Making EDI Better with the BSV Blockchain: Bitcoin Masterclasses #5 with Craig Wright
Smart contracts are not a new idea! As Dr. Craig S. Wright points out in the latest installment of the Bitcoin Masterclasses workshops, automation of business processes through digitization has been around for decades now. But how well has it been done? Not very. Can it be done better by using a scalable blockchain? Absolutely.
You can watch the first session and the entire first day of the latest Masterclass series here, and watch any previous Bitcoin Masterclass sessions on the CoinGeek YouTube channel.
Dr. Wright begins by asking how much everyone understands about EDI (Electronic Data Interchange), a set of business/logistics-focused electronic communications standards first developed in the late 1940s for the military. However, it did not really see commercial implementation until the 1970s.
I thought we were already digital
In today’s world, it is easy to assume that the entire global economy is digitized – along with most other important records. However, this is often not the case. Dr. Wright provides examples of shipping documents, including Bills of Lading, which are still largely paper-based. They are also traded as physical commodities on localized exchanges such as the CME.
Even examples that were ahead of the digitization curve (for their time), such as the US Army, use archaic forms of digital documentation. An estimated US$6 trillion in global trade passes through this institution per year, in a clumsy combination of fax-to-TCP, converted Excel spreadsheets and streaming TIFFs. These are highly error-prone and insecure, with their “digital signatures” based on CRCs (cyclic redundancy checks) and a code.
What we need is some form of attestation to confirm that certain processes and transfers have actually taken place, even if the transaction itself involves physical objects. Even this is often done in impromptu ways, such as regular emails or phone calls. We need a better form of proof, and while courts have accepted unsecured emails as evidence, there have certainly been cases where attackers have intercepted communications to send fake authentication emails (one early blockchain industry example was a fraudulent email attack on BitPay and former CEO Tony Gallippi in December 2014).
We have barcodes, QR codes, RFID chips, various systems for exchanging electronic data within a business or government process. A scalable blockchain can standardize these processes and make them far more efficient, as well as easier to learn. Its single source book of truth can avoid duplication or incompatible standards.
Defines what we send
Dr. Wright notes that any EDI document can form a (legally recognized) contract if it is a “master contract,” where all parties agree on a set of rules and definitions, and methods of dispute resolution, before starting the rest of the process.
We have purchase orders, invoices and other commercial documents. How can we make these better using a blockchain? How can you have this data in a format that can also be accessed by external parties (with approval), local tax authorities, accountants and auditors.
He charts a simple template structure for such things, which can take information from various sources and gather them in one place, and gives examples of Bitcoin Script. These include methods of attestation and authentication, including signed fields and methods of verifying them. The Bitcoin network handles the verification and the blockchain provides a permanent, auditable record.
These contracts can be made complex and more flexible, taking into account variables such as world events and political changes, natural disasters, weather, changes in price and availability of goods over long periods. Markets can emerge to trade on the differences in these variables, losses and risks can be minimised, and valuable marketing lessons can be learned (eg why do some supermarkets put beer next to the baby section?)
Placing all this information in a central (yet decentralized!) location creates efficiency gains and new commercial opportunities, by creating the ability to access and cross-reference data. There are efficiency improvements to be found in both physical goods and prices, and development opportunities for blockchain in building these systems.
Technically, all it takes is knowledge and creativity. Perhaps getting the first “master contract” agreement with the commercial world will be the hardest part – although increased awareness of blockchain and its potential real-world applications (other than coin trading), and more appreciation of its data verification capabilities, will greatly advance the cause.
“Wouldn’t that be better than Boring Apes?” asks Dr. Wright.
Watch the highlights of Bitcoin Masterclasses #4 in London: nLocktime and delayed transactions
New to Bitcoin? Check out CoinGeeks Bitcoin for beginners section, the ultimate resource guide for learning more about Bitcoin – originally envisioned by Satoshi Nakamoto – and blockchain.