Michael J. Casey is chairman of CoinDesk’s planning board and a senior advisor of blockchain research at MIT’s Digital Currency Initiative.
The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.
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After multiple proofs of concept, pilots and early rollouts, supply chain management is emerging because the killer app for enterprise blockchain technology, the very first to be “going live” – to cite the theme of this year’s Consensus conference.
But while multiple blockchain projects worldwide are demonstrating how smart contracts, data sharing protocols and cryptographic traceability can unlock trade finance, improve risk management, streamline customs processing and boost transparency, the most important change for global trade is yet to return .
That will be when the web of Things, 3D printing and other automating technologies finally free manufacturing from the constraints of geography. At that moment, blockchain technology could inherit its own, enabling a completely new paradigm of decentralized, on-demand production and forcing a realignment of worldwide economic power.
Reaching this new paradigm requires advances altogether these technologies. But even as importantly, it'll require manufacturers to adopt a more open-minded approach toward optimizing the balance between competition and collaboration and toward the role that blockchains can play find that.
As of now, big manufacturing, shipping and trading companies tend to look at supply chains from a proprietorial perspective. They mention their supply chains as if they're a club that suppliers join only after pre-certification establishes a trusted relationship with the customer .
Inevitably, these businesses are favoring permissioned blockchain systems, with the distributed ledger either managed by one , centralized party like a serious retailer or producer or validated collectively by a consortium of these same pre-established suppliers. Permissioned blockchains reinforce the “clubbiness” of the shared enterprise.
But when additive manufacturing eventually makes it possible to rapidly answer customized orders anywhere within the world by spinning up production within the customer’s neighborhood, manufacturers will got to quickly onboard 3D-printer providers – including many with which they need not established bonds of trust.
In that case, a permissioned blockchain could backfire, because the validators’ instinct might be to exercise their collective gatekeeping powers to guard their own market interests against those of the outsiders. Revenue opportunities would go wanting.
By contrast, enterprises that take a more open approach to business partnerships may find that a permissionless system gives them a competitive advantage over the permissioned supply chain clubs.
If 3D-printing machines are often uniquely identified with cryptographic primitives, and if their transactions, data emissions and overall performance are often logged to a registry that’s trustlessly notarized during a permissionless, open-access blockchain, then users of such a system could enjoy a really fluid onboarding process, making it much easier to reply to customer demand when it arises.
Brave new world
Clearly, this all depends upon significant technological improvements to form permissionless blockchains enormously more scalable – including the event of payment channels and interoperability protocols like lightning and other “layer two” technologies.
It will also require standards for certifying in-built chips, in order that the interconnected printing machines, sensors and other devices which will form these high-tech manufacturing networks can reliably provide the info upon which this technique of decentralized trust will depend.
So for now, this scenario exists only within the imagination. But the thought experiment is beneficial , because it paints a dramatically different picture of the worldwide economy, one which will raise an entire new set of challenges.
One of those was foreseen by an innovation team at precision parts manufacturer Moog Inc. when it conceived of its Veripart solution for 3D-printed parts. Specifically, Moog realized the necessity to make sure the integrity of the software files shared with different printing machines, to understand that flaws haven’t been introduced into 3D-printed products, whether by hackers or human error.
It’s a drag that, because the Moog team recognized, also requires a blockchain-like system of distributed trust with which to trace the event of the software code because it passes from one engineer to a different .
If these changes occur, they might significantly alter the ownership structure of entire manufacturing industries. Labor-intensive factories and assembly lines would be a thing of the past, and there would be many fewer stages within the production chain from primary material extraction to finished product. Importantly, the property attached to the varying designs of highly customizable products would have an elevated importance.
One can foresee supply chains shifting faraway from today’s sequential, iterative processes of production – where goods shift downstream as payments go upstream – toward more of a teamwork-driven model. Manufacturing might be the results of a collaborative effort between various owners of various pieces of IP, each claiming a pre-agreed proportion of revenues from the top sale, paid out via a sensible contract. consider how contributors to a movie or music project are paid royalties and you get the thought .
(For more on blockchain technology’s role during this “demand chain” future, read a forthcoming essay by CoinDesk advisor Pindar Wong which will be published when Consensus begins on May 14.)
A new notion of labor
Whether this world involves pass or not, a key element of this vision seems bound to do so: the further disintermediation of manual labour from manufacturing and therefore the continued ascendancy of creative work. It’s a bleak outlook for those that expect to form a living from the previous and portends even greater power for successful designers and owners of popular brands.
For a more equitable, harmonious and innovative society, we are getting to need a dynamic model that subjects inventors to constant competition from a good pool of newcomers with ever better designs. meaning reducing barriers to entry, which successively means curtailing gatekeeping intermediaries’ power to dam the innovative efforts of others.
Here, too, a decentralized architecture will matter.
As the global economy evolves, it'll be important to encourage a disintermediated system of distributed trust during which people have control of their data and concepts and are ready to trade them with one another on their own terms.
It’s an exciting future, but it could also go very wrong. A model supported the principles of open-source, open-access and permissionless innovation is that the best thanks to get the balance right.