Transparency is imperative to building meaningful relationships. With Nexus, the recording of information is naturally transparent. As such, through the use of the Supply API, interactions between many different groups, such as producers, manufacturers, carriers, standards organizations, vendors, and consumers can be recorded transparently. This enables different parties to share information in order to build digital ecosystems or decentralized standards organizations (DSOs) that provide greater visibility into the standards of production across various sectors.
Traditional supply chains are unable to support the growing interconnectedness that is required to produce the increasingly complex goods of today, while maintaining high levels of quality. They are managed through centralized services, and are often verified by costly third-parties that are required to be trusted.
Nexus supply chains not only benefit large organizations with complex global operations, they can also be used to build digital ecosystems to support local economies by connecting producers, vendors and consumers within local peer-to-peer networks, reducing the dependency on large distributors. Nexus open source technology automates many processes and is available at a very low cost, thereby revenues to independent producers can be increased, while the cost to consumers decreased.
First we will introduce some of the use cases of supply chains on Nexus, and then the technology that supports them. These use cases include benefits of increased trustworthiness of certification standards, protection against the sale of counterfeit goods, increased safety of products, provision of the life cycle of a product, real time data collection and tracking, integration with IoT systems, improved efficiency and security of operations and logistics, auditability, and the replacement of escrow services.
Decentralized Standards Organizations (DSO)
Today, many standards organizations issue certificates, such as organic, sustainable, recycled, fair trade, no animal testing, vegan, biodynamic, non-GMO, ethical labor, and quality assurances for electronic goods and components. Logos, labels, holograms, QR codes, and more recently SmartLabels, are used to inform the consumer and vendors of these standards, however these methods are susceptible to forgery.
With Nexus, a digital certificate can be issued to the producer which is recorded on the blockchain. Furthermore, with the DAO (Decentralized Autonomous Organization) technology that we are developing, a DSO (Decentralized Standards Organization) formed of various voting groups, could help the organization of existing standards bodies.
Different DSOs could issue certificates for the following products for example:
- Agricultural Produce & Fish
- Textiles & Leather
- Renewable Energy
- Electrical Goods and Components
Below we will outline an example for a DSO called ‘FlyOrganic’, comprised of voting groups such as agricultural inspectors, consumers, ecologists, nutritionists, animal welfare, vendors, and farm owners, which would issue annual organic certificates to producers that reach the standards of the DSO.
- A certificate is issued by the DSO i.e. Flyorganic, to an individual organic producer, such as a farm ‘Orchard Organics’. This could contain information such as location, farm name, address, acreage, produce, annual quantity of produce, practices, etc.
- The newly certified farm can then issue their own product certificates that would be linked to the DSO issued certification. The farm would be authorized to create product certificates for the duration of the DSO certificate, which would require annual renewal.
- With the help of an IoT device the weight and the coordinates of the container could be recorded, and this information added to the mutable fields of the digital certificate to record ongoing data about the product.
The data format of the digital certificates could be standardized by the DSO ‘FlyOrganics’ to record metadata such as:
Serial Number: 1F-92835473829
Producer: Orchard Organics
Item: Organic Pink Lady Apple
Harvest date: 5th October
Sell by date: 15th October
IoT GPS: 40.741895/-73.989308
IoT Weight: 1,000kg
At the point of purchase, a consumer using a smartphone could scan the SmartLabel to retrieve the history of the product back to the issuance of the organic certificate, in order to check whether the product holds its advertised standard. Consumer apps could be developed that enable people to personalize their individual standards, and therefore receive personal product listings.
Brand authenticity or quality assurance for high value goods can also benefit from digital certificates, in order to prevent the sale of counterfeit or fraudulent goods. Certificates could be issued by luxury brands, by quality assurance standard bodies for electronics, pharmaceutical companies, or by societies and guilds for arts and antiques.
To support the resale of goods, the certificates would be transferable between parties, allowing buying and selling on secondary markets. Certificates on the blockchain would also reduce cases of theft, as people would be less likely to buy a good without a certificate.
