Proof of Supply, a Proposed Blockchain Consensus Model for Supply Chain Network Participants

Jared Stauffer
3 min readMay 14, 2019

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In this article I will propose a network participants consensus model for blockchain supply chain projects.

In most blockchain supply chain systems there exists two main problems:

How do you incentivize network participants (NP) to actively and accurately participate in the network?

The main vendor or the major purchaser in a supply chain could mandate that all downstream suppliers participate.

How do you allow NP to participate in the value creation of the network?

The use of a blockchain supply chain network creates and builds significant value. The more decentralized the network is, the less it is controlled by any one central party. And it being decentralized and uncontrolled by any one central party is what encourages untrusting, and even competing, parties to participate.

How do you align the distribution of the value of a decentralized supply chain network to the incentive to actively and accurately participate?

Proof of Supply

Proof of Supply is a proposed method for aligning the distribution of the value created in a decentralized supply chain network to the incentives necessary to encourage network participants to actively and accurately participate.

Each NP (np) stakes (x) amount per (y) variant to begin participation in the network. NP also pay transaction fees (z) in to an accumulated value pool (AVP) each time they take action (a) on the network. An action would be anytime the blockchain is written to. I suggest that the chosen blockchain be one that has a super low gas cost (like a side chain, POA for example). This will allow for a small supply chain network transaction fee to be added (via smart contracts) without making the transaction costs unreasonable. Also, staked amounts can gain interest that can be added to the AVP.

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NP nominate validators (v) that perform audits on NP processes to ensure compliance and accurate participation in the network. If an audit is failed, the NP will forfeit the amount staked (x), and have to re-stake an additional amount (x) to rejoin the network. When a validator fails an audit, a smart contract can trigger an automatic forfeiture of the amount staked to the AVP.

A portion (p) of the core customer contract is paid in to the AVP. This results in a portion of the NP compensation being paid out via the distribution of the AVP. And this helps to align the interests of all the NP.

At certain intervals (t) the accumulated value pool (AVP) can be distributed pro rata (or via some other distribution scheme) to NPs.

By purposefully accumulating value to the decentralized system through amounts staked, transaction fees, and contract value portions, and then distributing this value to NP, individual NP interests are aligned in a way that benefits the whole. Each NP benefits as the network grows.

Alternatively, a network token can be used in all instances of the AVP (stakes, fees, contract portions). This token can then be traded publicly and its value would be representative of the value of the network as a whole. It would also potentially allow other participants outside the network to participate.

Additionally, NP can also potentially achieve higher grades from large purchasers due to higher accuracy rates, higher quality, and reduced waste resulting in a higher win rate for future sales.

With NP accurately and actively participating in the network and passing validator audits, the system provides Proof of Supply.

This is a work in progress. :)

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