The global supply chain has become extremely complicated, as manufacturing is increasingly outsourced overseas to countries such as China and Japan. Despite the globalization of the wholesale logistics chain, lack of transparency and other barriers in the system still force retail websites to geographically limit their target market, rather than expand internationally.
And although we mostly associate blockchain technology with digital currency transactions, the technology goes far beyond that field. For those looking for practical use cases, the international supply chain is one that is already using “Proof of Work” and other blockchain technologies to help improve the system.
We have gone from cargo ships and locomotives, to hauling freight via trucks and highways, boats and waterways, and even drones. But, to keep things in perspective, understanding why the blockchain is most suited for the supply chain can help on-board those in the industry still hesitant to adopt.
What is ‘Proof of Work’?
Proof of Work is a payment system which charges users indirectly, by requiring users to send proof that an expensive task has been completed.
Even before Satoshi Nakamoto launched Bitcoin in 2008, ‘proof of work’ (PoW) was an idea that was already published by Cynthia Dwork 15 years earlier.
Dwork described it as a means of “pricing via processing”, ie a payment system which charges users for a service by forcing them to spend money on electricity and then prove that expense by sending a cryptographic signature, rather than asking users to directly send the money to the service provider by credit card payment, etc.
Nakamoto realized that one benefit of this payment system is that it does not require permission from any company, government or other central authority, and can therefore be implemented by a decentralized network of equals.
Although the idea itself isn’t novel, the way Nakamoto combined it with P2P networks (which had become popular among the file-sharing community) and the way he used it as a voting system, replacing the traditional “one-person one-vote” with “one-megawatt one-vote” resulted in the first viable distributed consensus system. The participants who collaborate to verify transactions do so by voting with their electricity dollars on various proposed transaction ledgers — effectively putting their money where their mouth is.
Although most computer owners don’t notice the extra electricity costs involved with their computer usage, ‘Proof of work’ systems require such heavy computer processing that a hefty additional sum is added to the user’s monthly electricity bill. When someone wants to make a transaction, they broadcast the details to all participants on the network. The participants group together several transactions which they consider valid and propose this group of transactions as a new ‘block’ to add to the chain. Once more than half of the megawatts of electricity (votes) used by the entire network is cast in favor of a proposed block, the block is officially added to the chain.
The Consensus Algorithm
The blockchain community hopes for the general public to not only see and accept a decentralized ledger as a positive, but also believe that it will be close to impossible to build something better in the future.
Over the past few years, traditional servers have seen data breaches become more prevalent, and as of late, our most trusted companies such as Equifax and Facebook are teaching us they can’t be trusted. This is where PoW comes into play.
By utilizing a PoW consensus algorithm, there are two major benefits — defending against DDoS attacks and incentivizing participants to review and verify proposed transactions by rewarding them with digital currency in return.
The system also effectively bribes hackers to refrain from attacking the system, by making it more profitable to use their skills to support the system rather than trying to break it.
Why Does the International e-Commerce Market Seem Impenetrable?
In 2016, Amazon indicated its goal of transforming its e-commerce market into a $400 billion enterprise. By the end of this year, Amazon predicts it to be worth around $600 billion, based on revenue projections through Morgan Stanley.
Looking at the business-to-consumer market, international trade represented about 20.6%.
So, why are countries like China and Japan experiencing this explosive growth? Technology like smartphones and increases in the internet population have forced the online market space to evolve. However, their evolution is distorted because of the lack of proper technology to ensure its final transformation.
If you haven’t heard it before, it’s time to hear it now — blockchain technology is a game changer for the supply chain. Regardless of the platform or application, the blockchain revolution offers shipping companies enhanced transparency, greater scalability, stronger security, and an overall increase in innovation.
For those shippers who have already begun to implement this technology into their systems, they are finding new ways to leverage such mechanisms to help increase their profits and strengthen their relationships across the supply chain.
