Social Scalability

By lowering the barriers to entry, we maximize the network effect found in supply chains. This unique combination of benefits that a blockchain provides is said to improve a quality called “social scalability.” If every organization has their own set of rules, culture, behaviour, politics, ethics, laws, etc., then the probability of engineering a single system that is equally equitable to all parties is greatly reduced so long as a one party controls it.

To improve social scalability, the blockchain makes tremendous trade-offs between scalability and security, to favour security at the expense of all else. It is perhaps the least scalable database if used directly, but through carefully well-engineered systems — the blockchain can still be used to solve complex trust problems without drastically reducing scalability.

Reputation Systems

In practice, blockchains excel at removing trust in systems that are self-contained, but only a handful of problems can be truly represented in this form. A secure property registry [1] is the canonical example because it can be represented with little third-party trust because all of the information needed is self-contained and verifiable in the same system. But other, more complicated systems (like supply chains), need to rely on outside verifiers or “oracles” to ensure the integrity of information before it is stored on the blockchain.

If third-party trust in a set of oracles is still required to maintain integrity, then the main benefits of a blockchain are lost [2]. One possible solution to this problem is to introduce a reputation system [3]. Reputation systems have been shown to be highly effective at solving trust problems — even in extremely adversarial environments like deep web marketplaces where none of the participants know or trust each other. For this reason, reputation systems work well for solving complex trust problems but they are far from incorruptible, and their introduction reduces social scalability [4–5].

Evidence Based Approach

To avoid the problem of having to rely on a single trusted third-party the Ambrosus protocol introduces a holistic, evidence-based approach. As products move through the supply chain tamper-proof packaging and intelligent sensors are used to detect fraud [6]. Every actor must sign off on the receipt of goods from the previous actor, thereby establishing a provable chain of custody. This is similar to the use of checks and balances in accounting where no single actor is allowed to have full control over the entire process and the responsibility for integrity ends up being shared between all sides [2].

We improve on the idea of provable chains of custody by applying analytical sensors towards assessing chemical-organic properties. This is the simplest way to prove that goods have been created to a given standard without worrying about manipulated data because it becomes increasingly difficult to describe a physical good that you don’t have, that can satisfy every metric without knowing how each and every parameter is related. We intend to combine a range of data into a unified, statistical model based on machine learning approaches to form a kind of analytical fingerprint for securing the integrity of physical and organic goods.

Holistic Model

Analytical fingerprints form part of the solution, but in the future we may also consider a holistic model that combines intelligent accounting controls with automated smart contracts, offering additional security [2]. For example, a land registry on the blockchain could contain records of an area and its location. These records could then be cross-referenced with information provided by sensors to detect whether or not a given yield could have been grown at a select location based on the size of the area owned, its unique weather patterns, soil content and the relation this information has with the analytical fingerprint of goods.

Another interesting example might be to consider the flow of money as part of running a business as a form of proof-of-stake [7] and use that evidence to infer the existence of goods. For example, if a producer or manufacturer is producing goods then surely there should be a trail of assets moving between the expected parties such as the workers, suppliers, and other actors in the chain — or put as a real world question: how could someone be producing organic goods, if they don’t have token receipts for organic pesticides from the expected suppliers?

During this process, some of these assets could even be consumable tokens used as part of a proof-of-burn contract [8] to mint complex assets, or they could encode business processes that dictate the expected relationships between business information. For instance, the pay roll required to run an operation based on a given yield size; or the certifications needed by a factory to be considered valid and/or capable of producing a particular kind of good.

Conclusion

It is clear that a combination of approaches from provable chains of custody, analytical fingerprints, smart accounting controls, and so forth, offer the best improvements over a traditional reputation system. However, any oracle-based system cannot remove the possibility for unexpected outcomes.

We attempt to reduce their occurrence as much as possible with a holistic model, but actors in the supply chain will still need to rely on some standard contracts to hedge against adverse events like changes to commodity prices, the bankruptcy of business partners, accidents in the supply chain, or even intentional sabotage.

We will improve more on these processes in the future [9]. We plan to build a system for anti-counterfeiting protection within our future Center of Excellence. Our future protocol version will incorporate more of these concepts in order to reduce fraudulent practices.

For more information visit Ambrosus.

Sources:

[1] http://nakamotoinstitute.org/secure-property-titles/

[2] http://firstmonday.org/ojs/index.php/fm/article/view/548/469-publisher=First

[3] https://www.cypherpunks.to/faq/cyphernomicron/chapter15.html#2

[4] ttp://unenumerated.blogspot.com.au/2017/02/money-blockchains-and-social-scalability.html

[5] https://motherboard.vice.com/en_us/article/xyw7xn/darknet-slang-watch-exit-scam

[6] https://ambrosus.com/wp-content/uploads/2017/07/4-2_Food_Sensors_and_TracersNEW.pdf

[7] https://bitcointalk.org/index.php?topic=27787.0

[8] https://en.bitcoin.it/wiki/Proof_of_burn

[9] https://ambrosus.com/wp-content/uploads/2017/07/5-1_Operations_and_ApplicationsNEW.pdf