How can we solve the blockchain conundrum?

Leanne Kemp, Founder and CEO, Everledger; Queensland Chief Entrepreneur, Australia
Leanne Kemp, Founder and CEO, Everledger; Queensland Chief Entrepreneur, Australia

Everledger CEO Leanne Kemp discusses the advantages and potential dangers of blockchain and gives her perspective on how the OECD can help ensure the benefits this technology can bring to reach as many people in the world as possible.

If you search online for news stories on blockchain, you’ll find plenty of articles in favour, especially in those industries where there is a need for increased efficiency, transparency and interoperability across supply chains. But it’s not all good news. When blockchain focuses entirely on commercial gain, at the expense of transparency, the result can be confusion instead of certainty. In the wrong hands, blockchain could be used to exploit trust, mislead and even curb freedoms, in direct contrast to its original purpose.

This conundrum sits behind the recent launch of the OECD Advisory Board of blockchain experts and innovators. The group has met a number of times over the past 12 months to explore the principles and fundamentals of policy that will foster blockchain applications which help supply chains and other sectors to thrive globally.

Some of the key issues under discussion include:

  1. How to ensure accountability in decentralised, border-less systems
  2. How legal and regulatory certainty can encourage innovation
  3. How to promote transparency and support interoperability
  4. How blockchain can improve skills and bridge the ‘digital divide’

At Everledger, our purpose is to drive digital transparency in supply chains, by connecting separated and siloed ‘information honeypots’. One example is the world’s first neutral, public enterprise blockchain platform – hosted on the International Trade Centre’s independent site – which is capable of visualising blockchain-based supply chain data from multiple companies and sources. This ‘track and trace’ platform will help businesses across industries respond to consumer demands for ethical and environmentally friendly products, with the potential to bring to light circular economy and SDG data.

The global dimension

Today, it is conceptually accepted that blockchain stands out as a disruptive technology that will change a number of processes in supply chains as well as other sectors including financial services. It could, in turn, impact corporate governance, rewiring global value chains. The strength – and potential frailty – of distributed ledger technologies is that they operate above national borderlines. And this gives blockchain’s development a global dimension. The OECD is uniquely placed to engage with such a broad group of stakeholders.

The global nature of blockchain’s development can help distribute opportunities for wealth creation and economic development more widely than ever before. The proliferation of blockchain applications is forcing traditional institutions to rethink their current trust-facilitating models, and reinvent themselves using this technology and its underlying values. Blockchain can enable fairness across developing economies by providing a framework that rewards ethical business practices and unlocks value in supply chain participation in ways never seen before.

The OECD has signalled its intention to help governments set a policy environment that encourages innovation and experimentation in blockchain, while monitoring the risks of misuse. To achieve this aim, it is essential for countries to cooperate in order to share best practices and ensure interoperability. Australia, my home country, is already contemplating this opportunity in its recently released national blockchain roadmap.

Recognise the potential

When people hear the word blockchain, they tend to think of finance and cryptocurrencies like Bitcoin, but that is just one of many opportunities. The OECD can help to publicise and explore the policy implications in a variety of areas including health, transportation, agriculture, environment, and supply chain management. And if we look at blockchain as a catalyst of due diligence and transparency in supply chains – by allowing multiple parties to access the same database to track and record and audit products as they move along the supply chain – then certain opportunities and challenges emerge. For example, the potential value of data sharing simply by focusing on manufacturing process optimisation has been estimated by the WEF at over US $100 billion, based on best practices.

Enhanced transparency also helps companies and consumers to identify risks of adverse impacts (i.e. human rights abuse and financial crime). On that basis, they can prioritise further efforts to prevent or mitigate such risks. In addition, blockchain can encourage financial inclusion, by integrating informal actors and SMEs in the formal supply chain and by helping to overcome cash flow barriers.

Conversely, if the data entering the blockchain is inaccurate, then supply chain actors can put their trust in a fallacy – or even a lie. Fragmentation is another pitfall, where multiple blockchains are created for the same purpose and with different platforms, operating procedures and regulation.

Providing the big picture

In light of the climate crisis, we should be reframing our approach to supply chain due diligence. It’s not enough to consider where something came from. We must also consider where it goes after we are no longer using it. Blockchain has a leading role to play in the establishment and expansion, and (eventually) the standardisation of the circular economy.

An umbrella organisation like the OECD can make a difference by providing the big picture. Many of the benefits that can be achieved using blockchain technology already exist and governments, international organisations and industry should be facilitating their implementation.

Dissemination of information between governments and innovators is crucial to determining the most appropriate regulatory framework and supporting innovation. Governments and policy makers require a deep understanding of blockchain technology to develop policy and regulatory frameworks. Consequently, communication and collaboration between governments and other stakeholders, particularly those involved in use cases, should be encouraged and easily accessible.

Leaving blockchain unregulated, at the whim of the open market, would prove counterproductive. Blockchain can help to stimulate free trade, but risks becoming a victim of commercial greed if left to run wild. Let’s be honest: human nature needs checks and balances. That’s why I believe transparent operating principles and open innovation models are the future. In fact, our future relies on it.

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