Designing a Blockchain SCM Solution for the Precious Metals Industry
Blockchain technology is revolutionising the way supply chains operate in various industries, including the precious metals sector. Blockchain is a distributed ledger system that records transactions in a secure, transparent, and immutable way. By integrating blockchain with IoT (Internet of Things) and AI (Artificial Intelligence), supply chain participants can track the origin, quality, and movement of precious metals from the mine to the end user, as well as optimise their operations, reduce costs, and enhance sustainability.
One example of how blockchain, IoT, and AI can work together to improve the precious metals supply chain is the Responsible Sourcing Blockchain Network (RSBN), a consortium of companies that aims to create an ethical and traceable source of cobalt, a key metal used in batteries for electric vehicles.
RSBN uses IoT devices to capture data such as GPS location, temperature, and humidity at each stage of the cobalt supply chain, from the artisanal mines in the Democratic Republic of Congo to the smelters and refiners in Europe and Asia. This data is then recorded on a blockchain platform powered by IBM, which provides a shared and verifiable record of the cobalt's journey. AI algorithms are used to analyse the data and provide insights into the supply chain performance, such as identifying bottlenecks, risks, and opportunities for improvement.
Blockchain, IoT, and AI are transforming the precious metals supply chain by providing greater visibility, efficiency, and trust among the stakeholders. These technologies can help the industry meet the growing demand for precious metals while ensuring compliance with environmental and social standards.
Record Transaction
One of the main elements is to design a blockchain software tool that integrates IoT and AI for the precious metals industry supply chain is to record transaction data from IoT devices on a blockchain. This can help to capture extremely detailed decentralised data and verify that transaction records are authentic. Blockchain technology can also bring transparency, reliability, scalability, and traceability to the supply chain, allowing companies to track the movement and origin of precious metals from mining to refining to retail.
Analyze Data
Another main element is to use AI to analyse the data collected by IoT devices and optimise the supply chain performance. AI can help to understand the relationships among different variables, provide visibility into operations, and support better decision making. AI can also enable integrated end-to-end planning that can balance trade-offs across functions and optimise profitability for the whole organisation.
Security & Sustainability
A third main element is to ensure the security and sustainability of the blockchain software tool. This means protecting the data from unauthorised access or tampering, as well as minimising the environmental impact of the blockchain network and the precious metals supply chain. This can involve using permissioned blockchains that restrict participation to known supply chain partners, adopting data standards and governance rules, and implementing green solutions such as renewable energy sources or carbon offsets.
Elements Required in the EMCO Network Software Tool
By following the following guidelines, we are able to create a blockchain software tool that can optimise the efficiency, security, sustainability, and profitability of the precious metals industry supply chain.
The first element is to define the scope and objectives of the blockchain software tool. What are the pain points and challenges that the precious metals industry faces in its supply chain? What are the benefits and value propositions that blockchain can offer to address these issues? For example, some of the common problems in the precious metals supply chain are lack of traceability, fraud, theft, counterfeiting, environmental impact, and regulatory compliance. Blockchain can provide solutions such as provenance tracking, authentication, smart contracts, sustainability reporting, and audit-ability.
The second element is to select the appropriate blockchain platform and architecture. There are different types of blockchain platforms, such as public, private, or hybrid, that have different features and trade-offs in terms of security, scalability, performance, and governance. The choice of the platform depends on the requirements and preferences of the stakeholders involved in the supply chain. For example, a private or permissioned blockchain may be more suitable for a consortium of trusted parties that want to share data and execute transactions in a confidential and efficient manner.
The third element is to design the data model and smart contracts for the blockchain software tool. The data model defines the structure and format of the data that will be stored on the blockchain ledger, such as the attributes and identifiers of the precious metals products, their origin, quality, quantity, ownership, and movement history. The smart contracts are self-executing programs that encode the business logic and rules for the supply chain transactions, such as validation, verification, payment, and delivery. The data model and smart contracts should be consistent, accurate, and interoperable across the supply chain.