However, the market isn’t shy of its own weaknesses, at least from an international perspective. One company, Special & Pleasant Pte. Ltd., has abundant experience conducting e-commerce from Japan to Thailand, operating from its base in Singapore.
According to the company, there are four major issues the international market is confronted with — language barriers, delivery quality, advertising costs, and an opaque international delivery process. In identifying these four barriers, the company has created the Arium 2.0 platform, seeking to resolve these issues for the international supply chain.
Japan currently uses the Arium 1.0 platform, which allows anyone to easily create free e-commerce websites for selling Japanese products to other countries, with no initial costs. Sellers pay for the system only as a percentage of actual sales. Unlike platforms such as Amazon or eBay, which provide only a simple list of products from various sellers, Arium allows each seller to maintain their own customized e-commerce site, conveying their own unique personality.
When a purchase is made, sellers simply send their product to the Arium warehouse, located domestically in Japan, and Arium handles everything from stock management, picking and packing, customs formalities, and dealing with international delivery carriers.
Whether you travel abroad or purchase internationally, there is one issue that all can agree on — there is a very high language barrier that inadvertently makes the transaction itself difficult and extremely frustrating,
In the stream of commerce, any given phrase or word could mean two different things depending on the country or parties involved. Depending upon the age, sex, and purchasing habits of the target audience, different phrasings have different effects, and the cost of determining these meanings can be extremely high.
If we could take the software and technology behind Google Translate, Dragon Naturally Speaking, and all these other translations services, and inject them into the blockchain, we can have an entirely new means for global connectivity.
The Delivery Process
Overall, the delivery process is extremely unclear. In any given country, when an item is shipped domestically, it is common for that delivery to be performed by a single company or carrier. This makes it easier for the consumer/buyer to determine the exact location of their goods (hopefully) at any given time, simply by entering the tracking number on the carrier’s website.
International delivery is entirely different, often being performed by a chain of several companies, and there can be problems getting items through customs. In some countries, the infrastructure isn’t well-developed, making it difficult to identify where along the supply chain the package is during transit.
If that isn’t enough to worry about, how packages are handled is something else entirely.
“Take Japan for example — if you were to look to YouTube or Facebook in Japan, consumers often see user-uploaded videos of delivery staff carelessly handling, throwing, or even kicking packages,” says Takashi Narita, CEO of Special and Pleasant Pte Ltd.
Whether we look internationally or domestically, there is always a risk that the product will be damaged before reaching the end-consumer.
“With the Arium 2.0 platform, we solve this problem by implementing a comprehensive e-commerce platform, that monitors the status of packages, so that the buyer’s items are delivered perfectly into their hands”,
By collaborating across borders, we can ensure delivery quality by enabling delivery status confirmation at any time and place, wherever the package is sent from and wherever it is being delivered to.”
Effective Translation & Advertising Costs
In order to sell products overseas, there is a formula to adhere to:
(1) Translation (2) Advertising (3) Shipping
Traditionally speaking, there have only been two kinds of translation — machine translation and human translation. Machine translation provides low cost, but often contains critical mistakes.
Human translation, on the other hand, is customizable according to the target audience, but comes at an extremely high cost. So, how do we balance the two?
After the translation stage, product information is usually published in magazines, classifieds, internet advertising, and through social media (sponsorships, influencers, etc.). However, implementing a platform like Arium 2.0 allows for an affiliate system to take over. By having partners residing in target countries who are able to translate and promote the product locally, a worldwide network of supporters bridge this gap.
Making Your Purchase
Whether it’s Arium or any other company similar to an Amazon or eBay, everyone wants to sell their products in as many different markets as possible, but have been discouraged from expanding overseas due to the complexity and initial costs. Most importantly, buyers want to purchase their products safely easily, whether its domestically or internationally.
By having a system that monitors each and every stage along the supply chain, all run on an unfalsifiable blockchain, our shipping industry can begin to evolve into the digital age.