This week we are going to be sharing with you expert visions outlined in the Connected Products Economy Report. From Natasha Franck to Mats Linder Consultant, Ellen MacArthur Foundation, we take a closer look at their key message which focuses on how we can power circular business models, global transparency and new economic incentives to change patterns of production and consumption.
Unlocking value and catalyzing innovation at the intersection of people, products, and systems, the report presents an ambitious plan for how the industry can embed circular economy principles in connected products. Yorke E. Rhodes III, Co-founder Blockchain @Microsoft, Microsoft Corporation, shares his knowledge on how digital identity meets blockchain and AI.
According to Rice Business School, Yorke E. Rhodes III is a passionate technologist who has worked in software across large enterprises such as Microsoft and IBM as well as startups in wireless, mobile, digital marketing and eCommerce.
Achieving circularity requires a combination of characteristics across several seemingly disconnected elements in a product’s life. In fact, these elements are systemically linked in a circular economy. Opening the opportunity for a circular economy requires unique identification of the goods, ensuring those goods are authentic, and tracking the custody and condition of those goods as they move through their usable life and into reclamation, reuse and recycling. In its most idyllic realization, the custodians and other actors touching the goods are identified uniquely, creating new opportunities to validate participants in the circular ecosystem, and enabling new business models in the circular economy.
To achieve the valued outcomes desired of a circular economy, we must break down these characteristics into relevant foundational components that enable the building blocks of the technical stack. This is where digital identity meets blockchain and AI. We won’t address AI here as it is simply a beneficiary of new data that it can take advantage of to perform predictive analysis about supply chain and product lifecycle concerns. Let’s break down how digital identity and blockchain are intertwined and can help to achieve a product’s interoperability within the circular economy.
“Blockchain has been proven to be the foundation for creating globally unique identifiers in a distributed fashion.“
A unique identifier that works across an ecosystem to track goods requires a system that works equally well for products, people and institutions. Importantly, it must transcend enterprise boundaries and function throughout the entire value chain of a global ecosystem. And in order to achieve the appropriate level of openness that ensures interoperability, a set of standards must be established, adopted and consistently followed.
Fortunately, new technical standards support this goal while complying with existing data format standards for goods tracking systems such as electronic data interchange (EDI) formats and GS1 product identifiers that are already in use. These systems must operate across institutional boundaries in a global ecosystem, and logically speaking no single party should control or own the identifiers used to monitor the history of the product or goods. Fortunately, we have systems now that allow us to establish self-owned identities which can be authorized by various parties regardless of who created the original product identifier.
A utility for hosting such identifiers must be based on a set of standards such that the identities can work across the disparate enterprise systems and be easily understood and interpreted by consumers and their applications. It must work up and down the value chain of the goods supporting large enterprise retailers, brands, recyclers and source-material smallholder farmers.
Such a system could be implemented on a private utility or a public utility. In the private case, that could mean a private blockchain with various stakeholders in a supply chain. The public case could involve something like Libra, the new initiative led by Facebook that promotes a controlled public chain with 30-100 participating (and validating) institutions. In its most publicly distributed form, a utility like this is possible using public blockchain systems like Ethereum or Bitcoin. Fortunately, a few years of self-owned identity work are well underway with the World Wide Web Consortium (W3C) recently publishing a draft specification in this area.
Blockchain has been proven to be the foundation for creating globally unique identifiers in a distributed fashion. Parties are not required to coordinate with each other to create root keys in a blockchain. Each root key can represent a unique identity, and even value, for a good, just as it holds other data about its owner and current condition. Each of these identifiers can represent goods at all levels in a global supply chain; individual items, parcels, pallets, and the institutions and participants touching those goods. This enables the possibility to establish a circular economy driving value by uniquely identifying the goods in a global value chain.
A blockchain-based identifier can bring together many systems. The definition of the data fields associated with these identifiers is determined by a flexible framework with a minimum set of required fields that can also support GS1, EDI, or X12 standards. The ability to find these identifiers using metadata, regardless of the registering entity or system they are stored in, has come to be known as a resolver, similar to Domain Name System (DNS), a global standard for finding websites based on a name, for example, Microsoft.com. The standards have been established across a number of technical bodies including the Decentralized Identity Foundation (DIF), Verifiable Claims Working Group (VCWG), and others in the W3C.
Blockchain is just one type of data carrier for registering unique identifiers associated with goods, institutions and participants in a value chain. While there are multiple systems that could comply with the standards, blockchain has a number of differentiating factors that enhance its value proposition as an identity registrant and data carrier. First, the potential to have fully controlled identifiers associated with the goods, people or institutions helps to avoid the “your data, my data” problem that is rampant today. Second, an item’s data is self-defining. This means it contains a set of data about its own state, condition and custody as it moves across a value chain transcending institutional boundaries. Third, is the possibility of the identifier also to carry an item’s value and history of transactions as it changes hands.
After several years of building siloed systems that end at the boundary of institutions, we haven’t been able to effectively solve the global challenges associated with tracking goods in a complex supply chain; from source materials to recycling and through its entire journey and effective life. While EDI was designed to address this problem, it is so highly complex and costly to implement that it is widely regarded as a failure beyond its data formats.
Blockchain is a perfect match for solving these problems as it holds the keys for members of civil society to establish circularity across global ecosystems that solve global challenges in our massively inefficient supply chains. Importantly, it does this while avoiding single institutional ownership, and therefore questions about the veracity of data.
Words by Yorke E. Rhodes III
If you would like to read the full report, you can download it. Tomorrow we will be sharing words from Mats Linder, a consultant at Ellen MacArthur Foundation on Creating value by embedding connected assets with circular economy principles.