By Francine Harris
Blockchain technology was the topic of an informative panel discussion at the GMG Leadership Summit in Perth in November. Initially developed to record cryptocurrency transactions, blockchains are data systems consisting of individual digital records that are securely encrypted. By design, blockchains resist data modification making them a valuable tool for maintaining transparent, auditable and immutable records to a variety of ends.
Panellists Mark Eberling, CTO Financial Services Industry, IBM; Andy Mulholland, GEOVIA Portfolio Management Director, Dassault Systèmes; Anya Nova, Crypto Economist, Power Ledger; Leanne Kemp, Founder and CEO, Everledger; Michelle Ash, CIO, Barrick Gold and GMG Chair shared their perspectives on blockchain applications in mining.
Current blockchain applications in mining
Blockchain technology is being used to streamline several processes in the mining industry including procurement, traceability, provenance tracking and insurance.
Smart contracts, blockchain-enabled automated contracts that execute actions based on pre-established conditions and clauses, have several applications in the mining industry. “Can we take costs out of the whole contracting process?” According to Ash, smart contracts aim to solve that problem. For Barrick, smart contracts served a dual purpose: “to standardize contracts and make those contracts visible” and “to settle them under predefined conditions instantaneously.”
Insurance is one area, Ash noted, where smart contracts work very well because they could be used to share and transfer data from a blockchain-based maintenance data system and track inspections and activities instantaneously, transparently and securely. These contracts could also potentially be extended to add suppliers to speed up transaction times. Additionally, when suppliers send parts for existing machinery, these data could, on receipt, be immediately added to the machine’s maintenance record.
Ash further mentioned that smart contracts also have the potential to help reduce costs dealing with intermediaries like banks, for example, by replacing letters of credit. Drawing on his background in procure-to-pay, Mulholland explained that he sees significant opportunities for blockchain networks to eliminate huge costs there because they link all contracted parties. “With all these things” Ash explained, “it is really about the extension of the ecosystem so that you can get the costs down.”
In terms of traceability, Kemp drew on her experience with provenance tracking in the diamond industry where “blockchain was a matter of self-preservation.” Diamond companies found that sharing data across the supply chain has been proven to bring “far greater value than not sharing” because “we’re starting to see premium pricing becoming embedded in part of the provenance story.”
Privacy, trust and relationships
Responding to concerns surrounding security, privacy and how relationships and the competitive landscape will change, Ash explained that security concerns depend on whether you are using a private or public blockchain. Private blockchains are very secure, strengthened by lessons learned from numerous efforts by both black hat and white hat hackers to exploit public networks.
To Ash, using a private blockchain network “doesn’t replace human relationships.” Instead, it enhances them by making processes more efficient and transparent, thereby increasing the mine’s competitive advantage. To exemplify, she described Barrick’s experience with contested gold assays. In that scenario, blockchain could enable faster resolution and payment with more immediate and secure data transfer. It could ultimately mitigate damage to the relationship.
Privacy, Nova added, “is one of those things that people say is something that prevents mass adoption.” She advises, however, “you’ve got to think about what you are actually able to see.” In a blockchain, it is not possible to see who owns which wallets, and transactions can be encrypted. Privacy concerns only arise when there is a backup system that links wallets to individuals. Such systems can be useful for regulators because they can track fraud, but they do raise some very legitimate concerns that are currently being researched.
Blockchain as an enabling tool
The panel emphasized that, like other advanced technologies, it is important to emphasize that blockchain technologies are enabling tools in specific contexts, not full solutions.
“There are definitely places where blockchain doesn’t serve,” Kemp explained, further stressing that there is not just a single blockchain architecture and that each architecture has a different specific value depending on the use case.
Ash, too, emphasized that you first need to identify the problem you are trying to solve and then see whether the blockchain is a suitable architecture for that. Scenarios where goods change hands many times, or where there is potential for contested ownership, for example, would be good use cases for smart contracts.
