Blockchain expert discusses ‘Why Retail is Ready for Blockchain’

Allan Gulley, a senior manager at Auburn University’s RFID Lab, and his colleagues have published a paper titled Why Retail is Ready for Blockchain. Below, he answers questions about blockchain, how it works and the advantages over current data communications systems. Media outlets are welcome to run as is or to pull excerpts.

What is blockchain?

The best way to answer this question is by explaining what blockchain is not. First and foremost, blockchain is not the same thing as Bitcoin. The two are commonly confused because Bitcoin was the first prominent application built on the blockchain, much like email was the first groundbreaking application built on the internet. In the case of Bitcoin, blockchain was the foundational framework that enabled the cryptocurrency’s cutting-edge capabilities. It would be foolish though to limit the application of blockchain solely to cryptocurrencies, because, at its core, blockchain enables users to communicate and transact in a way that is more seamless, secure and sustainable. It doesn’t matter if we’re talking about dollars, data or digital pets—there is tremendous value in the new network capabilities that blockchain can provide. Imagine where we would be today if the world had decided to isolate the internet to email-only applications.

The second point I’d like to make is that blockchain is not a replacement for the internet or a substitute for a database. In reality, blockchain-based systems are generally built on top of both, acting as improvements or complements to existing digital infrastructure. In many ways, blockchain is a culmination of existing internet technologies and is considered by many to be the next generation of application infrastructure, or the foundation of the next evolutionary step in software and the world wide web. Now for the layperson, this doesn’t mean much. The apps on our phones and the software on our laptops won’t be wildly different than they are now. User experience will remain somewhat the same, but the back-end components of any given piece of software will undergo a major transformation. That being said, consumers will absolutely benefit from applications built on blockchain, but it won’t necessarily be apparent because the blockchain will be running behind the scenes.

That leads into my last point, which is that blockchain is not the single solution that will solve all of the world’s problems. There has been a massive amount of misinformation that has led people to this conclusion, which has contributed to inflated expectations and subsequent disappointment for many who have experimented with the technology. Given its status as application infrastructure, blockchain alone cannot solve a business problem or deliver consumer utility. It is only as useful as the systems or applications that are built on top of it, in the same way that the interstate system in the U.S. is only as valuable as the commerce that it facilitates. As with any emerging technology, effective implementation must begin with a well-defined use case and realistic expectations on the front end. The blockchain space has been dealt a heavy dose of skepticism as of late, but that will ultimately benefit the long-term health of the technology. All things considered, blockchain is not going away anytime soon—it is very much here to stay.

Why is an industry standard needed and how can it be implemented?

Standards are a crucial aspect for any solution that is looking to serve an industry. To give some perspective, one of the previous projects that we conducted at the RFID Lab, Project Zipper, collected three distinct streams of supply chain data from each of 13 brands and retailers across the country. We ultimately received data in 35 different formats, which added a significant amount of complexity to the data analysis portion of the project. Data elements and reporting mechanisms varied by company and required a lot of time and energy to interpret and analyze. The incongruent output of these seemingly similar systems highlighted the dissimilarity of data between trade partners, reinforcing the industry-wide need for fluency across organizational borders.

Consider a metaphor using spoken languages. Spanish and Portuguese share the same romance roots, but each language has evolved over time to include its own vocabulary and pronunciations, not to mention the different dialects that are spoken throughout the world. If I speak Spanish and you speak Portuguese, we may be able to stumble our way through a conversation, but it would be far more effective if we were speaking the same language. The same is true for information systems within businesses today. Home-grown systems have evolved over time to satisfy the needs of each particular company, but when it comes to communicating information outside the boundaries of that organization, things become complicated quickly. Therefore, industry standards are essential for any cross-company communication, which is why adherence to standards must be a prerequisite for stakeholders plugging data into the blockchain.

What is the benefit of collaboration among competitors?

Because competitors tend to operate in the same domains, it is not uncommon for them to encounter the same problems. Retailers like Walmart and Target suffer from the same problems in the store like shrink and on-hand accuracy, and brands like Nike and Under Armour are both combatting counterfeiting across the globe. Organizations have tried to crack the code for these systemic issues on their own, but doing so in isolation isn’t typically successful, especially when technology is involved. By pooling resources and conducting research with like-minded competitors, companies can solve their problems faster and do so in a way that benefits the industry, not just the individual organization.

In a blockchain context, collaboration is the keystone for a successful network. Most blockchains are designed to be decentralized, meaning that control of the system is democratized and responsibilities for maintaining the network are distributed amongst participants. Cooperation is at the core of the technology, and in the case of an industry-wide blockchain network, you must have a critical mass of stakeholders and competitors to keep everyone honest and derive maximum value from the collective ecosystem. Given the novel nature of blockchain, it is essential that all stakeholders, partners and competitors alike, contribute to research and development so that their voices may be heard and their organizations are poised to put the technology into practice.

Will it give away their trade secrets?

This is the number one concern that most companies have when they begin their blockchain journey, and it is very understandable. There are many popular blockchain projects that promote radical transparency and open networks, but in many enterprise use cases, privacy is baked into protocols and permissions are put in place that prevent unwanted entities from interacting with competitively sensitive information. These capabilities are crucial for many business-to-business use cases in any industry, especially within blockchain networks where competitors coexist.

How would a blockchain affect the average consumer?

There are a number of ways that consumers will benefit from the blockchain being implemented. Blockchain is a “backbone” for applications, so while we may not be immediately aware that it’s there, there are several unique capabilities that it can provide. From a financial perspective, blockchain can diminish transaction fees and expedite transfer times, effectively driving down prices wherever you swipe your credit card and enabling you to send money anywhere almost instantly. From a supply chain standpoint, we can see the story of a product all the way from its source to the store shelf, as well as ensure its authenticity and sustainability. In the case of identify ownership, we could have complete control over our personal data, allowing us to share it when and where we want to, and even sell it to advertisers if we so please. There are a myriad of other applications that consumers stand to gain from, and there really is not a consumer-driven industry that blockchain has already affected in some way.

What is the CHIP project and when do you expect to publish results?

The CHIP Project is a proof-of-concept for serialized supply chain data exchange in the retail supply chain. The goal is to construct a blockchain-based solution that allows our corporate partners to share item-level RFID data from different touch points along the supply chain, from manufacturing to distribution to the store. The retail industry is highly serialized today, meaning that products are already assigned unique, digital identification numbers that are embedded in RFID tags, QR codes and other types of data carriers. However, there is not an effective solution for exchanging this rich, item-level data between supply chain stakeholders. Enabling this degree of data exchange between trade partners can have a significant impact on billion-dollar pain points that the industry suffers from, and it would also enable us to see the history of an item as it progresses through the supply chain. But before we can do all of that, we have to prove that it is possible to build it all on the blockchain.

Since the CHIP initiative began in June 2018, we have onboarded 21 partners that will participate directly in the proof-of-concept or support the project as part of a working group. Of those contributing to the project, there are five brand owners including Herman Kay, Nike, PVH Corp., Spanx and Under Armour in addition to three national retailers, namely Dillard’s, Kohl’s and Macy’s, and one global logistics provider, FedEx. Over half a dozen technology solution providers are engaged as well, including Avery Dennison, Checkpoint, IBM, Mojix, Smartrac, SML and Zebra Technologies. Strategic partnerships with Collaboration LLC, GS1 US, Hyperledger and Tuskegee University have also helped propel the project forward. The first phase of the project will conclude at the end of this month, and we expect the white paper with the project’s findings to be published in early 2020.