Gaining an Edge with Blockchain-Powered Transparency

    Most people are beginning to understand that blockchain is not a cryptocurrency associated only with Bitcoin. Rather, it is a collection of technologies. This collection includes the following technologies:

    • An immutable (unchangeable), distributed datastore
    • A consensus validation mechanism
    • Smart contract code
    • Digital identities for participants and assets or products being produced
    • Cryptography and heightened security—even quantum-level security in some cases

    These are the core blockchain technologies. The distributed datastore provides us a data framework, consensus validations provides a transactional framework, smart contract code provides a network-level process and automation framework, the digital identities capability provides an identity framework and the cryptography elements provide a security framework…all of these supply chain applications are especially tuned to managing the interactions between companies. All these technologies work together to allow us to create software, purpose-built for collections of companies to work together on the same application.

    Traditionally, software is built to help with a process for a single company. These blockchain technologies allow us to build software platforms focused on companies that partner together to produce a product or deliver a service. Each product produced relies on the efforts of multiple participants. Even the most vertically integrated supply chains rely on service providers, independent testing labs, and others to get their products to market.

    Why is blockchain a game-changer for the natural products industry?

    Blockchain technology is uniquely qualified to build trust among industry stakeholders, including consumers. One of the pieces of functionality that these blockchain-based technology platforms naturally enable is the simple track and trace of the ingredients of a product. Because the technology tracks the identity of the participants and their interactions with the product being produced, we get a rich product genealogy with the complete family tree of each product. And all of the information is held in the distributed, unchangeable datastore. This is huge for our industry where we struggle with some bad actors and folks trying to pass sub-par or counterfeit ingredients along to unaware consumers.

    Blockchain’s ability to serve as an immutable single source of truth is very important. A blockchain record cannot be deleted or manipulated, it can only be appended and a time-stamped record is made of all updates and by whom they were made. This audit trail can be viewed by other permissioned parties. So even if the evidence provided by a brand that supported the safety, sourcing, or sustainability of a particular batch of product was only self-reported by the brand, the fact that there are documents in the public domain, on an immutable blockchain, that are standing by the claims the company is making for a specific batch, should provide a powerful incentive for that company to be truthful about the evidence it is providing. This is also a powerful signal to the public and to consumers that a company is standing by their commitment to quality, safety, or sustainability for every batch of product when they contribute to a blockchain record.

    Blockchain is also the perfect technology to help build trust with consumers because of its ability to operate as a network-level application and establish the digital identity of its participants. These characteristics allow it to essentially enact the “law of witnesses” in the digital world. For thousands of years, judicial systems around the world have operated under the premise that a testimony is more credible and trustworthy if there is a witness who backs up or supports the facts or version of events as told by the first party. If there is more than one witness that supports and agrees with the first party, then truth becomes even more clear and established. The court of public opinion and trust of the consumer should work the same way.

    A blockchain-enabled audit trail enables a “show me, don’t tell me” environment. When a brand provides evidence supporting its claims of quality, sourcing or sustainability to the blockchain that is a good thing and at least there is some basis for trust, but when the brand’s contract manufacturer, analytical testing lab, ingredient supplier, farmer, third-party certifier, or other supply chain participant contributes directly to the blockchain on behalf of the brand, then the brand becomes much more credible and trustworthy in the eyes of the consumer and other stakeholders.

    The next step for responsible players in our industry should be—while waiting for and encouraging regulatory agencies to make and enforce appropriate legislation—to put their rhetoric into practice by voluntarily adopting a blockchain-enabled audit trail and requiring their large suppliers and customers to do the same. That will create competitive advantage by signaling to consumers and investors that the company is making auditable progress in backing up their quality, safety and sustainability assertions. The power of demand and supply-side markets and competition, informed by blockchain-powered transparency, should encourage corporations to engage in verifiable action rather than use trendy buzzwords or simply issue greenwashed ESG statements.

    Conclusion: These blockchain technologies have evolved quickly, and they allow for a complete, transparent, auditable genealogy of products. The time has come for the natural products industry to take responsible self-regulation to the next level with blockchain technology. Our industry conditions beg for a mechanism to increase trust, and the profile of the largest and growing consumer groups are demanding increased transparency. Blockchain technology has advanced to the point where it is much easier and cheaper to deploy than ever before and it is simply superior to traditional technology in so many ways. Blockchain-powered transparency is better brands, better for retailers, better for the health of consumers, and ultimately better for the health of the planet.

    Previous article3 Top Things to Learn From the World of Fasting
    Next articleIn Memoriam: William F. Sardi, 1945-2022
    Derek Lurth is the chief executive officer and co-founder of HealthLoq, a company that helps the natural products industry convert investments into quality and compliance into compelling marketing assets through the use of blockchain technology. Prior to HealthLoq, Derek’s focus was in the nutraceutical industry, where he was the chief financial officer of a dietary supplement brand, the CFO of a virtual dispensary provider and distributor of natural products, and co-founded a botanicals extraction company. Derek has also held senior finance leadership positions at high-growth publicly-traded pharmaceutical and homebuilding companies. He began his career at Deloitte as an auditor and is still a certified public accountant in the state of Arizona. Derek graduated from Brigham Young University with a master’s degree in accounting and a minor in information systems management. He is married with five children and enjoys volunteering in his community, scuba diving, hiking, camping, and performing in an improv comedy group, among many other interests.