Engaging the end user
When the panel was asked about disintermediating brokers and getting end users onboard, Mulholland identified two scenarios where blockchain can be an enabling technology for dealing directly with end users: it can be used to establish a new trust relationship when there is no trust network or when there is an established trust system that you want to bypass, such as a bank or broker. Identifying and understanding the benefits of each of these cases is essential before engaging end users.
Communicating the benefits to the end user is key to engagement says Nova. “Answer this question for the end user: ‘What’s in it for them?’ Usually what’s in it for them is that the product should be cheaper because you cut out the intermediary, and there should be fewer errors.”
Ash suggested that an aggregate blockchain, one that brings the entire ecosystem together as branches of a single blockchain, would work best, but that it is difficult to create. Ultimately, to get user engagement and acceptance, the blockchain should be easy to use and interoperable.
The interoperability factor
Interoperability is essential for blockchain technologies to be useful. “[The blockchain technology] has to coexist in a symphony of technologies,” Kemp explains. Tracking diamond provenance, for example, requires many scientific technologies like spectral imagery and machine vision systems to build the conditions that enable the blockchain to map provenance throughout the chain of custody. There needs to be harmonized data, which has to co-evolve with new data standards as part of the blockchain application.
Blockchain can also create an environment for developing greater interoperability through collaboration. Eberling described how he observed instances in the finance industry where blockchain can help enable broader collaboration because of the level of trust that the blockchain network provides, allowing competitors to “work together to solve their problems.” He commented on the collaborative atmosphere in the room, telling listeners, “you have it in your own hands” to accomplish something similar in the mining industry.
“In terms of interoperability,” Mulholland added, “I don’t think it is unusual that we have so many different blockchain technologies.” He explained that it is natural that for fledgling technologies there would be many competitors that are not interoperable at first. As the technology becomes mature, interoperability between large players happens organically.
Community engagement and environmental initiatives
The panel was also asked about how blockchain can affect, and often help, with community trust and engagement. Ash suggested that one way to do so would be to allow individuals to own their demographic data, and then the mining company could pay individuals to generate data and let them use it. “This will not only create a mindset around generating wealth, but also having some say in how the data is used builds trust,” according to Ash.
Ash added that blockchain could also be used to be more transparent with the community on environmental concerns, such as the amount of cyanide or greenhouse gases used.
Nova spoke to her experience with Power Ledger’s Asset Germination Events, a tool that uses blockchain to facilitate community to co-ownership of renewable resources. With this tool, each part can be purchased and tracked independently, making it more feasible for mines to “choose to invest in more sustainable technology” while also engaging the community to “vote directly with their money on whether they want that asset or not.”
More broadly, blockchain’s traceability function can help develop trust in a country or region’s brand, something that Kemp has seen first-hand with Australian diamond companies’ ability to track corporate social responsibility across all economic participants. This capability builds trust and, in turn, the funding to support environmental and social initiatives.
Mulholland suggested looking to the agriculture industry for more examples, such as how the Australian cattle industry used blockchain to track tuberculosis in animals, preventing outbreaks and establishing a high level of trust in Australian beef.
Blockchain and the future of mining
New blockchain applications might emerge when products and policies are better able to accommodate them. One example that came up was the potential for using blockchain’s tracing capabilities in the circular economy. Kemp explained that despite global interest in developing the circular economy, products still need to be redesigned for it. She noted “urban mining,” extracting minerals from electronic waste, as an exciting possibility.
Eberling added that there are new solutions emerging that aim to lower business costs, such as IBM’s new Blockchain Platform that gives users the tools that allow “[them] to get onto a business-ready blockchain network” and manage it.
Ultimately, with this emerging technology, Kemp stated, it is “incredibly important for custodians of the technology and thought leaders in this space to ensure that that becomes demystified.”
Because the technology is new, there are still significant costs of private blockchain technologies that will need to come down for greater adoption to happen.