Why Blockchain Isn't Fraud-Proof & How To Rectify It

19 July 2019   |   Readtime: 2 Min.

One of the key tenets (and major benefits) of blockchain is that it is immutable. This is achieved by immediately duplicating and storing all transactions as identical copies in every node of the digital ledger so every member of the consortium has access to the exact same information. Therefore, transactions data can only be added, accessed, and inspected, but never deleted or altered — making the stored data tamper- and fraud-proof.

But one of the biggest misconceptions about blockchain is that blockchain itself is fraud-proof. You might think, "Wait, you just said that blockchain is fraud-proof and now it is not?" While this might seem confusing at first, it really isn't.

Blockchain Isn't Fraud-Proof, The Data Stored On It Is

Once data is stored on the blockchain, it is theoretically tamper- and fraud-proof, barring any future hacking successes that could allow malicious algorithms to crack the cryptography hashes (which is possible but highly unlikely). Remember, this technology was initially developed for the financial industry to offer an alternative to a traditional intermediary to transfer the cryptocurrency Bitcoin.

But the same cannot be said about the blockchain itself. Many organizations feel that by implementing this new technology, they have found the holy grail, something that can establish trust beyond any doubt.

But here is the problem: who says that the data entered isn't fraudulent?

Blockchain Alone Doesn't Solve The Issue

Let's have a look at it from a supply chain perspective using the example of romaine lettuce. Last year's E. coli food safety incident that caused five reported deaths and 89 hospitalizations with a total of 197 people reported ill really brought home the point how desperately farmers, suppliers, transportation companies, distribution centers, and retailers need to come together to provide a trustworthy solution that not only increases transparency across the entire supply chain, but also significantly speeds up the trace-backs.

Some hail blockchain as a sure-fire way to solve this problem. In fact, we also believe that blockchain can revolutionize supply chain management in the food industry and beyond. For example, instead of using pencils and clipboards and relying on manual inspections, all members enter data into this digital shadow ledger, giving the entire supply chain instant visibility.

Here is how this works. Let's say a grower harvests, washes, and packages the romaine lettuce. More often than not, blockchain solutions will require the printing and attaching of a bar-coded sticker, so he slaps a sticker on each pallet or crate.

Now the bar code, similar to a tracking number on a UPS or FedEx package, can be scanned, traced, and tracked. Each time the bar code gets scanned, a new transaction is added to the blockchain and additional information is added (e.g., when it was picked up at the farm, when it arrived at the distribution center, when it was put in the retailers coolers).

But how do you know that the crates weren't accidentally left outside the cooler for a much longer time? How do you know that the cooling unit in the truck was functioning properly? How can you be sure light-sensitive products were not exposed to excessive radiation?

The list goes on, but the point is that you will have to trust that the person entering the data isn't purposefully, accidentally, or unknowingly entering wrong data.

Secure Smart Sensors For Fraud-Proof

Considering the likelihood of human error and existing negligent and fraudulent behavior, implementing blockchain and relying on human input alone won't solve any of the problems you are trying to alleviate.

What you need is a tamper- and fraud-proof way to enter data in the first place. That is where smart sensors come in. Smart sensors, like Chainvu's Intelligent Sensors, are Internet-of-Things enabled devices equipped with sensors that can detect environmental changes, such as temperature, humidity, motion, shock pressure, location, and more. This enables you to achieve 100% traceability and monitoring across the entire supply chain — from the time your product is first packaged to when it is put on the store shelf.

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Bob Burrows

CEO & Founder of Chainvu

As the CEO and founder of Chainvu, Bob is passionate about the safety and sustainability impact in the food and pharmaceutical supply chains. Did you know that 35% of food in North America doesn’t make it to the table? Chainvu gives the entire supply chain actionable product visibility and 100% traceability of products live at every step. Our solution is embedded and proactive, providing immediate notifications to prevent damage, reduce labour & waste, and improve product quality. Prior to Chainvu, Bob has over two decades of experience as a serial intrapreneur and entrepreneur achieving global leadership in digital networking products, and large-scale communications services. Bob holds a B.S. in Electrical Engineering from the University of Waterloo and an M. Sc. in Business from the Sloan School at MIT.


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