Blockchain: Shaping Industry 4.0

Paula Sweis
8 min readMar 14, 2021

Introduction to Industry 4.0

Advanced digitization within factories brings us an ecosystem right from the product being manufactured to the interconnected factories, supply chains, customers and various other stake-holders termed holistically as the Connected World. The combination of Internet technologies and other future-oriented technologies is poised to result in a paradigm shift in industrial production leading to what is known as Industry 4.0.

Industry 4.0 brings us an ecosystem that is mainly based on automation included smart services, smart products, and smart factories. This change creates many opportunities for game-changing ideas in sustainable industrial manufacturing. Building such an automated environment requires internet connectivity along with a large number of objects. Originally such objects are not secured-by-design rather exposed to attackers, therefore hackers should be prevented from enrolling into botnets, to patch their vulnerabilities or to be able to update them. From the past few decades, many cryptographic techniques are used to protect sensitive information either in communication or in storage. Initially, these techniques were only used in information security systems but now they are moving into other use spaces.

Originally blockchain was developed for the cryptocurrency known as the Bitcoin. Bitcoin’s blockchain is a decentralized data management and transaction technology. The idea of blockchain technology was coined in 2008 and it got much interest because without the involvement of any third party its central attributes provide data integrity, security, and anonymity. The implication of blockchain in Industry 4.0 has spawned a wealth of new innovations. Blockchain ensures that the cyber-physical systems making up smart factories can autonomously and safely order a necessary spare part, streamline their production processes to cut down energy consumption, pinpoint upcoming faults in the supply chain before they happen and many other advantages.

Blockchain’s potential makes us able to adapt ourselves to a new, optimized, flexible and more efficient business model based on trust and security of all stakeholders. This makes Blockchain technology a staunch ally in the development of Industry 4.0. The products in an automated industry, from the factory to end consumer, provides priceless information that is vital for various concerns. End consumers are interested in this; hence greatly concerned about finding out the exact traceability of the products.

Here I will highlight the use cases below —

1. Supply Chain

Depending on the product the supply chains management process is extraordinarily complex. Different geographical locations contain different links for supply chains to create and distribute goods. There can be hundreds of stages, a multitude of payments and invoices. It can also extend over months of time and have several entities individuals involved. Insufficient transparency and increased complexity broke our supply chain from several points in many ways. The unique attributes of blockchain could transform the industry of supply chain and logistics in better form. Supply chain in industry 4.0 can be based on the following two different dimensions:

Physical Supply Chain Dimension

In physical supply chain we use blockchains in self-controlled and Autonomous subsystems of logistics like transport(e.g. autonomous trucks providing and supplying materials. Using smart contracts products and services could be made available to customers by the process called autonomous delivering.) order processing(smart contracts) order processing systems can use blockchain technology for facilitating seamless business executions (e.g.condition monitoring , object self-service or remote usages), and turnover handling (e.g.piece picking robots or trailer unloading).

Digital Data Value Chain Dimension

Different type of data is collected through machines and sensors on an end-to-end supply chain that is entirely physical at a level called physical thing. High-value data can be placed on blockchains for record-keeping and provided for any kind of analytics that could result in business services which are potentially highly value-added services. Early models of blockchain-based smart contracts assume a single transaction. These models become more complex when the coordination of several transactions involves. For example, a manufacturer order some critical components from a supplier to provide a system to end-users. That supplier order different elements from different parts of the supply chain, eventually reaching back to source raw materials in the extractive industries. Now suppose if each link in the supply chain operations on a just in time basis, then ability to meet an order is dependent on dynamic procurement in the whole chain. So there might be a need for the immediate contracts between the End-users to the manufacturer, manufacturer to suppliers, suppliers to suppliers forming all the links to be conditional upon the conclusion of all contracts back to the root of the supply chain. So if there is a delay in process the whole chain can be viewed for a delayed reason and no legal action can be taken against the wrong person. Alternatively, there can be a legal force, only if suppliers can give an assurance (probably written on smart contract) that he is responsible for any contractual delay in chain necessary to meet the order. There is nothing, that is insurmountably complicated in the supply chain. It simply requires the smart contract to be formed only when different components of the supply chain can generate a request or confirmatory message. However, providing for the consequences of default of any such message and methods for ensuring their validity would have to be an explicit element of any smart contract system.