Certificates can be issued to renewable energy producers. For example, a digital ecosystem can be built to allocate surplus electricity from renewable sources within a local power grid, enabling people to trade electricity without having to go through a central provider.
Supply chain technology can also be used to increase transparency and history of used goods, such as motor vehicles, by recording their lifecycle, providing many benefits to purchasers wishing to resell an item, and also to the recycling and remanufacturing industry. For example, vehicle registrations could record the entire past ownership of a vehicle plus any additional information provided by garages regarding services, modification or repairs.
Traceability on the blockchain can aid the identification of the origin of contaminated foods in order to improve the accountability of food producers and reduce foodborne illnesses. Likewise, the technology can be used to identify the source of faulty electrical components.
Real Time Data Collection, Tracking & IoT systems
Items can have mutable data fields enabling important data to be uploaded to the blockchain along the supply chain, such as chemical and temperature readings, and pallet weights, without affecting immutable fields, such as the Serial Number. Containers can also have tracking devices which can intermittently upload GPS coordinates.
The integration of IoT devices would replace the need for some manual data entry, reducing errors and fraud. A system of IoT devices could be used to create a distributed oracle system, to automatically cross reference collected data which could be used to streamline the work performed by DSOs.
Operations & Accounting
Supply chains combined with QR codes, SmartLabels, RFID tags and IoT systems, can provide organizations a very transparent and accurate account of their entire operation, including data on stock inventory, and state of goods, such as sell by dates etc.
Supply chain data can be used for analysis and modeling for the purpose of managing or automating warehouse space allocation, distribution to meet consumer demand, shipping routes, upstream purchases, and financial projections. An accurate and automated supply chain can reduce the possibility of overproduction, the spoiling of produce, double handling and returns, erroneous stock accounting, and theft by employees. Overall, increasing the speed of production and delivery times, lowering the end cost to the consumer.
A certificate on Nexus naturally provides an audit trail. Each transaction, and delivery or sale along the supply chain is recorded, displaying an accurate history and sequence of events, making the process of auditing efficient and less prone to error.
Supply chain data can also be used to provide data to produce a receipt given by a carrier to a consignment of goods. With legal recognition, a bill of lading (BoL) could be issued using the information provided by Nexus for goods being shipped by sea or air, such as type, quantity, origin, and destination.
Automatic Payments & Information Flow
With Nexus, a digital ecosystem would be the foundation of an automatic payment system. The end payment would have to be made using NXS or a cryptocurrency supported by Nexus. Payments for each item would then be instantly dispersed to the participants of the supply chain (i.e shop, carrier, producer, manufacturer, charitable cause etc).
This would serve to improve the chain of payments which today requires manual transfers. By reducing the cost of the payment process, everyone in the supply chain receives a better deal.
Traditional supply chains use vertical payment systems, where the funds flow downstream from the consumer. In a horizontal payment system, the participants would be able to claim a percentage of the total revenue, through the tokenization of product certificates. In blockchain terms, this means that there is a shared revenue in the sale of the good that would be realized at the final point of sale. The certificate and applicable token would represent a source of revenue associated with a specific product, creating frictionless cooperation between all participants.
Automatic payments create an instant and transparent informational flow regarding sales, allowing easier coordination of harvesting produce, ordering supplies, assembly of manufactured products, packaging, and the orchestration of carrier and shipping routes.
Exchange of High Value Goods
With the exchange of high value goods, there is a requirement for the digital certificate to be transferred to the purchaser. In a conditional contract, the payment would be a prerequisite for the execution of the transfer, releasing the certificate when the payment is claimed by the vendor. This is one example of how Nexus can benefit the exchange of goods without the requirement of trusted intermediaries.
We have designed a seven layered Software Stack with one layer able to record everyday items as digital items. This is the ‘Register’ layer which allows items to be transferred between users by a technology called ‘Signature Chains’.
The native functionality of Nexus contains the state and history of an item, enabling the recording of supply chains by design, without having to maintain a complex state and history in a single contract as do other blockchain based contracts. The technology is easily accessible through an API designed specifically for supply chains. Below is a list of our notable innovations that power supply chains on Nexus.
