Blockchain – everybody is talking about this technology, but did you know it is about to revolutionize the global trade in raw materials? Blockchain can actually help make trade more sustainable, improve the lives of raw material suppliers and even reduce the environmental impact of production.
Here you see Wirecard’s new blockchain-based use case in a nutshell:
We wanted to go deeper and had some more questions for Jannis Riesz, the Vice President of Wirecard’s Innovation Labs:
Jannis, today, Wirecard’s Innovation Lab presented a supply chain platform, based on blockchain technology. What is the goal behind this?
We’ve been observing the crypto economy very closely for the past few years. And today we are very proud to be able to present a real use case that truly creates value and enhances our existing services with blockchain technology. So we developed a prototype that in trade can increase trust, automation, provenance and while reducing the risk. This ultimately leads to more efficient processes and lower costs.
But traditional supply chains of raw materials have been working fine for ages – why do you see the need to change everything?
The present supply chains are bureaucratic, quite slow, and expensive – commodity trade today still largely depends on e-mails, faxes, and very much real-paperwork. In times of digitalization this simply is no longer up-to-date.
This is why we prototyped a private blockchain platform that combines the transactional, financial and banking expertise of Wirecard with an ecosystem that aims to bring more balance and transparency to global supply chains, making them much more efficient.
So what exactly might change now?
Blockchain is a powerful key enabling technology. With its help you can record, track, monitor and exchange assets, both physical or digital, in a cost efficient and transparent manner and without the need of an intermediary. So this may be the solution to all the many logistical and cost-related issues that plague the growth, transparency and operation of global value chains.
Can you illustrate it with a concrete example?
Just think about a small coffee farmer in Brazil named João – with our platform, he will be able to enter into direct contact with the fictional German coffee company MeinKaffee. Before, coffee trade involved many middlemen, which made the process much slower and also made prices and costs increase, much to the disadvantage of average farmers.
But now João in the north east of Brazil can enjoy direct negotiation and make business with MeinKaffee in Hamburg – he is not forced any more to sell his harvest to a regional intermediary or wholesale dealer.
So it stands to reason that both sides profit, the raw material supplier and the coffee company. But what about the end consumer?
End consumers will also benefit – because for them, not only are the prices lower, but also the quality will be higher. I am sure everybody can name a couple of food scandals in the past, for example horse meat in what was sold as beef … this was possible due to a lack of transparency. But with our system, everything is traceable, identities can be proven digitally, so a much higher level of quality is assured.
But I would even go further – as we see it, the whole world would benefit! With a world population set to reach 9.8 billion people by 2050, one thing is certain – the current way of producing, trading and consuming food is not sustainable.
What exactly is the technology behind that private block chain?
So as mentioned, a private blockchain is the basis, acting as a secure and transparent bookkeeping and reporting tool with added functionality. This will be programmed into smart contracts, deciding the business logic for the interactions and transactions in the system.
Smart contracts will automatically execute the business logic that the participants agree upon – so when for example payment arrives at the coffee farmer, shipping is initiated. The smart contract’s program code represents the terms and conditions and cannot be changed. So this provides the high level of trust that traditionally would come from control and audit processes.
The blockchain is based on Ethereum, which provides a good platform thanks to its wide adoption, active development support, and growing ecosystem of distributed applications.
Source: Simply Explained / Nick Szabo
How come we now engage in the supply chain management – isn’t this completely new territory for Wirecard?
You are right, this industry actually is a new market for us. But in terms of digitalization of technologies, this is one of the most dynamic sectors, which makes it so interesting – we see tremendous business opportunities here!
We are in a very good position to engage successfully here because we have a global presence and an agile company structure. We are technology, finance and retail experts and see great potential here – so this is a valuable addition to our portfolio. Plus the technology is also transferrable to other industries, as this decentralized and blockchain-based supply chain is adaptable for any B2B and B2C processes.
So which economic potential do you see in your model?
We firmly believe that it has the potential to disrupt a whole market. With roughly 40 percent of the global workforce in farming, agriculture is one of the leading job providers worldwide, and not least a critical sector for boosting economic growth in developing economies.
Thank you Jannis, and the best of success!