is to look for Exchanges that rank within the top 50 on Coinmarketcap. Besides, they need to analyze reviews of the Exchanges on various crypto platforms. STO fees may also be another concern, as a top rank Exchange may charge an extremely high fee. Therefore, there is always a trade-off between the fee and the reputation of the Exchange.

References

https://hackernoon.com/security-token-offerings-what-is-it-and-how-to-market-it-a067f46a6f2

https://diamco.io

https://blog.tokenomica.com/6-essential-steps-for-launching-and-preparing-your-sto

https://www.coinist.io/crypto-hard-caps-soft-caps/

Fighting COVID-19 with Blockchain

COVID-19 outbreak has become a global pandemic in recent months. The epicenter of the outbreak has moved from China to Europe and then the US. It has sickened hundreds of thousands of people and caused ten of thousands of deaths.

The coronavirus pandemic has highlighted many of the applications for blockchain technology. For example, Blockchain technology has been proposed as the most efficient means through which the United States’ stimulus package could be distributed.

On the other hand, the Chinese government has deployed blockchain in numerous applications to assist its efforts to fight COVID-19, using DLT to track the virus’ spread, medical records, and the distribution of medical supplies and charity donations.

To fight the outbreak, WHO has launched a DLT platform for sharing data pertaining to the COVID-19 Pandemic. In addition, some companies and non-profit organizations have also launched blockchain-based projects to counter the outbreak of COVID-19. Let’s examine a few of the aforementioned initiatives :

WHO

WHO has launched the blockchain-based platform know as MiPasa to fight COVID-19. The platform will enable “early detection of COVID-19 carriers and infection hotspots. It was built on top of the Hyperledger Fabric. Hyperledger Fabric is an open-source enterprise-grade permissioned distributed ledger technology (DLT) platform.

The MiPasa platform was co-developed by MiPasa, IBM, Oracle, Hacera and Microsoft. It aims to facilitate fully private information sharing between individuals, state authorities and health institutions.

MiPasa is a verifiable information highway that allows cross-references siloed location. Furthermore, health data is stored on the platform to obtain global insights while ensuring patient privacy. Besides that, MiPasa is will host an array of publicly accessible analytics tools too.

SNARK HEALTH

Snark Health is a platform that connects patients, doctors, insurers, and donors for health care services, private data sharing and payments via the blockchain technology.

To combat COVID-19, SNARK is building a framework for data-driven discussions and shared learnings to help people have a greater impact at their respective local, state, national level in collaboration with their organizations and governmental agencies. It aims to enable more rapid dissemination of information to improve patient outcomes.

The goal of this project is to facilitate the exchange of knowledge, best practices, and lessons learned to support the people and organizations that are tasked with problem-solving at the local level across the globe. According to SNARK, there remain many unanswered questions in regards to the clinical, operational and financial aspects of the COVID-19 pandemic. Through the process of answering these critical questions, the new framework could lay the foundation for global triage support, improved access to health care services and clinical research.

BINANCE

Binance’s Blockchain-powered donation platform Binance Charity has initiated a $5 million coronavirus relief campaign At the time of writing this article, its “Crypto Against COVID” campaign has received 24 donations, amounting to a total of 160.6306 BTC. A wallet has been set up for public donations, which can be made in BNB, BTC, BUSD, and XRP. Besides that, Binance will make an upfront donation of $1 million in BUSD, which will be converted to fiat and used to purchase supplies to send to hospitals in affected countries.

In addition, Binance will also match donations up to $1 million. Furthermore, the company will donate $1 for every retweet of its #CryptoAgainstCovid posting and will donate an additional $1 million if the number of retweets reaches 1 million within seven days.

As of March 20 this year, Binance Charity has delivered a number of coronavirus aid products to over 300 hospitals and medical teams in multiple provinces and cities, including Hubei, Sichuan, Guangxi, and Shanghai. The items delivered include 366,000 pairs of gloves, 56,800 masks, 9 sterilizers, 173 barrels of disinfectant, 5,280 bottles of hand sanitizers, 20,000 testing kits, 7,850 protective suits, 20,000 pairs of goggles, 388 oxygen concentrators, and 1000 germicidal lamps.

Hashcash Consultants

Hashcash Consultants has launched the Corona Fund Index Cryptocurrency (CFIX), a coronavirus relief initiative involving cryptocurrency.

This global software firm promised that 90% of trading fees derived from CFIX will be diverted to its Corona Relief Fund. The fund will be donated to various non-profits and organizations that are actively combating the global COVID-19 pandemic crisis.