The next big step in digital transformation

Source: www.miningmagazine.com

One of the main challenges of the digital transformation and the convergence of information technologies and operations technologies (known as IT/OT) is to be sure that business and operations personnel understand the language and potential of IT technologies.

Today miners and business executives need to become ‘shallow experts’ in most emerging technologies and understand the basic impact of these technologies on their business.

The concept of ‘shallow experts’ is about the need to be constantly learning and aware of all kinds of new technologies popping up around us, because, sooner or later, there might be a potential use in our industry.

In the past we were simple users of technology without any major obligation to understand what was ‘under the hood’, but today the digital transformation requires a deeper knowledge about technologies and their applications.

Defining blockchain

Readers are going to find all kinds of attempts to explain blockchain in simple ways – some of them better than others. It is much easier to understand the business potential of a technology like blockchain once you have a more complete picture of its definition.

In our attempt, we offer an adapted explanation from Investopedia and other sources: 

A blockchain is a digitised, decentralised, permanent summary of transactions (for example cryptocurrency), where the transaction data is permanently recorded in files called blocks.

Constantly growing as ‘completed’ blocks (the most recent transactions) are recorded and added to it in chronological order (like a chain), it allows market participants to keep track of digital transactions without central recordkeeping. Each node (a computer connected to the network) gets a copy of the blockchain, which is downloaded automatically.

The safety aspect comes into play because it is distributed, thereby eliminating a central point of failure, and all nodes have copies of the records. Any change needs to have a consensus of most nodes and every block has ‘a key’ from the previous one.

Given this definition, when it comes to commercial and trade/financial contractual transactions, blockchain allows these operations to be more secure, while eliminating the potential need for a middleman or central system that could be susceptible to hacking or failures.

Samples, diamonds and more

The most promising use of blockchain is indeed around transactions and the supply chain, and involves the movement of materials, purchasing, contracts and even sample analysis.

One of the best examples of blockchain we’ve seen so far is actually within the mining industry. In this case the attributes and origins of diamonds are tracked and validated through blockchain technology, virtually eliminating potential counterfeits. It also eliminates the paperwork required to prove the authenticity of the diamonds, commonly called provenance.

Blockchain technology will also streamline the relationship between miners and their vendors, for example, in the use of blockchain for contract management during the whole lifecycle – storage, tracking, searching and reporting.

An interesting concept is also the ability to better control samples and lab analysis through blockchain. Drill analysis can rarely be performed by third-party companies or geologists. However, blockchain will make this process easier, mitigate potential errors and make operations more secure, since drill results can contain sensitive information related to potential investment from mining companies.

Simplified supply chain

Another intuitive example is the overall simplification of supply chain transactions by reducing paperwork and processes that require manual validation and reconciliation. It will also provide better tracking of the material along the entire supply chain and help minimise counterfeit products further down the supply chain.

Since one of the benefits of blockchain is better visibility of the supply chain, tracking commodities such as diamonds and gold from their point of origin makes it possible to identify conflict minerals, which will allow responsible miners to continue their focus on ethical mining practices.

Another possibility that has been explored is the potential use of blockchain for fleet management, allowing assets to automatically order parts and fuel as needed.

Smart contracts are another common term used regarding blockchain transactions and can be part of some of the ideas described above. Smart contracts theoretically allow simple, traceable and reliable transactions, and can be carried out among disparate, anonymous parties without the need for a central authority. However, a smart contract isn’t a contract as we are used to. They look more like a piece of code with some pre-defined instructions if approved by the consensus (for example, to execute a payment triggered by an event).

Tokenisation of precious metals

Tokenisation is the idea of having token equivalence for a particular material and trading or owning it without moving the actual material. For example, if 1 token = 1 gram of gold, the value is exchanged by trading a token of gold, and the transaction is completed virtually without actually shipping the precious metal.

Beyond this scenario, there is some consideration about tokenisation of ‘equivalent’ gold that has not even been mined yet, let alone processed, where ownership changes hands even though the gold still remains underground.

Industrial applications 

Blockchain is typically associated with cryptocurrencies, more specifically bitcoin, and, as mentioned before, it’s easier to understand its potential use in financial, contractual and trade transactions, but its potential is increasingly being explored in industrial applications.

But one crucial element of blockchain is that it can be private, meaning all members are known and trusted. This is useful when it is used between various entities that all belong to the same company or family of companies.

Sensors in the IoT 

The use of IoT sensors in mining has been growing exponentially, and the number of applications is limited only by the creativity of users. Potential uses of IoT sensors include environmental management, machine health monitoring, material tracking, personnel tracking, and fleet management.

For decentralised ‘over the air’ industrial IoT (IIoT) applications not managed by programmable automation controllers one of the main concerns is cybersecurity. By their nature, these sensors are more vulnerable to tampering and unauthorised access, although the problem is mitigated somewhat because wireless IoT sensor are used more commonly for monitoring and telemetry applications than for critical control applications. Accordingly, it might seem tempting to use blockchain technology to ensure data security, since it ensures the data is validated.

However, in a more confined industrial application, the classical blockchain format can represent an issue: blockchain approval requires 51% of the nodes’ consensus, so in a massive network it seems improbable to hack 51% of all the nodes. It might be possible in a smaller number of nodes, and there is now ongoing research looking into reducing this potential issue by adding more layers of security.

Conclusion

The utilisation of blockchain is now upon us. Its use in recording transactional exchanges in the supply chain is well established and enough precedent has been set to give its adoption a clear path forward.

As for emerging potential uses, such as forming the foundation of IoT-based applications, the horizon is in sight, but we have not quite yet arrived More exploration around blockchain and the IoT/IIoT are needed, but the technology seems poised to be the next big step in mining’s digital transformation.

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