Corda enables businesses in Trade Finance, Insurance and beyond to transact directly with privacy, scalability, and security. Let’s understand what’s the role of Corda in the Supply Chain.
The supply chain is one of the many industries that have been optimized by Blockchain implementation. However, the use of Blockchain in the supply chain industry has revolutionized this industry to its core. It has redefined the way the supply chain industry operates.
There are several Blockchain platforms that can be used for creating a global supply chain network. From the public Blockchain networks like Ethereum to private Blockchains like Hyperledger, a decentralized supply chain application can be made on all, based on the specific requirements.
Among the several Blockchain platforms, r3’s Corda has become a prominent choice for this industry.
Corda Blockchain is being used extensively in the supply chain which has allowed Blockchain to prevail in this industry. To understand the Corda supply chain ecosystem, we must understand what supply chain is and why Blockchain is required in this industry.
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The Supply Chain Industry
The supply chain is how the world stays connected. Exchange of goods to meet specific requirements and procurement of goods that are available in another nation is necessary for any country. The current lifestyle is extensively dependent on the import and export of goods commonly called cross-border business transaction. However, the process of supply chain is not as simple as it seems.
There are a number of entities involved in a typical supply chain system. Therefore, the establishment of trust is a crucial factor in the supply chain ecosystem which is not easy to achieve with the current technology. For instance, the buyers need assurance that they will receive goods on time and in promised conditions while the sellers need the assurance of receiving money in the agreed timeline after they have sent the shipment.
Another prominent feature required is the need for transparency to establish credibility. Importer and exporter both need to be aware of each other’s performance and industry relationships in the past. Further, the transparency of the capabilities of the trucking companies, warehouse providers, and financial authorities is also necessary.
Therefore, the whole process of cross-border trade requires unmatched trust, regulations, compliance, authenticity, and a flawless payment process. As a result, Trade Finance also becomes prevalent.
Trade finance is a process where the importer’s bank provides a letter of credit to the exporter or the exporter’s bank stating that it will provide payment provided that the goods to be received are as per the prior agreement between the exporter and the importer.
Therefore, the four pillars of Trade Finance are:
- Risk mitigation
- Provision of information
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The need for Blockchain Supply Chain
The complexity of a supply chain process including trade finance calls for a technically advanced system. A lot of manual work hinders the efficiency of supply chain networks. There is no standard of interaction or a platform where all entities can synergize.
The world of the supply chain has been unable to experience the powers of digitalization due to the lack of trust in the online system. This further includes security, cost-effectiveness, and most importantly, time consumption. It takes weeks if not months to complete the agreement for a trade and get the required permissions for it, including the compliance.
This is where Blockchain comes in. The primary goal of Blockchain is to provide true digitalization in the supply chain industry, with the added benefits of security, transparency, and trust.
Read More: Hyperledger Vs Corda Vs Ethereum: The Ultimate Comparison
Benefits of Blockchain Supply Chain
The core capabilities of Blockchain are exactly what the supply chain industry needs such as:
- Unparalleled security on a digital platform
- Market visibility
- Trust-based ecosystem
- Seamless cross-border payments
- Paper-less process
- Immutable records leading to provenance
And much more.
Role of Corda Blockchain in Supply Chain
Corda is a DLT platform that accommodates the development of decentralized applications called Cordapps. These decentralized applications are built for specific purposes to incorporate the functionalities of a distributed ledger in a system.
The core architecture of R3’s Corda is based on a need-to-know basis. There are several nodes inside the Corda ecosystem but the nodes have their own separate databases. This means that if Node A and Node B are doing a transaction, Node C will not be aware of it. This transaction goes through the Notary of Corda to be verified or authenticated. The final transaction exists on the two nodes and the Notary node, creating an immutable record accessible t only the involved parties.
In a sense, Corda provides a limited decentralized database which is why it is not called a Blockchain but a distributed ledger technology.
Specific to the supply chain industry, the Corda Blockchain platform is a popular choice for the development of decentralized applications creating Corda supply chain applications.
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Before understanding how Corda supply chain, let us go through the benefits of using Corda:
1. Transaction finality
Corda has a need-to-know architecture which means that the transactional data is shared only between the parties involved. This transactional data is added to the immutable ledger but is accessible only to the involved parties thus leading to a permissioned network. The transactions are validated by a Notary node on Corda and authenticated through the private keys of the parties.
2. Instant updates
Corda creates a node-to-node connection which allows each node to be notified almost immediately regarding any activity such as signing a transaction or initiating a transaction. In a typical supply chain process, the notification consumes a lot of time leading to an overall slow process. For instance, the authentication of request by a compliance officer takes its fair share of time
Corda uses several industry-standard algorithms including the SHA256 algorithm which is the reason why even the government authorities favor Corda as their Blockchain platform. This allows Corda to implement advanced encryption and hashing on the user’s data, providing the utmost security.
Now that we understand the basics of Corda Blockchain and why it is suitable for Blockchain supply chain applications, let us see how the Corda supply chain is formed. For this, we will see how various features of Corda can be used to create a Corda supply chain.
