BLOCKCHAIN, DLT & SMART CONTRACTS
WHAT IS BLOCKCHAIN?
A blockchain is, in the simplest of terms, a time-stamped series of immutable records of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) is secured and bound to each other using cryptographic principles (i.e. chain).
Blockchain is a distributed database that maintains a list of records. Each record is called a block, and each block contains the history of every block that came before it.
Authors Don and Alex Tapscott of a book titled Blockchain Revolution describe the blockchain as “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
WHAT IS DISTRIBUTED LEDGER TECHNOLOGY “DLT"?
Distributed ledger technology (DLT) is a digital system for recording the transaction of assets in which the transactions and their details are recorded in multiple places at the same time.
WHAT IS A SMART CONTRACT?
A smart contract is a computer program or a transaction protocol respectively, which is intended to automatically execute, control or document respectively legally relevant events and actions according to the terms of a contract, of an agreement or of a negotiation. The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious and accidental exceptions.
HOW DOES BLOCKCHAIN SUPPORT SUSTAINABLE PRACTICES?
Blockchain allows for tracking any value or asset (tangible or intangible) throughout its lifecycle. Transparency in supply chain tracking gives producers a bird's-eye view into their value chain, supporting them to guarantee the proper handoff of third-party assets and final product labeling.
Additionally, it hosts the possibility of creating a transparent ecosystem, where stakeholders, regulators and auditors can verify the production processes efficiently, reducing complexity.
Blockchain can track the production progression, record the information, and show previous records. Therefore, it can significantly expand the potential of sustainable and ethical production and consumption of any commodity on a global scale, supporting circle-economy models.
Sustainability has gone from a ‘nice-to-have’ to an almost absolute necessity. Nielsen reports that 66% of global consumers and 73% of millennials are willing to pay more for sustainable goods. By tokenizing sustainability values and allowing consumers to see the source of their carbon offset print, the growth opportunities increase relative to the consumers’ standards development. Investing today in tools that support that aim cost-efficiently, will set the track for the thriving business of tomorrow.
HOW DOES BLOCKCHAIN IMPROVE DATA MANAGEMENT?
Managing data in silos leads to suboptimal procedures and critical reconciliation issues. Essential information can be appended conveniently to a blockchain and exchanged securely across business lines, operations and stakeholders. Blockchain is the go-to technology for sharing information when trust and transparency are at stake.
HOW DOES BLOCKCHAIN REDUCE COSTS?
Blockchain technology can significantly reduce operating costs across sustainable circular-economy systems, enhancing supply chain management, and reducing the risk of double-counting and greenwashing. While peer-to-peer distributed ledgers broadly strengthen supply chain management and sustainable claims, improvements in data processing, immediate cost savings from new kinds of Just-In-Time inventory management and improved trust and interactions among stakeholders are also part of the expenses reductions’ benefits. Blockchain provides a lightweight and easy to integrate layer for data reconciliation across service lines and operations, that ensures the quality of standards in sustainable production.