Interview with Michael Casey, Author, Senior Advisor to the Digital Currency Initiative at the MIT Media Lab, who spoke on blockchain at the 2018 Xcelerate Retail Forum in Boston, MA.
Why is blockchain important now and how do you define it?
I start with the idea that it is a decentralized record-keeping system. There’s this capacity for the first time ever to keep track of transactions without relying on a centralized ledger-keeper. It’s not just for financial transactions. It’s transactions in terms of the sharing of any data of value. The transactions get recorded in a decentralized distributed process. Multiple computers track those same transactions and arrive at a consistent, updated consensus around the veracity of that information. At any given time, there is a fully reconciled, fully recognized shared record of truth for whatever it is that you’re trying to track.
Human beings are always faced with trust barriers, but if there’s a commonly understood set of records around shared values, then on that basis we can enter into economic exchanges. That record-keeping function has traditionally been performed by centralized ledger keepers, like banks. But having one record keeper is expensive for various reasons (it requires a lot of accounting and auditing work, for example, to ensure that each distinct ledger is reconciled with others) and prevents some types of transactions from ever taking place. If we can, at any time, agree on a common record, then we can have peer-to-peer exchanges and avoid all of those costs.
Bitcoin is a peer-to-peer currency system. Without having to rely on centralized record keepers, we can now trade a new form of currency back and forth directly with each other. But it’s not just in currency, that these concepts are valuable. Take the supply chain realm. This technology has the capacity to recognize transfer of value – of rights to goods for example – between different buyers or sellers along a supply chain without the need for outside authentication of the transfer. And when we add smart devices and the blockchain-powered concept of “smart contracts,” which allow for the automatic execution of a contract’s terms and conditions without the approval of an outside party, we can also foresee a system for much wider automation of activity between different organizations in the chain. That brings a lot more automation and fluidity into the system.
You mention supply chain, but what is the significance of blockchain for fast-moving consumer goods retailers and manufacturers?
Yes, one of the key areas of interest is provenance. The core problem of a supply chain is that you have a group of independent entities who have a common interest in optimizing sale of finished goods, but they don’t necessarily trust each other to provide accurate information. Doing so could compromise their interests in terms of their negotiations with each other. That’s a great use case for retail blockchain. Supply chains fall into that category. When we can share information in a way that we all can trust, knowing that no one is manipulating it, we begin to have more reliable proof of the work that’s being done along the chain. Consider:
- Unique identifiers being installed. The idea of a hash as an identifying number that we recognize because it resides in a blockchain environment as being uniquely identifiable to a certain work process or a certain machine or a certain factory or whatever. You could prove that a product is fair trade, for example or whether goods are pirated or not.
- Greater opportunity for efficiency of resource usage because you can incentivize each participant along the chain to provide more information about their work processes. If the interests of the chain are in everyone acting efficiently, then collectively, we should be able to optimize our use of whatever resources that we care about by incorporating into smart contracts a set of rules that aspire to those objectives. That’s an aspect I think is very important. It’s just pure efficiency gains.
- The financing component. With more information available about the activities happening along the chain, then small and medium enterprises, many of which have been unable to access letters of credit because they can’t prove the veracity of the documents they receive – the bills of lading or the shipping documents etc. – might now be able to say, ‘Look, this is a provable record of the transfer of goods, that I indeed have an invoice that is legitimate. Please loan me some money.’ Banks are developing trade finance solutions on the blockchain to be able to more reliably provide funding that they were never willing to do before because of the lack of faith in those documents.
You write about people taking control of their lives, disruption, redefining society. How do retailers, CPGs and customers benefit from this?
Yes, it’s an interesting question. I think one could argue that we end up with a much more decentralized, fragmented world of suppliers. In terms of retailers, rather than having brokers in warehouses or big, aggregating, e-commerce sites like Amazon, you’d go direct to the customer. We think of Amazon and the eBays of this world as a direct customer solution, but they’re not really. They are intermediators and data aggregators. The key here is not their involvement around sales margin, but that they get to extract key information from customer transactions. This is key to product development, relationships, and enhancing marketing efforts. They dominate through centralized data control. They might not be charging us on a per-transaction basis at a margin, but retailers lose because of the inability to take advantage of that data.
The interesting dynamic is that with technology coming together – high-level encryption, AI, blockchain – in theory can go direct to the customer and I can start to build interesting data profiles around that relationship that enable me to improve my product, improve my development. I think this gets really interesting when we move into the world of 3D printing and much more localized, automated production as well.
Interesting. We talk alot about localization in retail. If you’ve got a store in Miami, FL, you need Cuban goods, how does blockchain help?
We talk a lot about demand chains as a function of the future, when you can onboard suppliers more readily. The retail blockchain should give us a chance to say, “All right, I don’t need to put you through as heavy, compliance requirements as previously. I now can trust this record of data that you’ve provided automatically and onboard you into my supply chain quickly.” If I’ve got an order in Miami that needs something that’s Cuban, then I can quickly get somebody there. We think about that as being demand chain rather than supply chain. I can much more quickly respond to the customisable requirements of my customers than I could previously.
Please give us a peek at what you covered at Xcelerate 2018.
I presented a picture of how we move towards this self-empowered, controlling-my-own-data world. I described how the blockchain frees up individuals, businesses and other entities at the edges, to interact directly with each other. We may end up with an amplification or a steroid addition to the gig economy, to the whole empowerment of people in that context. I also delved into the supply chain use case, exploring how different businesses in such supply processes, right through to the retailer, can harness this technology to better track goods and manage costs, so that retailers can help customers make more informed decisions about the products they buy. I gave a bit of a rundown about what the blockchain is and its history and why it matters – essentially because of how it represents an entirely new way of dealing with record-keeping. Gaining access to those records on one’s own terms, rather than relying on big e-commerce intermediaries to control and analyze the data for their purposes, represents the real promise of blockchain technology for retailers.
Please tell our readers something interesting about yourself that they would likely not know.
Most of my life I was a journalist – 24 years actually. I lived in Jakarta, Argentina, Thailand and other spots. In my first job, my first big story was to write about the war in Burma – exotic, right? What’s funny is that my very first job out of college was as an accountant at Deloitte Haskins & Sells. I hated that job. In some respects, it’s why I became a journalist, to do the opposite. But here I am, all these years later and I have, at the center of my existence, this ledger. That’s what blockchain is; a ledger. It’s all about accounting; it’s a new form of accounting. I like to say, however, that this is the sexiest ledger in the world. So there you go.
Learn more about Artificial Intelligence and its applications to the retail industry in the EIQ Research report, Artificial Intelligence: Opportunities in retail.
Learn more about the Xcelerate Retail Forum.