by Kevin Madden
Although “blockchain” is still an unfamiliar concept to many people, most individuals involved in business and technology have at least heard the term. Blockchain was first introduced in 2008 by a figure named Satoshi Nakamoto as the technology behind the now world-famous cryptocurrency, bitcoin. While its most significant application has been in the financial industry, the hype surrounding cryptocurrencies and bitcoin has led experts to wonder what impact blockchain could potentially have in other sectors of the economy.
Blockchain has also garnered the interest of investors and technology enthusiasts in Canada. A blockchain supercluster application was submitted as a possible recipient of substantial government funding (Canada’s Innovation Supercluster Initiative), and although it did not ultimately succeed, the proposal raised $50 million in pledged support from 60 partners. The plan was to locate the supercluster in the Toronto-Waterloo region in order to capitalize on the wealth of blockchain expertise in Southwestern Ontario. Despite the lack of funding, those behind the blockchain proposal still plan on moving forward with the project.
Ontario’s historically powerful manufacturing sector and the rise of blockchain talent puts the province in a unique position to explore the potential intersections between the two domains. Further, as Industry 4.0 continues to spur the use of big data and the digital representation of physical assets, advanced manufacturing is poised to benefit from blockchain technology. To see how these benefits will develop, a basic understanding of blockchain is required.
What is blockchain?
In its simplest form, a blockchain is a distributed, append-only ledger that can store any type of digital information; this means that ledger can only be added to and once something is added, it cannot be removed. The data on a blockchain is immutable, public, and secure because it is supported by advanced mathematics and cryptography. While the technical components of a blockchain are complicated, for our purposes, it is sufficient to think of it as an online community database.1 Everything in the database—whether it is a transaction, contract, asset, certificate, or anything else—can be viewed by every member of the community. However, as noted, the data can only be added to, meaning it is impossible to alter anything that has been entered into the blockchain in the past. Moreover, every new entry must be validated by each member of the community using advanced computing (the computers run a series of tests to ensure the entry is legitimate), which results in the blockchain acting as the keeper of trust between all participants.
How can blockchain supplement advanced manufacturing and Industry 4.0?
Industry 4.0 can be characterized as the use of advanced automation and big data in the manufacturing process, with a focus on the digitization of physical assets and the value chain. Physical objects like machinery are becoming increasingly interconnected via the Internet of Things (IoT). At the same time, they are also storing, processing, and analyzing real-time data using sensors. With this massive digital shift, manufacturers will need to determine the best way to organize and extract value from their digital information.
Blockchain technology could help address this need with two specific benefits: establishing transparency in the supply chain and facilitating the use of smart contracts. A blockchain has the potential to connect all components of the supply chain by creating an authentic, historical, digital trail for all physical assets. To see how this connection is could work, suppose a hypothetical Ontario machine parts manufacturer collaborated with suppliers, customers, and stakeholders to put product information into a blockchain. This information amounts to a kind of “digital passport” for a product, tracing it from the raw material supplier to the manufacturer, and ultimately to the end customer. At each stage of the process, IoT data is stored on the blockchain for all partners to view and utilize in their business decisions. As IoT data continues to become more advanced, it is conceivable that a manufacturer could photograph, measure, and record all components of the product, and have this data instantaneously available on the blockchain, which would not only facilitate transparency and collaboration among business partners, but would also precisely document the value added at each stage of the process. Furthermore, because data on the blockchain cannot be altered, all partners can trust that the information they access is secure and reliable.
Another way that blockchain can be applied to advanced manufacturing is in the use of smart contracts. A smart contract is a programmed set of instructions that are executed once a specific condition has been meant. With regards to the hypothetical scenario described above, the machine parts manufacturer could register its production equipment on the blockchain and have raw material purchased as soon as its sensors indicate that it is time to do so. In this way, smart contracts further contribute to transparency and decrease transaction costs, while also being supported by the dependability that blockchain offers.
Although blockchain has the potential to serve as the future platform for conducting all business in the manufacturing sector, it is not without challenges. Skeptics can point to privacy concerns, costs (blockchain requires significant computer power), and technological feasibility as hurdles that blockchain must clear before it can be implemented on a large scale. Whether it becomes the dominant technology of the future or not, members of Ontario’s manufacturing industry would be wise to become aware of blockchain and the ways it could potentially shape their business.
For more information about the intersection of blockchain and advanced manufacturing, visit the links below.