Blocked Borders

UK EU Border

The one certainty around the January 31st Brexit milestone is that there is going to be an awful lot of work to do in the coming year and beyond. The time has come to flesh out the details of our future relationships and establish the systems and processes which will help the country’s infrastructure and economy and our trade across borders to function.

The thorniest issue throughout the protracted negotiation of the Withdrawal Agreement has been the land border with the European Union on the island of Ireland – although all borders are likely to present a challenge. At the 2018 Conservative Party conference, the then Chancellor of the Exchequer, Philip Hammond, was asked about possible solutions. He clutched at the straws of emerging technology as a way to maintain the existing freedom of movement and avoid imposing border controls. “There is technology becoming available,” he said. “I don’t claim to be an expert on it, but the most obvious technology is blockchain.” Fortunately, according to the BBC’s Rory Cellan Jones, this statement did not reflect the more practical opinions in the corridors of Whitehall. There is no existing technology solution which will allow a land border to be effectively controlled without some noticeable blockages. In the wider context of the passage of goods through our ports, though, there is rapid innovation. Blockchain is on course to help with smoothing trade routes and relationships around the world, part of a powerful toolkit which also includes the Internet of Things, Artificial Intelligence, and satellite technologies. There are many examples of effective applications in the supply chain which are are already running under our very noses.

A compelling future vision

At the ConsenSys Ethereal conference in New York in November 2018, the provenance of the tuna on the sushi served for guests was authenticated through an Ethereum application. This was a glimpse of a possible future. Transparent records, independently authenticated via an immutable, independent source, will give regulators confidence. Prime entry from sensors in the widening Internet of Things will mitigate human error and reduce the risk of deliberate falsification of records, ensuring that raw materials originate from a regulated source and that goods are transported under the right conditions. Hashed identity and qualification records will allow secure and reliable verification of current permits for people at every stage. A clear holistic chain will allow all parties to be properly rewarded. Artificial intelligence and machine learning will use the wealth of newly captured data to refine and improve our supply chains, optimising the carbon footprint. It is a compelling vision, and many of the building blocks are already in place in the present.

In October 2018 the IBM Food Trust platform went live as a commercial product. During the proof of concept phase, IBM worked with Walmart who challenged them to trace two mangos from farm to store. Using existing systems this process took almost a week to run, while the blockchain-based system completed the task in 2.2 seconds . Since then, IBM Food Trust systems have been adopted by other North American store chains, notably Albertson’s, and organisations including the National Fisheries Institute. In Thailand, exporters of the legendary durian fruit are working with DiMuto, a Singapore-based start-up, to transform fresh durians into traceable digital assets, tracking each individual fruit along the supply chain. So what are the other pieces of the trade jigsaw which are being addressed using blockchain and distributed ledger technology?

Building blocks of the supply chain

For a successful and reliable ecosystem, we need several things. First, we must have confidence in the prime entry, overcoming the problem of garbage in, garbage out. The very nature of immutable records promotes rigour and accuracy, as we saw in my previous article ‘Getting to Truth on the Blockchain’. We must also be confident in the authenticity of the asset, which is being addressed by the luxury goods market as it drives to combat counterfeiting and illegal trade. Top fashion brands Louis Vuitton and Parfums Christian Dior, under their parent umbrella of LVMH, collaborated with ConsenSys and Microsoft to develop the Aura platform, launched in May 2019. Aura was a natural extension of the Louis Vuitton Track and Trace program, building trustless authentication into the model.

Once we are confident in what our goods are, the next step is to understand where they are on their physical journey. The shipping industry has made strides towards this transparency while using blockchain to solve other problems. The Insurwave platform was launched in May 2018 by a consortium including Ernst and Young, Microsoft, network security experts Guardtime, and insurers XL Catlin (now AXA XL, a division of AXA), MS Amlin and Willis Towers Watson. Freight giants A.P. Moller – Maersk faced a challenge in managing the complex ecosystem of the purchasing and administration of their highly transactional insurance process. Now, the Insurwave platform’s smart contracts manage the insurance transactions when vessels are bought and sold. The system makes use of the Internet of Things for prime entry to the ledger, and the sensors are delivering additional benefit by collecting more data points than could be captured or processed previously. It has since widened its scope to include not just the hulls but each vessel’s machinery, and added a further piece to the jigsaw thanks to a partnership in May 2019 with China’s Zhuhai port.

Underneath all of this lies the paperwork. How are back office functions being transformed by blockchain? Payments across borders were some of the first fintech blockchain applications to go live, starting with the Santander One Pay FX product in April 2018. More prosaic administration has been tackled by Guernsey’s Northern Trust Bank, whose work on private equity audit via blockchain technology is now being rolled out at scale in Delaware, and whose continued innovation in collaboration with law firm Allen and Overy and tech startup Avvoka has delivered the capability to deploy legal clauses as smart contracts direct from a digital legal agreement.

Moving forward

These are just a few of the extraordinary blockchain developments we have been seeing in global trade since the Brexit vote in the dim and distant past of 2016. While the current climate for trade in the United Kingdom is one of uncertainty and anticipation, the rapid pace of innovation and emerging technology adoption gives us hope and may help to alleviate those blocked borders.

You can read more about the work of Kraken IM and other innovators in my latest book Blockchain Hurricane: Origins, Applications and Future of Blockchain and Cryptocurrency (Business Expert Press), available in paperback and ebook from Amazon and all good bookshops

Originally published via LinkedIn Pulse, January 2020