Supply Chains Don’t Want Total Data Transparency. Here’s What Will Work Instead
Data transparency is a tricky subject.
When I present at pharma and blockchain conferences, people in the audience always ask me, “Why don’t you agree with total data transparency?”
After all, many believe complete transparency is the principal benefit of blockchain.
My answer is this: No industry will actually use a completely transparent supply chain blockchain-based solution.
Total data transparency is generally anathema to companies with sensitive business intelligence.
But let me expand on this, as there are a couple of factors necessary to understand.
First, for blockchain solutions to be immutable, they need to be distributed.
This means a range of players are operating the nodes of the network. In the case of the MediLedger Project — an open network solution for the pharmaceutical industry — our vision is for the nodes to be operated by companies in the industry that either participate in the prescription medicine supply chain or are key service providers serving the industry. Companies that have a stake in the success of the network and its function.
By operating those nodes, they have access to the data on the nodes. Because of this, there can be no relevant information discernible on the blockchain. Transactions can be stored (aka hashed) but if they are obfuscated in a way that business rules cannot be enforced, then value is lost. And there is additional information to be garnered just from traffic patterns.
Second, blockchain solutions will flourish if industries participate — specifically companies that overlap in their business relationships.
This means competitors who use the same vendors will be in the system together. If everyone is posting transactions, either directly or through a service provider, they have access to each other’s information.
Despite the clamor for utter transparency, we could use a healthy dose of caution. Implementing the blockchain across industries is going to take a realistic and open-minded approach.
A transparent blockchain network isn’t the ultimate solution for sharing data.
It’s usually wise to be wary of people who say they have a silver bullet for a complex problem.
It’s easy to say, “Why don’t I find a set of trusted people who are not in the industry, let them run the nodes, and promise not to share the information.”
I’m idealistic—but not that idealistic.
We live in a world where data is an incredibly valuable asset. Entire businesses revolve around collecting and selling data. And it’s naive to think companies will give up business intelligence just to use the blockchain.
The fact is, many companies may not benefit from complete transparency.
Today, a company sees all their own incoming and outgoing transactions. But they can’t see all of the transactions taking place along the supply chain.
If a supplier discovers where a company downstream is selling their products, they could potentially design a supply chain around that downstream company. They might develop a model that makes them irrelevant.
In the pharma industry, there’s a new regulation (the DSCSA) that is requiring the entire supply chain share data on an interoperable system. But not every industry has such regulations and rules that can align them. The challenge lies in getting many different parties to come together and agree to use the same network.
And radical data transparency just isn’t the best way to make that happen.
A trusted blockchain network can solve for data privacy issues.
So, businesses still want data privacy, potentially more so than they want to eliminate diversion and other unpleasantness in their supply chains.
That’s why at Chronicled we have created a system that enables both appropriate data privacy and “visibility” into the chain of custody. Using zero-knowledge proofs called zk-SNARKS, Chronicled came up with the MediLedger Project — a blockchain-based data privacy solution for the pharmaceutical supply chain. Utilizing business rule enforcement of smart contracts, coupled with the power of zero-knowledge proofs, companies can know that rules are being enforced without actually seeing the data.
This solution doesn’t require participants to give up their privacy, but it does require them to work together in a network and standardize their processes.
As more companies join the network, it becomes more useful by enforcing business rules, preventing diversion, and flagging counterfeit products. And the magic of zk-SNARKs that make it possible to do so without violating the business intelligence of the companies involved.
But all of this requires participants give up a certain measure of control to gain an overall advantage in their supply chains. The only way that will happen is if the benefits of the blockchain solution outweigh the concerns about data transparency.
The solution will evolve as the industry advances.
The blockchain industry is still in the early days of exploring the impact this technology will have on supply chain operations.
Our ideal solution is that everyone keeps their own data, decides when, with whom, and for how much value they are willing to share it. And part of this exploration is going to involve watching big ideas hit roadblocks.
Some participants want complete data transparency. Others don’t. You have to know what problem you want to solve, and identify what incentivizes (or de-incentivizes) everyone participating. Many people couldn’t even imagine solving problems like diversion without sharing any data.
That’s one of the most interesting and fun parts of working with a developing technology. You set off down a path and figure out how to solve problems as you go. Each problem you solve has the potential to create a new issue or new opportunity you didn’t foresee. Then, you have to refine ideas and create solutions you might not even have realized when you started.
Blockchain designs and solutions are still evolving, and it’s going to be very interesting to watch what data privacy solutions emerge as the industry advances.
Want to learn more?
Get in touch with the Chronicled team here.
