Why blockchain can’t solve Brexit related customs issues

Brexit is happening. Love it. Hate it. In denial about it. Excited about it. None of that matters. It’s coming. And it doesn’t matter about a deal, no deal, a great deal or a terrible deal – things at the borders are going to change.

Can blockchain provide a magic solution to make everything ok?

The short answer? No.

What some people fail to understand is that blockchain specifically – and even DLT (Distributed Ledger Technology) more broadly – is nothing more than a way to store information. Blockchain is nothing more than a shared spreadsheet with protected cells. (Read here or here)

Yes – Some blockchain solutions allow for smart contracts to automate transactions, but even with this functionality, blockchain doesn’t even begin to come close to being fit for purpose as a standalone technology.

Of the many digital challenges Brexit creates which must be solved, the top 3 for me right now are:

  • Data: Secure digital access to the data associated with moving goods across borders.
  • Identity: Managing the identities of thousands, if not millions, of identities.
  • Infrastructure: Designing and deploying the network of computers to manage and maintain this data.

If you’re wanting to push the digital transformation boundaries here, linking the transfer of goods directly to payment to take advantage of central bank digital currencies (which are NOT blockchain-based), then there is even more work to be done.

Through the pioneering projects of TradeLens and Blockchain in Transport Alliance, the industry has learned a great deal about how to make the management of customs and shipping data more digital, more efficient and a lot more accessible. They have also developed a foundational experience for creating and growing blockchain consortia for the benefit of all stakeholders and not just the ‘mega global industrial’ few.

Data:

Although I’ve written about it many times, there are still volumes of people who think that every single piece of data should be stored on the blockchain. Nothing could be more inappropriate. 

Blockchain systems are not designed for managing vast amounts of data. Neither are they intended to respond to thousands of queries an hour (or per second). Blockchain data is one large file, and anyone who knows anything about data will understand that there are well-known limitations for this type of data.

One of the most overlooked aspects of building a blockchain solution is data architecture. By this, I mean deciding how much data is part of the solution and where that data is stored. The data must be accessible. It must be secure. It may need to be encrypted. Access to the data must be carefully managed. 

People who think that everything should be stored on a blockchain don’t understand blockchain.

Identity:

When most people hear the word identity, they associate it with their own identity. But identity in the case of blockchain is far broader. Identity in this context includes people, companies, agencies, ships, trucks, containers, IoT enabled sensors – anything or anyone who might either add or access data on the blockchain. Unlike with bitcoin, where every transaction is pseudonymous (not anonymous), in the case of a trade enabling blockchain, every identity must be fully known for maintaining control and effective auditing. (If you’re interested in exploring IT security in regards to Blockchain and IoT I would point you here)

The challenge here is to decide where and how these identities are managed and maintained. The data on the blockchain can be transparent to all parties to ensure that there has been no tampering – but due to commercial sensitivity, data privacy and other considerations, the identity system must be carefully protected. In a cross-border system with multiple distrusting parties, deciding who maintains this information is vital.

Infrastructure:

Blockchain can refer to the data, the protocol or the network. In this case, I’m referring to the network. When building the system, there must be a sufficiently large number of computers running the network so that any attempt to hack the data on the blockchain can be detected and rebuffed. The infrastructure could be run by the governments (not always well regarded for IT systems and operations), or it could be run by the myriad of enterprises looking to share information and then make that data available to regulators, customs houses, auditors and others.

Depending on the design of these systems, this needn’t be thousands of systems, each with terabytes of storage and petabit Internet connections. And again, depending on the protocol, these systems don’t need enormous processing power. It all comes down to what I describe as MEB (Minimum Effective Blockchain).

Sitting alongside the blockchain is where the real infrastructure investment is required. Every customs document gets scanned, and its metadata (data extracted from the paper documents which has core meaning) must be stored. The safe and secure transfer of this data is what is required and this is what a properly executed blockchain infrastructure would provide.

Lack of regulation is NOT the problem. You don’t regulate blockchain.

The false flag in why blockchain won’t solve Brexit? Regulation.

Several articles are claiming that there isn’t enough regulation of blockchain. It is one of those things which is extremely annoying because it misstates the problem. It is like how customer service agents rely on the phrase “because of data protection” as a backstop for anything they don’t want to do – even if the request has nothing to do with data protection.

You don’t regulate blockchain. You don’t regulate blockchain any more than you would regulate Excel or MongoDB.

Regulation regarding the standards for what information is required for cross border commerce is already in place. Standardisation is already in place. The majority of the systems are in place. What is missing is an accepted way to ensure data integrity when moving digital data. And that’s what blockchain can provide.

We need regulation stating that blockchain-based systems can be used for ensuring the accuracy and integrity of data.

This brings me directly to the point of why blockchain won’t solve Brexit. 

Blockchain alone is nothing more than a system for sharing data. It’s a tool. It’s infrastructure. To solve Brexit related customs issues requires multiple distrusting parties to agree to work together, to capture digital data, to create networks of identities and to build an infrastructure to support the network. It requires cooperation between competitors. 

Sadly, today, there is an excessive amount of brinkmanship and precious little willingness to cooperate – on both sides.

Get in touch with us [email protected] / Twitter @igetblockchain.

Troy Norcross, Co-Founder Blockchain Rookies

Twitter: @troy_norcross