2. Quality Control

In addition to supplier data, product and material data and movement can be maintained on the blockchain. Every product can have several transactional characteristics that are recorded on the blockchain, along with the historical data of a product. These transactions may declare the origin of the product, the quality, quantity, owners, and time. These data provide the ability to trace green quality, recyclability, and carbon footprints. The environmental information ensures customers are aware of safe and sustainable production and transportation of goods. Therefore, customers, with the ability to access this information, would have the opportunity to select sustainable products. To ensure sustainable purchasing, companies can track the journey of resources for rare and high-value products.

The ability to track the source of products to address biodiversity concerns and contribution of products to resource depletion are two cases that demonstrate the role of blockchain in ensuring the sustainability of products. Using blockchain technology, life-cycle analysis of products can be completed using actual product data, rather than by estimating the values, such as in current life cycle analysis methods, as demonstrated by experts of the field. This accurate and actual information is a revolutionary contribution of blockchain technology in the life-cycle analysis domain.

3. Trade Finance

In the trade sector, there are a number of parties that would potentially benefit from the security advantages offered by blockchain. There are manufacturers, for example, who have a desire to produce, market and sell their goods to an international audience. We must also consider commercial buyers, whose task is to import global goods in order to sustain their employers’ business. The latter is particularly challenging at present, with UK buyers and those with an active trader account familiar with forex trading having seen the cost of imports increase as the pound has continued to endure a process of devaluation. With these points in mind, there is an increasing level of risk associated with international trading and trade finance in the modern age.

While this risk is usually offset by banks and traditional lenders, who act as trustees in order to safeguard the interests of each party while also assuming the responsibility for reimbursing one or the other in the event that a specific deal collapses. The issue with this is that banks are increasingly ill-equipped to perform such a role in the current climate, particularly with a larger number of trades completed through open trading platforms and the increasing pressure of a volatile social, economic and geopolitical climate. In contrast, blockchain has the technological foundations and natural advantages that make it well-placed to address these growing challenges. It instantly negates the need for a central (and potentially vulnerable) ledger, for example, as blockchain is a distributed ledger that enables each party to store their own transaction history and data. Not only this, but blockchain also has a level of transparency and traceability that helps to provide genuine reassurances to parties, in the form of an enduring list of historical transactions that is constantly accessible and capable of providing advanced conflict resolution.

Of course, the issue that remains is the question of accountability, as an independent technology source as blockchain would not be able to reimburse parties in instances when international goods are not delivered (as an example). The sensible solution would, therefore, be for banks to integrate blockchain technology into their existing software, primarily by acting as platform suppliers that external clients and counter-parties can connect to. This would help banks to improve their market share over time, rather than threatening the traditional status quo and placing their status as central ledgers at risk. This will cause some considerable disruption in the short-term, of course, as banks get to grips with blockchain technology and look at adapt to a brave, new world. These challenges would surely ease over time, however, while enabling both lenders and blockchain to achieve their true potential in the commercial marketplace.

4. Security Risks

Finally, as the industrial systems enter a more cyber-physical sphere, built on automation and hyper-connectivity, it brings new security challenges with it. Industry 4.0 provides us with the power to develop more resourceful, smarter and sustainable machines. On the other hand, making use of ground-breaking methods to alleviate security risks and boost buoyancy, we need to be smart in our approach to protecting these hyper-related infrastructures.

Blockchain technology has the possibility of helping us innovate cybersecurity, providing a vigorous mechanism inherently confirmed and pseudonymized. The instinctive procedures in blockchain technology give the stylish industry ecosystem the opportunity to cross-check its own devices and suppliers while giving the assurance of confidentiality of sensitive information.

--

--

Paula Sweis

I write on topics that focus on finance, social sciences and technology. Views are my own unless stated otherwise. For inquiries. www.silverweiss.com