Blockchain technology

Blockchain traceability will change the way you do business...forever

Tom Meulendijks looks a little tired but happy as he settles into a chair in the Stainless Steel World office. He’s just come from a prospective customer, and when we’re finished talking, home is a three-hour drive away. But when he starts talking it’s clear that despite three years of development, research and fundraising, his energy and enthusiasm for his groundbreaking steel traceability program is undiminished.
 
^ Blockchain technology

Article by Joanne McIntyre
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Understanding exactly how blockchain technology can provide perfect traceability in the (stainless) steel industry is complicated, so I start by asking Tom to give me his short version, well-honed from three years of pitch meetings.

“Steeltrace is a platform for the traceability of steel from melt to end product,” Tom begins. “Our online platform enables all parties in the entire supply chain to collaborate and work together efficiently. It’s all based on blockchain technology, so let’s begin there.”

Blockchain technology

Blockchain technology is all about recording transactions between multiple parties in a transparent, secure way. As suggested by the name, a blockchain is a virtual ledger made up of linked blocks. To form a block, a user must initiate a transaction. The transaction can only be completed if the user has the appropriate credentials; a unique ID that grants access to the blockchain. Once a transaction is verified, a block is created containing transaction details and the unique ID of the user who initiated the transaction. Crucially, the new block also contains a link to the block that precedes it, securely embedding the new block on the end of the chain. With each step in a series of transactions, a new block is added to the chain.

One of the benefits of blockchain technology is that blocks cannot be altered after they have been added to the chain. This is where security and transparency come in. There is no way to insert a fraudulent transaction onto the block—remember that a party’s credentials must be verified before a block can be added to the chain—and there is no way to retroactively modify a block, because on creation each block is linked to the block that comes before it. In this way, once a block has been created, it will remain unmodified in the chain forever.

Blockchain technology can be used for any application that requires the secure recording of multiple transactions, and Steeltrace applies it to the stainless steel industry supply chain. After all, the supply chain is, at its basic form, a series of transactions. Steeltrace records the movement of stainless steel between manufacturers, laboratories, traders, and end customers in a blockchain, leading to transparency, security, and efficiency.

How does it work in practice?

Enough theory, how is Steeltrace actually working in the pilot? “In our system, every user has a unique ID. On top of this, a unique ID is created for every product as it’s produced.

Finally, all the data generated during the production of the product is recorded on the platform. When it is time for a product to move forward in the supply chain, a block is created that records the initiating user’s unique ID, the product’s unique ID, all the data about that product, and the unique ID of the receiving user. For our purposes, the block also points to ownership, recording the physical transfer of a product between parties in the supply chain. For example, during the pilot, the pipe maker (Van Leeuwen) started by adding all the data required to comply with the TOTAL specifications into the Steeltrace platform as the pipes were made. When the pipes were transported to SEW, who upgraded the material by carrying out additional tests (with Lloyds Register as a witness), the results were entered into the platform and a new block was created, reflecting this transfer of ownership. SEW then cut the pipes to the required lengths, generating a new unique ID for each cut-off piece; these always reference back to the original complete pipe, and all the data is maintained in the system.

This means every single piece of pipe has its own immutable unique ID for perfect traceability, and these unique IDs are passed along the blockchain as they are passed along in the real world. Eventually, the pipes ended up at TOTAL where they have been installed in a plant and are in use. If you wanted to see the entire route of a given product along the supply chain, you could use the Steeltrace platform to track its movement. You would also have access to detailed data on the product, such as its origin, its certificates, and dates of ownership transfer. As you can imagine, there are a number of benefits to this approach.”

Digital ownership transfer

In terms of preventing fraud and human error, the system offers a perfect solution. “A pipe on its own is worth nothing, but once a certificate is issued detailing the chemical composition, for example, the pipe is worth money because the certificate determines the value. However, under the current system, a dishonest person can buy one documented pipe, copy the numbers and the certificate, and then use that certificate to increase the value of any number of pipes falsely. For many years people have tried to find a way to label a physical product to prove that it comes from their factory. The problem is, any physical product can be faked.”