Supply Chain Application
For the creation of a successful digital ecosystem, different groups along the supply chain will require custom applications. On Nexus, all that is required is the development of the interface and logical layers, i.e an application integrated with the Supply Chain API, that interprets the items relevant to each type of group who interacts with the supply chain.
If you would like to view a demonstration application for supply chains, you can view it here on our source code repository:
Supply Application Programming Interface
Programming a supply chain with the Supply API is designed to be intuitive and very simple. A basic supply chain could be created with the following commands:
- supply/create/item – This initiates the item by the recording of meta-data. Parameters to this command are omitted.
- supply/transfer/item – This transfers the item to another user (sigchain).
- supply/claim/item – This allows the recipient of the transfer to claim official ownership of the item.
- supply/history/item – This provides a list of events associated with the item, including updates to the register, and change of ownership (sigchains) along its lifecycle.
The history of an item includes data fields such as created, modified, operation, and owner. It displays transparent data on the series of events along an item’s supply chain and life cycle. The functionality of supply chains is built into the design of the Nexus software stack; Nexus records supply chains by design.
Nexus is built to facilitate the peer-to-peer exchange of any item. Items are recorded as registers, which are a data storage system that maintain an immutable record and history of an item, including its current and previous states. Registers record items as meta-data stored in a programmable object register.
A register can be used to issue a digital certificate with immutable data for the purpose of certification or a quality assured standard, or as a certificate of authenticity. Some data fields can be made mutable to enable the modification and recording of data (such as GPS location) to be changed through the production supply chain by authorized accounts or IoTs. Mutable fields can also be used by the current owner of an item through its life cycle, to update notes regarding repairs on a vehicle registration, for example. Other data fields in a register, such as a certificate, could have mutable quantity fields, for recording and tracking a variable amount of items represented by one register.
It is also possible for fungible tokens to be issued from a register, for example to represent 1,000 semiconductors. This would provide the benefit to the consumer of having a ‘proof’ of the item through the ownership of the fungible token, which would be linked to the certificate produced by the manufacturer. This would aid the merging of supply chains for different materials that are required for complex products such as a Smartphone. The division and quantity of these tokens together would form the basis for the components of the device.
One of our most important Nexus technologies is the Signature Chain (sigchain), which is a decentralized blockchain account, accessible through a username, password, and pin. This pseudo-anonymous identity layer is important for the verification of all authorized accounts.
A register, being on the layer above the ledger where sigchains operate, is transferred across the sigchains that represent the accounts of the producers, vendors, and end consumer. Therefore, by design the transfer and claiming of registers between sigchains provides a history of a chain of custody, and any modifications or notes added to the mutable fields of a register.
Sigchains replace the need for physical signatures and paperwork, and ensure authorization systems securely prove the identity of all participants or accounts. In our opinion, sigchains are a very important step for mainstream adoption across all use cases, given that users will no longer have the burden of storing private keys (as is the case with applications using other blockchain based contracts). Other benefits come from the efficiency gained by reducing the requirement of storing a large array of signatures on disk, generated through high transaction volume.
Contrarily, legacy blockchain designs rely on the safe keeping of the private key associated with an account or smart contract, which if lost could lead to broken links in supply chains, reducing overall system integrity. This renders legacy systems susceptible to human error, boding for the need for complex hardware designed specifically to store private keys securely. Though these devices are a step towards user friendliness, they are still at risk of being lost or stolen, and therefore are not reliable replacements for conventional authorization systems that exist in centralized systems. Please see Signature Chains for more information.
There are many supply chains use cases that can use Nexus contracts to automate processes, increasing their efficiency and accuracy, thereby lowering the costs for producers, vendors and ultimately consumers.
The majority of Contract functionality comes from the interaction of operations and registers, which are made immutable through the ledger layer. Operations are instructions that act on registers, and define contract logic. They include primitives such as ‘Debit’ and ‘Credit’, and conditions that reside as a contract between the parties.