The fourth element is to integrate IoT devices and AI algorithms with the blockchain software tool. IoT devices are sensors and actuators that can collect and transmit data from the physical world to the digital world. AI algorithms are software programs that can analyse and process large amounts of data to generate insights and recommendations. IoT devices and AI algorithms can enhance the functionality and performance of the blockchain software tool by enabling real-time monitoring, tracking, verification, optimization, and prediction of the supply chain processes. For example, IoT devices can capture data such as temperature, location, weight, and quality of the precious metals products along their journey from mine to market. AI algorithms can use this data to detect anomalies, optimise routes, forecast demand, and recommend actions.
The fifth element is to implement the software in a pilot case before mainstream adoption. This involves conducting pilot projects with selected stakeholders to evaluate the feasibility, usability, scalability, and impact of the blockchain software tool. The pilot projects should also identify and address any technical or operational challenges or risks that may arise during the implementation. The feedback and lessons learned from the pilot projects should be used to refine and improve the blockchain software tool before scaling it up to a larger network of participants.
The design of the EMCO Network blockchain software for supply chain management in the precious metals industry will include the following main modules:
This module would be responsible for recording all transactions in the supply chain. These can include the properties of the product, transfer locations, actors involved in supply chain transactions, and adherence to responsible production standards linked to all of the above.
Blockchain's immutability is leveraged in this module, securely recording all transactions involving precious metals. Cryptographic hash function, such as SHA-256, is used to generate a unique hash for each block of transactions, which is stored in the block header along with timestamp and other block metadata.
In the block body, a list of transactions is stored. Each transaction includes the sender's and receiver's public keys, the amount of precious metal being transferred, and a digital signature generated using the sender's private key. The Elliptic Curve Digital Signature Algorithm (ECDSA) or a similar algorithm is utilised to generate and verify the digital signatures.
This module would allow for the tracking of goods along the supply chain. This can be facilitated using bar codes, digital tags, or serial numbers assigned to physical goods. The traceability module will be critical for ensuring the legitimacy of the precious metals as they move through the supply chain.
This module enables the tracking of the journey of precious metals through the supply chain. Each piece of precious metal is assigned a unique identifier, stored in the blockchain with each transaction involving the metal. A query to the blockchain retrieves the transaction history of a specific piece of metal, tracking its origin and path through the supply chain.
This module aims to integrate all actors in the supply chain, including artisanal and small-scale mining (ASM). This can help improve supply chain efficiency and ensure all actors are accountable for their part in the supply chain.
This module facilitates seamless interaction between all participants in the precious metals supply chain. An Application Programming Interface (API) allows external systems to interact with the blockchain, supporting operations such as submitting transactions, querying the blockchain, and subscribing to events. gRPC or REST protocols and Protobuf or JSON data formats are used.
This module will manage the data recorded in the blockchain. The questions that need to be answered include what level of sophistication is needed, what data should be recorded, and to what level should material be traced. There can also be consideration of whether there's a risk that demand for data will increase once downstream companies have access to it.
This module manages the storage and retrieval of data from the blockchain, using a distributed database that supports the high-throughput, low-latency requirements of a blockchain system. Key-value stores such as LevelDB or RocksDB provide high performance for read and write operations.
For data retrieval, an indexing service is created to quickly look up transactions based on various criteria.
This module will ensure adherence to responsible production standards. This can include checking that the mining entity (ME) is not involved in illegal taxation of mines or supply routes, and that legal taxes, fees, and royalties are paid.
It's important to note that blockchain is not a magic panacea that can solve all barriers to traceability in the minerals and metals supply chain. Implementing such a system can be complex and pose challenges beyond technology. However, if implemented properly, it can offer powerful benefits for responsible production.
This module enforces compliance with environmental and responsible production standards through the use of smart contracts that encode these standards into business rules. Turing-complete programming languages that support conditional logic and state changes, such as Solidity or Chaincode, are used to implement these smart contracts.
