Blockchain innovation in the supply chain: opportunities and challenges

An important workshop was held in the past few days at Bocconi University on the topic of ‘Decentralisation of Business Activities: Technological, Legal and Financial Aspects’. A panel of experts analysed the challenges and opportunities for innovating business organisation through the use of distributed ledger technologies and blockchain in particular. To better understand the innovations brought about by the event, we interviewed one of the keynote speakers, Claudio Tebaldi, director of Fintech Lab and professor in Quantitative Methods for Economics, Finance and Insurance, who works in Spoke 4 as part of the MUSA project.

Professor Tebaldi, what is meant by decentralisation of business activities?

So-called decentralisation is usually associated with activity that takes place via blockchain, a decentralised system that updates a computer network according to cryptographic rules. For example, we speak of decentralised finance when the activities managed by the network concern payment systems or financial transactions, as is the case with networks associated with cryptocurrencies. The novelty of the research being conducted is that it is proposed to use blockchain to consolidate business networks. The aim is therefore to use this technology not so much to innovate market finance but rather to achieve better overall management of business networks and their financing.

What are we talking about when we refer to business networks?

As is now well known, the production of consumer goods is not done by individual enterprises but through supply chains. These are nothing more than networks of enterprises that coordinate to produce more efficiently. The business network is in fact already ‘decentralised’ and is exposed to shocks of various kinds that may limit its operation. We analyse how these new technologies, blockchain, can be used to make these networks more resilient. It is a potential use known to technicians that has often been regarded as a less interesting activity than applications dedicated to activities more closely related to cryptocurrency trading.

The use of blockchain therefore to improve the organisation of production.

These management methods via blockchain can improve the functioning of the districts that make up the backbone of the Italian, European and continental economies that we know so well. The idea is to build a ‘digital twin’ of the supply chain whose functioning has many similarities with the organisations that are called DAOs, or Decentralised Autonomous Organisations, in the cryptocurrency field. The DAO is an innovative organisational structure that functions autonomously and decentralised, using governance rules based on member voting and the transparency of blockchain technology to increase trust and efficiency in network activities. Unfortunately, these organisations are often born and raised outside of existing regulations. This obviously generates risks and limitations.

Is it therefore necessary to introduce new laws to regulate them?

The first result of the research project we have presented is a contract drafted according to existing rules that can be used by an enterprise network that wants to use this decentralised mode of collaboration via blockchain to make decisions and carry out its coordination activities. Thousands of enterprise networks already exist in Italy, but they do not function in the same way as DAOs. This new contract allows network members to interact via the blockchain voting mode, but also to be consistent and compatible with what is provided for in the network contract by the current legal system. Of course, there are discussions to figure out how to decline the current rules with the regulation governing technological DAOs, to decide what the network can or cannot do under the current regulation.

Is there a concrete case you have focused on?

Yes, one particularly interesting and promising use we are working on is in relation to the need to improve the coordination of sustainability, social and corporate governance policies along the supply chain.