UNIVERSITY PARK, Pa. — Penn State is an early adopter and one of 50 organizations that will help power a project to bring the potential of a reputable blockchain, or network of connected computers, to the study of supply chain management. It’s a move that project backers say could take the University a step toward offering its researchers not just a new field to study, but possibly even offer a new way to fund research itself.
Penn State’s Smeal College of Business recently announced an agreement with GoChain, a leader in enterprise and government blockchain solutions, that would make the University a node in the GoChain’s innovative reputation-driven blockchain network, according to Steve Tracey, professor of practice in supply chain and information systems and executive director of Penn State Executive Programs and the Center for Supply Chain Research at Smeal College of Business.
A blockchain is a network of connected computers where transactions of various types between parties are encrypted and recorded redundantly in a net of multiple databases. The computers are called nodes in the network.
In this distributed network of computers, the blockchain can act as a distributed referee monitoring all the transactions, which potentially can make these transactions less expensive, more accurate and more efficient.
According to Tracey, this partnership could potentially create innovative research collaborations and opportunities on the blockchain.
“This new and innovative agreement, as well as the groundbreaking use of blockchain technology in supply chains, is a huge step forward for the college,” said Tracey.
Blockchain innovation beyond Bitcoin
When most people think of blockchain, they think of Bitcoin and other alternative currencies, or cryptocurrencies. While the blockchain serves as the underlying technology that powers cryptocurrencies, it also has massive potential to serve in other ways.
“The biggest differences between a blockchain in a business setting and a blockchain in a cryptocurrency setting includes two key elements,” said Tracey. “In a cryptocurrency setting the transactors — the people who are engaging in the transaction — are anonymous and the transaction is public. In the case of a supply chain transaction, or any business transaction, the transactors are public and the transaction is private.”
Supply chain meets blockchain
Researchers and entrepreneurs are just beginning to realize how powerful blockchain is in creating new businesses and reshaping current business models, according to Aydin Alptekinoglu, associate professor of supply chain management, Robert G. Schwartz University Endowed Fellow in Business Administration and director of research of the Center for Supply Chain Research.
The team said supply chain researchers may find blockchain particularly interesting because of its potential uses by the industry. For example, blockchain could be used to track individual transactions along a complicated process, such as a food chain, which researchers refer to as supply chain traceability, he added.
“Let’s say you have a food supply chain and something happens at a restaurant and you want to know exactly where those particular ingredients came from. Some people hope that blockchain technology would make that much easier because you could track all the transactions and find precisely where that ingredient came from,” said Alptekinoglu.
This is much different than how supply chain transactions are typically tracked, said Tracey.
“The way things happen today is, for example, a farmer gathers the vegetables from the field and then he or she sells it to perhaps a cooperative, or maybe a wholesaler, maybe to some third party,” he said.
“Then they sell it to a distributor, who may ultimately sell it to a consumer, or it may go through another third party to a restaurant, who are using it in their food. All of those transactions are separate, so there’s no way to connect them together. If the farmer doesn’t pass the information onto the wholesaler and the wholesaler doesn’t collect it and pass it onto their customer, that information is lost at each step of the process.”
Blockchain gives these participants in the process the ability to interconnect those transactions, Tracey said.
Blockchain could also support interdisciplinary research efforts to make supply chains more sustainable and more humane, according to Alptekinoglu.
“People want to know where things come from, how they were made,” said Alptekinoglu. “They don’t want, for example, child labor being used in the making of their T-shirts. So, blockchain would be helpful in these social aspects of the supply chain. There is actually a whole supply chain infrastructure that operates now and through blockchain one could imagine different possibilities to organize a supply chain. On the social side, the social scientists could be brought in to study those.”
Data Autonomous Organization
The researchers are interested in exploring data autonomous organizations — or DAO — and, specifically, how these DAOs could be a new funding source for research.
In this case, the researchers are investigating an innovative way that Penn State, as a reputable node in GoChain’s blockchain, could be a research DAO.
“Our goal was to create a research collaborative that was data autonomous,” said Tracey. “In this case, we become a node on the blockchain network for GoChain. They use a technique called tokenization, which means that as transactions flow through the nodes in the network — and Penn State is one of those nodes — they accrue a certain number of tokens. Those tokens are then converted into a monetary value by GoChain. Then, GoChain takes that monetary value and contributes it back to Penn State as gift funds for research projects.”
Powered by Penn State’s reputation
Because the GoChain blockchain runs on reputation, Penn State made a natural node for its network, according to Henry Ines, GoChain CEO and Smeal alumnus. He added that Penn State will join other well-known, respected and reputable companies, such as Lenovo and Dish Network, that serve as nodes in GoChain’s proof of reputation blockchain network.
According to GoChain, these nodes foster the growth of the network while providing security through their geographic distribution.
“Penn State is one of the finest universities in the world and its Center for Supply Chain Research at the Smeal College of Business consistently ranks among the best of the best for its renowned supply chain management programs,” said Ines.
“As GoChain continues to focus on innovative enterprise solutions to include digital transformation, sustainability, and transparent and responsible supply chains, we are truly honored to welcome Penn State as our latest node signer in the GoChain ecosystem. Personally, as a Penn State Smeal College alumnus, I am especially thrilled to have the opportunity to work closely with the University to advance leading edge academic research, drive industrial innovation and to leverage technology for social good.”
The Center for Supply Chain Research, part of the internationally ranked Penn State Smeal College of Business, connects researchers and professionals from leading organizations within a community that is shaping the future of the supply chain discipline. Its members include more than 50 sponsors, representing a wide range of global industries and public entities, that currently leverage the research, knowledge, talent, and networking potential of a center partnership.