Blockchain tools for ITAD trading are getting closer to execution

by Arthur · November 9, 2022

A system under development allows different companies in the ITAD value chain to share one digital ledger, recording the material custody chain. | basiczto/Shutterstock

Industry stakeholders have taken the next steps in a blockchain-based project to better track data and reduce the possibility of fraud when buying and selling devices.

A non-profit organization known as OBADA Foundation is spearheading the effort, which supporters say holds promise for increasing transparency throughout the electronics lifecycle.

The software system under development allows different companies in the ITAD value chain to share one digital ledger and record the chain of custody of material.

Today, under industry certifications for data security and recycling/reuse, companies are supposed to track the chain of custody of devices leaving their buildings, but that proves especially difficult when multiple downstreams are involved and not all of them are keen to share information.

As a result, gaps in tracking are widespread, representing data security issues.

“I think we can say without much debate that a lot of ITADs are not doing it right,” said Rohi Sukhia, CEO and founder of Tradeloop, a wholesale marketplace for used electronics. Sukhia is one of several industry professionals leading the OBADA effort.

Another of the big benefits of blockchain technology is “you don’t have to trust your trading partners,” said Ron Lembke, a professor of supply chain management and business analytics at the University of Nevada, Reno, and another leader supporting OBADA. That’s because the technology creates a record that can’t be later audited, which helps prevent fraud.

“It gives you confidence that no one has tried to go back and change any transactions,” he said.

Now OBADA is looking for more companies that can participate in the work. So far, 23 member organizations have contributed $5,000 each, for a total of $115,000.

Organizers are looking for another 78 to contribute $5,000 each, raising $390,000 as part of a Round B of fundraising/membership registrations. The official announcement of a waiting list for Round B will be made at Electronics Recycling Conference, which is organized 14.-16. November in Denver. The waiting list is scheduled to open on 15 November.

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What is it and how does it work?

The system aims to solve major challenges in the ITAD industry, including tracking the chain of custody to ensure data security.

In extreme cases, the lack of information sharing can lead to data breaches and severe penalties. OBADA’s tools can enable ITAD service providers to prove where devices went and how they were processed – or it can point to where the data tracking trail went cold.

The heart of the blockchain system is a decentralized register, or the digital ledger that all participating companies share. The registry does not live on the wider internet for anyone to access; instead, participating companies and individuals operate “nodes,” which are software packages running on their own servers.

The register is opened and updated through the nodes. This means that individual ITAD companies will be able to offer access to the blockchain to their customers via their node.

In a way, it is akin to trading shares, Lembke explained. Individuals don’t need a seat on the New York Stock Exchange to buy and sell stocks, he pointed out, but realistically, most people have a relationship with a broker to facilitate those transactions.

In this case, organizers plan to have around 100 nodes running the blockchain software, Sukhia said. The electronic devices themselves will be identified by a “Universal Serial Number”, which is a unique address generated algorithmically. The numbers are either automatically identified when an ITAD company plugs in a device or, if the equipment does not boot, entered manually.

However, not everything is visible to everyone on the blockchain, Lembke said. Users, who access their on-chain assets via private passwords, have the ability to limit visibility, Sukhia said.

OBADA has been working with ISO (ISO/TC 307 AHG3) for several years to define a standard called “Representing physical assets as non-fungible tokens (NFTs).” Having an ISO standard means that in the future any company in any industry that formats its inventory according to the ISO standard will be able to share it on the blockchain with other OBADA participants. Essentially, companies within and outside the ITAD industry will be able to interact digitally with each other seamlessly.

Financing the system

Of course, running nodes costs money. “You have to pay someone to run the software, and that someone in this case is 100 different nodes,” Sukhia said.

Costs will be paid with a digital form of “system credit” that allows a transaction to be recorded. (For example, a “transaction” might be a hard drive that was erased and sold to another company.) Lembke described the credits as the “gas tax” that drives the record of the transaction.

There is no company that processes the gas taxes, and no middleman takes a cut. All gas fees are automatically distributed to the OBADA DAO members running nodes, according to an FAQ document prepared by project backers.

Supporters have been working at OBADA since 2017. Sukhia wrote an article in the Winter 2018 print edition of E-Scrap News describing the software technology and its potential.

Today, two organizations are primarily involved in the OBADA effort: the OBADA Foundation, which is focused on creating the standard and building the blockchain initially, and the OBADA Decentralized Autonomous Organization (OBADA DAO), which is focused on building and operating the decentralized registry.

OBADA DAO already includes a list of notable names in the industry. The 23 members of OBADA DAO are ASCDI, The Broker Site; CELX Advisory LLC; DMD system recovery; Dynamic Life Cycle Innovations; Eagle Advisors; E-recycling services; first class network; Good Point Recycling; Greentec; I’ll fix it; JT Environmental Consulting; Network Commerce International; Quantum Lifecycle Partners; repair.org (The Repair Association); Rhapsody Ventures; Techspec; Trade loop; Unduit; University of Nevada, Reno; Unpleasantness; World Data products; and XS International.

Bring others on board

The 23 memberships of OBADA DAO have driven the effort to date. About $20,000 remains in the bank, but that money can be spent in as little as two months given the cost of writing software, Sukhia noted.

As part of Round B, the organizers are now seeking a further 78 members to join. Some are already registered. On November 1, DAO members sent an announcement which indicates that 52 vacant membership places remain. A waiting list is available for members of organizations such as ASCDI, broker site, ERC, iFixit, repair.orgTradeloop and others.

When an organization joins the OBADA DAO, it becomes a member of a special type of organization incorporated under Wyoming law. In fact, OBADA was one of the first DAO LLCs in the world, incorporated on the first day such a designation was available, Sukhia said. Unlike a traditional LLC, the organization has no centralized decision makers or money managers.

Membership in OBADA DAO entitles each company to an equal share of the DAO’s membership. It also gives them a certain number of credits that will be used to track IT resources, and it gives them the right to set up a node and receive compensation for running the node.

The organizations will have equal voting rights, rights to provide “node services” and rights to share in all fees and rewards generated by the blockchain/protocol, Sukhia said.

Sukhia also said they have asked companies to put in more money – say $50,000 – to buy a bigger stake in the group, but the answer is no. The aim is to ensure that a large company does not come in and take over the newly started project.

“We want to make sure this is an ITAD-driven effort,” he said.

Mark Schaffer of Schafer Environmental LLC, a supporter of the OBADA effort, said the project is still “a pre-beta activity.” His goal would be to have potentially some Round B members on board as early as December 2022 or January 2023. He noted that setting up the nodes takes time.

Sukhia said the B round should generate enough money to complete technology development. “Then we could start production after this,” he said.

The aim is to launch the system in 2023.

The technology can quickly become confusing. But, Rohi explained, “at the end of the day, all we have here is a group of companies that have agreed to store their data in a spreadsheet in the same way.

“And that alone is such a big deal.”