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Corda supply chain architecture with Corda features
- There can be a single notary or a cluster of notaries which allows the Corda supply chain to have multiple digital signatures and more privacy. Further, the identity of an entity is also maintained by the notary so it means that potentially, a buyer can trust a seller without even knowing their true identity.
- Every entity in the supply chain is represented as a Corda node. The connection between them is direct.
- Corda supply chain can be built by any developer who knows Java or Kotlin. Contrary to other Blockchains that require special languages, Corda development becomes easy.
- There is no issue regarding the scalability as the transactions can be completed on different nodes in parallel. This is due to the fact that transactions are completed between two parties only and the data is also shared between them only.
- There is data privacy without the trade-off of decentralization in the Corda supply chain as the data is shared only among the concerned parties.
- Corda allows the creation of Flows that can be used to standardize the process of transactions across the network.
- The legal aspect of the transactions, as well as various conditions, can be defined through the contracts available in Corda.
- The interactions between the entities of the Corda supply chain are represented through evolving states, each state representing one step of the interaction. Therefore, it established provenance in the r3 supply chain ecosystem.
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Corda Blockchain Supply Chain Use Case
Let us take an example of a typical r3 supply chain to understand exactly how it is implemented;
Consider five entities of a supply chain, Farmers, Buyers, Transporters, Investors, and Insurance providers.
Every entity has its own nodes in Corda.
The farmer needs investment for growing a rare crop. He comes to the Corda supply chain platform and locates different available investors. The history of investors is shown to the farmers along with the amount they can invest. Therefore, the farmer node initiates a proposal for financing with the appropriate investor node. The proposal state now has a specific farmer and an investor. The state can either be agreed, rejected or put on hold.
The investor looks at the farmer’s existing record, previous trades, and credibility. He accepts the proposal and both parties sign digitally.
Now, the proposal state has been completed. The conditions associated with the proposal have been agreed upon by both parties. These conditions are pre-defined and are enforceable so both parties have to abide by their rules.
Next, the farmer looks for an insurance company on the platform. On the contrary, the insurance company can also reach out to the farmers to provide insurance. There will be a separate state and flow for this.
One party initiates the process of the proposal of insurance. Let us imagine if the flow for this process also requires the digital signature by the investor as the investor will get the insurance amount in this case. Therefore, the state now requires the signature by all three parties in the transaction to complete.
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Finally, the buyer goes to the platform and looks for a farmer with the desired goods. The buyer initiates the process of trade with the farmer. The buyer initiates a trade with the farmer but he requires a finance provider to pay for the goods before he can sell them. The financier node is also included in the agreement process between the buyer and the farmer. A digital signature by all parties is required to complete the flow.
A transported is also involved in the scenario where again an insurance provide comes in.
The financier provides the necessary funds to the buyer. Appropriate funds are transferred to the farmer and the rest goes directly to the investor who provided the money to the farmer in the first place.
All the financial transactions are done in the Corda supply chain through the token SDK which represents the transfer of value at a negligible transaction cost.
In the whole ecosystem, there is complete transparency in terms of the rate at which crops are grown, sold, or transported. The funds are managed in real-time and are sent immediately to the appropriate entity.
In case the crops are damaged, payment by the insurance company is released automatically.
This is how an r3 supply chain network can be established. As a further enhancement, all entities can hold an account on a node rather than a separate node, using the accounts library of Corda. This allows cost and infrastructure optimization.
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Popular Corda Supply Chain Projects
1. Marco Polo
Marco Polo was launched in 2017 and has become one of the most successful trade finance Blockchain applications. Its TradeIX platform is being used by leading banks to seamlessly exchange goods digitally. This includes entities such as ING Ventures, BNP Paribas, Tech Mahindra, and Kistefos. It is currently supported in UK, Ireland, Singapore, and the US.
Contour is another Corda-based trade finance solution that went live in October 2020. Contour has proven to reduce the time of LC issuing by 90%. LC is the letter of credit which is one of the major components of the international supply chain wherein the banks issue a letter for ensuring the other party that the bank’s client will pay after receiving the goods.
3. Digital Ventures
Digital Ventures along with Accenture have developed the world’s first procure-to-pay blockchain supply chain solution of r3 Corda.
The aXedras Bullion Integrity Ledger is a digital solution for the metal industry. This Corda supply chain solution tracks the metals throughout their journey from mining to investment. The primary benefits of this solution are provenance, relaxed compliance, more transparency, and an efficient process.
Blockchain will become a necessity in the supply chain industry but in order to achieve that state, we need an appropriate set of tools and technologies for the creation of sustainable, scalable, secured, and sophisticated applications. Therefore, the Corda Blockchain becomes a clear choice for implementing Blockchain in supply chain.
What Corda supply chain highlights is that even though the need for Blockchain is cloudless, the implementation of Blockchain in supply chain must be done in the right way in order for the industry to evolve.
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