However, you cannot fake a unique ID—which is generated through cryptography—on a computer. “Once a document is cryptographically secured in the blockchain, I need the key to prove I’m the owner of that document.

This means it can never be copied. If I transfer ownership of it to someone, I don’t have it any more. So I can never sell more than I have. The manufacturer creates the certificate as the pipe is being made, so only one certificate can be made for each pipe. Whenever they sell a pipe, ownership of the unique ID transfers with it. Down the track, if somebody claims to have a certain pipe, he will have to prove that he is the owner of its unique ID. And for that, he will need to be present in the blockchain.”

Blockchain is used to manage ownership transfer. “The system is completely safe; that’s why it’s also used for cryptocurrency because money also requires a system that prevents it ever being copied. The same principle applies to material certificates. That’s one of the main insights in Steeltrace.”

Time-saving technology

Another key characteristic of blockchain is that everything stored on it is unchangeable and kept forever. “Each person entering data into the system has their own unique cryptographic key, typically on their phone. The unique ID records digital proofs of each test, result, and certificate; as well as who entered the information and when. Once these results are in the blockchain, any authorised person can see them. For example, ten years after a pipe has been installed in a plant, if there’s a failure the operator can instantly determine where it was made, who did the tests, if there is more from that batch installed on site etc.”

The other key advantage is timesaving.

Efficiency

“Using the traditional system, external parties such as laboratories or notified bodies carry out tests, create their own certificate, then email it to you. If a witness is required, they email it to a notified body to be signed, and it can take days or weeks before that document is processed.”

“In our system, the moment a test is performed the laboratory enters that data into the blockchain using their own cryptographic key. It’s instantly available for you, and for your end customer if you want that.
This dramatically reduces delays in the supply chain. For example, if Lloyds is present as a witness at the test site, they cryptographically sign the certificate at that moment so it’s instantly available. As the cryptographic key is carried on your phone, it’s very easy to sign in.”

Tom explains that all test results are digitally secure and instantly transferred to the certificate owner who always has an overview of the status of his product. He can instantly see the tests that have been conducted, witnessed, and if the product is ready to be shipped.

Instant communication

Understanding how Steeltrace allows everybody in the supply chain to instantly communicate is easiest if you compare it to a similar platform such as Facebook. “Because it’s a platform, not a software package, it is possible to exchange data with outside parties instantly,” Tom explains.

“You don’t need email or any external communication. Each Steeltrace user allocates accounts to their external partners (laboratories, suppliers, customers, etc) who connect with them on the platform.”

“Furthermore, the qualifications of each user can be uploaded into the platform, as well as your company certifications. So when a customer clicks on a signature from your company, they can instantly review all your company’s qualifications. It’s no longer necessary to spend time verifying these or vetting a company because the certificates are uploaded by the actual certifying body. We have created compliance by design.”

Improving safety, continuity, efficiency

The Steeltrace platform system includes the order numbers, line items, and project ID’s to the unique ID, saving time for all links in the supply chain.

“The receiver doesn’t have to number or organize the order; the financial department knows immediately that a product has been delivered; the end-user knows the product is certified to be installed. All the hours formerly required to send and read emails, enter PDFs in the system, confirm invoices, ensure products are checked…all that wasted time will disappear. Furthermore, having a secure, searchable database which can instantly trace the source of a product and where more is installed presents a very different risk profile. We expect insurance companies will look differently at companies using this system and recalculate their rates.”

Furthermore, as the number of qualified Quality Managers in the job market decreases, and those that retire take their tacit knowledge with them, the blockchain system removes the problem of how to replace them. All information is securely stored, forever.”

“Steeltrace is now in the Beta phase; the software is working, the blockchain part is working and we’re about to go live. The reaction when I show people the pilot product is amazing. Now that people can see it in action, they realize it’s a much better, easier system that makes so much sense. It’s going to change the way the industry operates.”

For more information please visit https://steeltrace.eu/
 

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