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Overview
The configuration of blockchain used with Bitcoin does not have the transactions-per-second capacity needed for full production industrial blockchain in supply chain applications. Private and permissioned configurations of blockchain have been deployed for all 36 industrial blockchain consortia examined by ARC Advisory Group. This provides the anticipated capacity requirements needed by the consortia for when they reach full production.
Blockchain Transaction Capacity with Cryptocurrencies
Cryptocurrencies like Bitcoin allow transactions between any two parties and uses a public and unpermissioned blockchain. Immutable, trusted data and self-governance in this environment requires multiple layers of cryptography to prevent altering of the data and various consensus building algorithms for decentralized self-governance. While this blockchain technology description is simplified, it begins to explain the extensive computing overhead that slows the transaction rate.
The cybercurrency Bitcoin currently has a transaction volume that ranges between two to five transactions per second (TPS). Its theoretical capacity is 5.2 to 10.7 transactions per second. Industrial blockchain must support faster speeds for supply chain applications. The blockchain underpinning Bitcoin does not have the transaction capacity for industrial blockchain applications.
Blockchain Configuration for Higher Capacity
Blockchain technology has evolved with different types based on their build and configuration. Storage in the blocks of the blockchain and the activities performed by the various participants on the blockchain network can be configured to improve transaction capacity.
Public and Unpermissioned vs. Private and Permissioned Blockchain
“Public” blockchains allow unrestricted read access by any node and person. “Unpermissioned” blockchains also allow write access by any person. Thus, anyone with an internet connection can initiate and receive transactions through a public and unpermissioned blockchain. Also, anyone can be “validator” or “miner” to execute a consensus protocol for a block and the chain.
“Private” and “permissioned” blockchains, in contrast, limit access to the organizations and people admitted into the network. These networks require approval to join with suitable verification of the participants identity. With restricted access, the computational overhead for cryptology and consensus determination can be dialed back allowing for higher transaction rates.
Industrial Blockchain Transaction Volume
For a supply chain, the blockchain technology is used to track and trace materials from the source of the raw materials through to the retail store – farm to table or diamond mine to ring. The application typically tracks the source of raw materials through to the retail store including all the participants in-between. The large and complex scale of this supply chain drives a high transaction volume and the need for scalability.
Supply Chain Size for Industrial Blockchain Applications
Graphic depictions of a supply chain (including the one in this report) rarely represent the true size and complexity. Horizontally, the chain is much longer for raw materials, processing, fabrication, sub-assembly, and then final assembly or packaging at the manufacturer. Between these steps is a distributor or warehouse with transportation in and out. Including these steps expands the number of nodes with transactions from five to at least 21.
Vertically, the graphic depicts just one level. In reality, each step has multiple participants. For example, a store typically has many thousands of stocking units (SKU) from thousands of suppliers. Correspondingly, each of those suppliers ship to many thousands of retail establishments.
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Keywords: Industrial Blockchain, Private and Permissioned Blockchain, Supply Chain, ARC Advisory Group.