[AUDIENCE] I would like to preface the question with-
I think cryptocurrency is a fairly intuitive use for decentralized ledgers.
There is a lot of hype around using blockchains for other applications. I'm particularly interested in supply chains,
particularly food supply chains.
I think the biggest problem in food supply chains is the falsification of input.
So are blockchains really the right [tool] in that scenario?
[ANDREAS] The fundamental problem that you're facing, which is common, is the issue of custodial control...
over the primary asset if it is not held on-chain.
The advantage of native / intrinsic assets like bitcoin is, all ownership gets settled on-chain.
Instead, if you have something that just corresponds to a certificate of gold,
access to a car, a real-estate record, or the providence of food, then you have an intermediary.
That intermediary is the custodian of the actual asset being represented with the token,
which introduces counter-party risks.
The counter-party risk in the example you gave is the falsification of information, lack of integrity controls.
In other cases, it is hypothecation: selling the same asset to multiple buyers,
pretending there are more bars in your warehouse than there actually are.
This is not a small problem. In the gold markets, this is a recurring [issue],
[especially] in the last 30 years, with gold certificates.
You have the certificates and somebody is supposedly holding the gold, but when you try to redeem it,
you find out that two people "own" the same piece of gold, or the warehouse is empty.
That counter-party risk is the whole reason why blockchains are interesting.
We can remove the counter-party risk with native assets on the blockchain.
If you are trying to solve problems with tracking the ownership of assets that are not intrinsic to the chain,
that is not an easy problem to solve.
Even with a blockchain, you will eventually end up with counter-party risk anyway.
If you didn't achieve this disintermediation, maybe you have just wasted your time.
Being able to securely and immutably record things in a blockchain [is not useful] if you can't ensure...
that those records correspond to reality.
That is why I'm skeptical of these projects. That doesn't mean they won't happen,
but that means they can't easily happen today.
I will give you one interesting example which I think illustrates this problem.
There is a logistic supply company that creates environmental sensors,
embedded in [different] products.
Pharmaceutical products must remain below a certain temperature throughout the supply chain.
When you ship [them], if the temperature goes above zero Celsius, [the product is damaged], right?
It is trash and you must throw it away. At any moment in time, if it goes above that temperature,
even for a second, it is done.
So what happens if you have a truck refrigerating [the product] and you want to track whether...
all the things in the truck are actually kept at the correct temperature?
Could you put a tamper-proof sensor on every pallet? That is how technologists think, okay?
"How do we solve this? Internet-of-Things, machine learning, Big Data, and blockchain?"
Meanwhile, this is how the truck driver sees it: "My truck broke down, fuck sensors, I will lose my job!"
"I will buy a bag of ice from the gas station and put an ice cube on every sensor."
The sensors all stay below zero Celsius. [Laughter] All the stuff inside is rotten, but the sensors are great.
How do you solve that? Not with a blockchain.
Some problems do not have technical solutions.
If you think like a security person, you will quickly realize that the more you try to apply technical solutions,
the more easily those can be gamed by human ingenuity.
Supply chains are one of those examples.