Meeting the Capacity Requirements for Industrial Blockchain

April 3, 2020
Though blockchain, as it is configured now, isn't capable of meeting the transactions-per-second needed for full-production industrial supply chain applications, private and permissioned configurations may be the key to changing that.

As configured for Bitcoin, blockchain does not have the transactions-per-second capacity needed for full-production industrial supply chain applications. However, the private and permissioned configurations of blockchain deployed for 36 different industrial blockchain consortia that ARC Advisory Group has examined provide the anticipated capacity requirements needed by the consortia when they reach full production. The following descriptions explain the differences and highlight how blockchain can be application by industry.

Blockchain transaction capacity with cryptocurrencies
Cryptocurrencies allow transactions between any two parties and use a public and unpermissioned blockchain. Trusted data and self-governance in this environment requires multiple layers of cryptography to prevent data alterations. It also requires a variety of algorithms for decentralized self-governance. These, in turn, require 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 TPS. 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
“Public” blockchains allow unrestricted read access by any node or person. “Unpermissioned” blockchains also allow write access by any person. Thus, anyone with an internet connection can initiate and receive transactions through a public, 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 organizations and people admitted on the network. These networks require approval to join by verifiying 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, blockchain technology is used to track and trace materials from the source of the raw materials to the retail store and all points in between. The large and complex scale of a 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 rarely represent its 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 manufacturing location. 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. 

In reality, each step has multiple participants. For example, a store typically has many thousands of stock-keeping units (SKUs) from thousands of suppliers. Correspondingly, each of those suppliers ship to thousands of retail establishments.

Food supply chain
Food safety recalls occur more often and have increased in expense. Constraining the size of a recall offers one of the more popular applications of blockchain. Food safety concerns in the supply chain have driven formation of several industrial blockchain consortia with a huge number of participants. Going from farm to retailer includes multiple nodes for producers, processors, distributors, and retail establishments. The number of nodes in the global food supply chain extends into the millions.

However, blockchain consortia address a particular segment of the food industry, like fresh produce or fish. This makes the number of participants in a consortium more manageable. When these focused consortia reach full production, the number of nodes is expected to be in the 5,000 to 50,000 range, however, your supply chain may be different.

Anticipated industrial blockchain transaction volume
Determining the required capacity involves an estimate of the average number of transactions per node on the supply chain. Continuing with the food example, the distribution centers and retail establishments have the highest transaction rate. A typical automated warehouse or distribution center produces 1.2 TPS. An estimate for a food consortium in full production is a blockchain capacity requirement of from 6,000 to 30,000 TPS.

Industrial blockchain uses private and permissioned
ARC has examined 36 consortia that use industrial-scale private, permissioned blockchain. Researchers have achieved 20,000 TPS and are working on 50,000 TPS. As the consortia with an extensive supply chain scale up, configuration alternatives will allow them to remain viable relative to required transaction volumes.

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