These conditions disclose an agreement between participating parties, by outlining a set of requirements that must be met for the transaction to take place. They are the building blocks that allow users to engage in contracts with one another, such as contract expiration or the exchanging of items. More advanced forms of non-custodial escrow are also possible, which are discussed below. Please see Contracts for more information.
Escrow on Nexus is achieved through ‘Arbitration Triangles’ which function as non-custodial escrow services between a buyer and a seller. Ultimately reducing the need for trust that is required for the delivery of high value goods between consumers, manufacturers, and suppliers.
An Arbitration Triangle at its most basic level, requires two out of three signatories to unlock the funds and item of an exchange, e.g between a buyer and seller of a good, or any link in a supply chain. Since the third signatory or arbiter (shipping company or carrier) does not have custody of the digital certificates or funds, they act only as a neutral arbiter to resolve conflict between the buyer and the seller. In the case of a dispute, the arbiter settles the disagreement, essentially facilitating the function of an escrow service. Any organization with a supply chain or transaction involving three or more parties can benefit from this unique technology.
For a high value item such as a laptop bought online, the item could be issued a certificate of authenticity. The non-custodial agent, such as the carrier would then assume the role of arbiter, as the item and purchase funds are placed in an Arbitration Triangle. The carrier delivers the package to the buyer, receiving an electronic signature from them, fulfilling their role in arbitration by signing that the package was delivered. This would release the certificate to the buyer, and the funds to the seller, all without the carrier ever having custody of the certificate.
This means that the carrier never has possession of the certificate (register). Therefore, certificates of authenticity validate ownership rather than physical possession of an item, eliminating problems experienced in shipping with regards to manual paper signatures, theft by carriers, fraudulent claims, and erroneous deliveries.
Following on from the example of the Organic farm in the use case section, the payment for the carrier, (paid for by the farmer) and potentially a deposit from the carrier to ensure that they fulfill their part, (especially if the goods are of a very high value) are held in an escrow contract. The vendor would sign to release the funds to the carrier. If the vendor does not sign, they don’t receive the goods, nor does the carrier get paid. The carrier will possibly lose their deposit unless the goods are returned to the farmer (only the farmer can return the deposit back to the carrier on return of the goods).
Similarly, an arbitration contract can be made between a shipping and carrier service to incentivise good behaviour, whereby deposits from both parties are held in a contract to ensure that they carry out the service that they have been consigned to. In the event that one of the parties does not fulfill their part of the service, the arbiter, such as a supplier, would decide which party would claim the deposit. This type of peer-to-peer depositing system holds the potential to change the way we view insurance services, and possibly reduce the requirement for them.
LISP (Location Identifier Separation Protocol) is a protocol designed by a small group of Cisco engineers who are responsible for many of the protocols that power today’s Internet. It provides important advancements to the Network Layer, and many necessary features for secure access schemes for hybrid networks.
Most Internet devices use IPv4 addressing (the Internet equivalent of phone numbers), which is limited to around 4 billion devices. To accommodate the growth of Internet-connected devices, IPv6 was developed, though even decades later it still has not been widely adopted. On the contrary, LISP is able to use IPv6 as an overlay, since it does not suffer from the compatibility issues of underlay devices. The capacity of IPv6 is 2^128 devices, providing ample capacity for the growth of IoT devices. Please see LISP for more information.
Organizations that work closely together, such as producers, vendors and service providers, sometimes want to share information. However, they often wish to provide different levels of transparency to one another. Hybrid networks utilize technology that enables the granting of secure control access schemes, giving businesses the ability to privately share information with partners or alliances. These access schemes give specific accounts or applications access to various parts of the overall data, thus creating a ‘Hybrid’ of a public and a private network. Please see Hybrid Blockchain for more information.
Nexus is currently designing technology that can be used to create Decentralized Autonomous Organizations (DAOs). DAOs will provide more opportunity to people to shape the management of organizations by way of voting and interacting in working group structures. We envision this will empower many people to get involved in creating ethical, sustainable and regenerative practices, so that we can together build a resilient global community for the future.