Regulation poses a threat to industry’s innovation

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Logistics giant DHL announced it had partnered with Accenture and created a Blockchain-based supply chain prototype March 12. “DHL and Accenture created a blockchain-based serialization prototype with nodes in six geographies to track pharmaceuticals across the supply chain,” the release reports.

“The ledger tracking these medicines may be shared with stakeholders, including manufacturers, warehouses, distributors, pharmacies, hospitals, and doctors. Lab-simulations show how blockchain could handle more than seven billion unique serial numbers and 1,500 transactions per second.”

DHL and Accenture’s pharmaceutical prototype is just one of the use cases highlighted in their trend report. Blockchain technology shows great promise for dramatically improving the efficiency and reliability of supply chains in all industries. Just today, Accenture also announced a “revolutionary” blockchain solution for a supply-chain consortium involving AB InBev, Accenture, APL, Kuehne + Nagel and a European customs organization. This is another emerging model, companies banding together to create a consortium, like B3i, a group of 15 insurance companies collaborating to increase transaction efficiency.

According to the International Data Corporation (IDC), global spending on blockchain solutions is forecast to reach $2.1 billion in 2018, more than double the $945 million spent in 2017. In 2021 annual spending is expected to reach $9.7 billion, according to IDC Worldwide Semiannual Blockchain Spending Guide, 2017H1.

The potential for blockchain in logistics is akin to the internet in the ‘90s. The current challenges involve some necessary huge technical strides to move from concept and pilot application to actually deploying viable solutions, mostly around scalability and power usage.

But what about regulation?

Blockchain technology could drive the most significant change in society since the American Revolution, U.S. Rep. Tom Emmer says, speaking at the D.C. Blockchain Summit last week. But only if regulators resist the temptation to be heavy-handed.

“But the transformative potential of blockchain and cryptocurrencies will never be fulfilled if regulators overreach, said Emmer.

“We have to be vigilant and we have to remember that you create room for innovation when you don’t stifle it,” said Emmer. “And too much regulation, too many regulators has a tendency to put a wet blanket on it.”

Also last week at the Cantech Investment Conference, Frank Holmes, the chairman of HIVE Blockchain Technologies, spoke on a panel titled “Blockchain: Hype or Hope?” along with Anthony Di Iorio of Ethereum and Jaxx Wallet and Kevin Rooke of Coinsquare. Cantech is Canada’s largest technology investment conference, which brings together over 3,5000 investors and more than 100 tech companies.

The panelists were asked if they were concerned about regulation.

“No, I think it’s about education,” says Anthony Di Iorio. “The key is trying to educate people about the technology, about what this is going to for sectors, for jobs. I think that’s one of the things that really been missing, is ways to break it down for them, to show them how they can benefit from these technologies. The countries that do this and who help the technology build itself are going to be the real winners.”

Rooke of Coinsquare says across the industry most seem to realize that regulation is a good thing. “It is actually a sign of market maturity. You do have to work with regulators and make sure we’re on the same page moving forward. And again we don’t really know where things are going to go, but overall it’s a good thing.”

Di Iorio said, “I think one of the things about internet-unlocked information, information 1s&0s—and now value is 1s&0s as well—is good. Information should be free, and information should be able to expand beyond borders. I think we’re actually going to look back and say ‘Wow we actually tried to control value within our borders. And I think we are going to have regulations, but I think information is value and it should expand beyond borders. One thing we need to remember is these technologies are decentralized, and regulation may have its place, but how can we look for better alternatives and ways to tackle the real problems. Back in the day people were saying the same thing about the internet. The real value of what these technologies can do humankind is what we should be focused on, and I think the governments and the ones who realize that early will be the ones that distinguish themselves.”

What about the issue of power usage?

Frank Holmes says Hive is working with Genesis mining, the largest cloud-based company to outsource to do your mining with. “They go with stranded electricity,” he says.

“Whether it’s in Eastern Europe or Canada where there are pulp mills that are gone. You’re actually using surplus energy in Iceland that’s geothermal energy. You get this story that we’re using more electricity in the industry than the country of Denmark, and it’s so greatly exaggerated. I think there will be a point where all these pockets of electricity that are not connected to a grid, that are doing nothing, like Northern Quebec, Manitoba, British Columbia, and some places in Ontario, that will all of a sudden benefit from this.”

Public blockchain or private?

Success also depends on all parties working together to transform legacy processes and to jointly adopt new ways of creating logistics value. Organizational transformation and a willingness to collaborate between all stakeholders is increasingly the topic of conversation.

While Bitcoin is based on a public ledger that anyone can use to make secure financial transactions, Accenture is focused on building private blockchains that only its clients, their business partners and customers can access. It’s seeing the most demand in three areas: financial services, supply chain and identity.

But why does Accenture need to use blockchain to link entities together privately, instead of a simple database? According to David Treat, managing director and co-head of Accenture’s global blockchain practice, it comes down to trust. Historically, organizations have rarely trusted one company to become a central data repository, “either because of the proprietary value of their data or due to a lack of trust in others.”

According to JP Morgan blockchain head, Amber Baldet, private blockchains are faced with the same concerns as anyone building public blockchains today.

“These problems really aren’t so far apart, it’s just that people are trying to solve the problems in different ways,” Baldet said at EthCC, an ethereum conference in Paris this past Friday.

According to Baldet, who speaks with enterprises, business, central banks and corporates about blockhains, the conversations of private-public are crucial to mutually educate and improve both sectors of the industry.

“I don’t think those two things [public and private blockchains] need to be so different or are necessarily mutually exclusive.”

Similarly, Accenture’s projects with supply chain companies are based on interparty communication to bring a product from a factory to a store shelf. A blockchain can serve as one system that countless companies can plug into and are more likely to trust.

Accenture is also a founding member of a public-private partnership called ID2020 that aims to solve a wide range of identity problems, from helping the one billion people around the world who don’t have an official identity to solving the customer-service headache of having to provide your information every time you deal with a company or service provider.

Blockchain’s digital potential for the supply chain industry is gaining so much traction because of the inefficiencies of tracking goods through so many paper-based sources and multiple interfaces. The open and collaborative approaches between regulators and innovators, public and private blockchains, and related stakeholding consortiums, is key to gaining traction in the industry and the required market acceptance.

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