Blog: Why Tael Needs a Blockchain
In my previous article, How Adoption Will Lead the blockchain, I discussed the importance of adoption for the blockchain technology and the blockchain sphere overall. In the piece, I used Tael as an example of a blockchain project that is pushing for mainstream use and adoption. In the same piece, I mentioned that one of the main difficulties projects face is the fact that they don’t need blockchain. Instead, using the blockchain technologies for these projects create bottlenecks and difficulties for the product.
I received several questions asking me to explain why Tael’s use case requires a blockchain. I opted to create this piece to answer that question in details.
PS: While I am a fan of Tael and their product, I am even a bigger fan of the potential improvements that the blockchain brings to various industries. I am using Tael here as a representative for supply chain operations on the blockchain.
1- The Supply Chain Use Case
The first advantage of using the blockchain technology is the ability to utilize its advantages for the supply chain industry. The blockchain technology provides traceability and transparency on the supply chain in a matter of seconds. Up until now, the supply chain industry had a lot of bottlenecks and inefficiencies that led to delayed reactions and significant errors. This is best explained over the examples shown below:
- Before the blockchain:
a milk container is being sold on the shelves of a supermarket in Beijing. The container label says that the container was produced in Japan. The consumers naturally trusted this label and the authenticity of the product. Even the supermarket tends to trust the authenticity of the labels because they are unaware of the backend operations of the imported products. This blind trust simply is not good enough, and that was proven time after time in countries such as China. In fact, ten years after China’s infant milk tragedy, parents still won’t trust their babies to local formula. In addition, research shows that 40% of Chinese consumers still consider food safety as a major concern.
Traditional supply chain operations require this sort of “blind trust” in the paper trails that are available. Not only are those trails prone to fraudulent acts, but they also present extreme inefficiencies in the supply chain. This is a recipe for disaster in the making. Consumers are expected to trust a simple paper tag on products that can literally be the cause of their death.
- After the blockchain
Blockchain technology provides significant improvements to the current processes available to traditional supply chain operations. Tael uses the Hyperledger blockchain developed by IBM for the supply chain operations Tael provides. Following the same example mentioned above, Tael provides the following advantages over the traditional supply chain operations:
1- Data input is non-corruptable:
The main use of blockchain technology in an industry is the authenticity and security behind all the data on the blockchain. This means that the product data on the chain is not vulnerable to the “human” influence on the data. It is protected and secured ensuring that the consumer can trust information obtained from the chain. This takes out the middlemen who can influence the data for personal gain and profit and connects the consumer with the source of the product they are buying.
There are other solutions that include things such as QR code, but those solutions don’t provide 1:1 correspondence between the data on the blockchain and the physical items on the supply chain. This creates a security vulnerability in the products. Tael takes the security of the products to another level with their RFID labels. The RFID labels are attached to the products at the origin and are scanned throughout each step of the supply chain. Each one of these labels contains a unique ID. On top of that, there is a code that changes with every scan of the RFID label. This is similar to the Google authenticator process, but instead of changing with time, the code changes with scans. Those RFID labels with the changing code ensure the 1:1 correspondence and consequently a very secure and trustable process.
2- Data available instantly
The data to verify the product is available in a matter of seconds using a simple scan of the product. This means that there will be huge efficiency advantages in monitoring and tracking products on the supply chain. This will inevitably reduce several of the costs incurred by all the parties involved in the supply chain.
For example, even with the cases where the source of the food can be verified, issues can still occur in the product that may require a product recall. Earlier this year there was an E.Coli breakout due to Romaine Lettuce. With traditional supply chain operations, the process of recall can take time and effort and would cost significant amounts of money in attempts to identify the affected items and recall them. The blockchain can provide consumers as well as retailers instant information to identify the affected food items. This means that a process that would typically take days or weeks can be conducted in a matter of seconds instead. This saves time, money, and most importantly lives.
1- The Loyalty Points Use Case
Tael rewards users with (Wabi) tokens for every scan that is performed using the Tael app. The loyalty points obtained are similar to those provided by an airline, but they are built on a blockchain (Ethereum) and are with a fixed supply.
Having the loyalty points on a blockchain provides several advantages which were discussed in the recent AMA conducted by the Tael team. The team explains that points are much easier to integrate between different parties when they are on the blockchain and have a specific value. Currently, the reward points are available to be redeemed in the Techrock and partners ecosystem, but not on exchanges. This means that Tael is actually creating potentially long term holders of the tokens out of the average mainstream consumer.
Eventually, Tael is planning to grow the loyalty points system into a payment system (hence the TaelPAY.com domain name). When that happens, the standard financial/payments use of blockchain will be added to the Tael ecosystem and hence creating another use case.
Using blockchain also means that the value of the token is changing in real time in a truly free market situation. The value of the token will inevitably be dependant on the supply and demand rates of the token. Average consumers can see their rewards points values change with time which creates a gamified theme for the user. This gamified structure encourages users to do actions that allow the user to gain more reward points. In theory, the more those reward points are, the more are the tokens taken out of the total supply, and the higher the demand is on the token.
All these features wouldn’t be possible without using the blockchain as the backbone for the reward points system.
Below is an example that is taken from Tael’s Medium article on their business model. The example clarifies the use case of the reward points assuming a market value of 50 cents per point.
For this example, we will assume a product costs $20, 10% is given back in Tael loyalty points to consumer, and Tael tokens are at a value of $0.50.
Mrs. Wang is looking to purchase authentic infant formula for her newborn. Instead of calling her nephew abroad to send baby food back home (who would, as of 2019’s legal rulings, need a license to do so), she visits the Techrock online shop. She makes the purchase on the Techrock marketplace, paying $20 for her desired product.
Upon arrival of the product, she uses the Taelpay app on her smartphone and touches the product label to authenticate the product, as instructed. She verifies the authenticity, opens the product, and touches the label again to get rewarded with 10% of her purchase in Tael loyalty points. Since she paid 20$, Techrock purchases 4 Tael tokens worth a total of $2 on the exchange (4x $0,50 = $2 = 10%) and sends Mrs. Wang 4 Taels. She keeps these Taels in her wallet, which can be used as a discount upon her next purchase.
As seen in the example, the variable value of the points is a decisive factor in the way the rewards can be used. That variation on value cannot be obtained without using the blockchain.
In conclusion, blockchain technology is a double-edged sword. It has the potential to revolutionize various industries. However, it is important to realize when there is a viable use case for the technology. Projects today need to understand the potential of the technologies and identify fields where it can bypass difficulties, not introduce them. I used Tael as an example here for the potential influence the technology has on the supply chain industry as well as the loyalty points markets. Many other projects are identifying several areas where the technology can be a gamechanger.
If you are interested in Tael’s adoption competition, feel free to join it using my referral link