There is a distinct buzz around blockchain at the moment.
But so often, when I speak to people from the mining community, they say that they’re interested in the topic but don’t know much about it. There is a shortage of information on what blockchain actually is and how it will affect the way we mine.
In a bid to end that shortage, I turned to Nathan Williams, CEO and founder of Minespider. His company has developed the first open protocol for blockchain use in mining, and recently landed a contract to help Volkswagen ensure traceability in its lead supply chain.
If anyone could answer my questions, it was Nathan…
How widespread is the use of blockchain in mineral supply-chains currently? Is it more prevalent in certain commodities or amongst certain mining companies?
In the past few years the concept has become increasingly prominent. Right now, most mining companies are aware of the potential of blockchain for mineral provenance and traceability, though so far it has been only small-scale pilots that have been run.
The primary use of blockchain in mining at present seems to be in guaranteeing that conflict minerals do not enter the supply chain, but what other advantages can its use bring for companies?
Yes, that’s right. The first cases we are going to see are for mineral provenance – being able to attach the story of where the material comes from to the shipments of physical material, as well as different paperwork management systems, payment systems and other ways to increase efficiency in the mineral supply-chain.
Going forward, there is a lot that can be done with smart contracts and blockchain. We can use a smart contract to incentivise reporting of incidents of child labour, or environmental violations for example. We can create more efficient multi-stakeholder groups with smart-contract governance to help with international mining oversight.
By creating rules-based incentives that aren’t governed by any single entity, we open up a large and creative field for applying governance and policy to the mineral supply chain, and do not need to be limited to conflict mineral traceability.
How will the use of blockchain in mining affect the way we actually extract, process and ship minerals? What physical steps are required as part of the tracking process?
The changes will depend on the size of the mining operation, the material being extracted and the specific concerns for the supply chain in question.
In general, we can think of the blockchain as a way of creating digital ‘certificates’ that cannot be faked or duplicated and are rated to a certain mass of material at the point of extraction. This can be done completely separately from the mining process by an observer (during pilots this will undoubtedly be the case), or integrated directly into the workflow by using IoT-enabled devices and RFID tags, but the principle remains the same: when material is transported, it is identified at the beginning point and at the end, with the identifier linking the material to the digital certificate on the blockchain.
When the material is smelted, refined, or processed into components, then the certificates of the inputs are all linked to the new output, allowing the next player in the supply chain to know who provided the source materials for the metal or component they are purchasing.
What kind of systems must a mining company have in place in order to implement tracking via blockchain and ensure a smooth flow of data within the supply chain?
Minespider is a protocol and designed to be very flexible on this matter. In the simplest case, it can be run with a browser, a printer and a QR code scanner, but is designed to be capable of syncing up with existing data collection devices and ERP systems.
Tell us your team’s story and how you developed the Minespider Protocol
We got started in 2017, right when blockchain was entering the public eye. My previous company was a chemical regulatory software platform called Subvise, and so I was aware of compliance issues and the potential for emerging technology to address them.
Around that time in early 2017, there was an article in the Washington Post explaining how a number of electronics companies that had done so much work on mineral supply-chain due diligence were concerned that the newly-elected US administration would roll back Dodd-Frank 1502, the regulation pertaining to conflict minerals. This is what prompted us to look into the issue.
We spent the best part of a year talking to the industry, regulators, and NGOs, asking what efforts to secure the mineral supply-chain had been tried, what worked, what didn’t, and what the unintended consequences were. Our original design was born out of those discussions.
We specifically were aiming for a protocol that would:
- Run on a public blockchain, with the potential for decentralised governance to avoid that one company would get a monopoly on the mineral supply-chain;
- Would be able to attach certifications and due diligence data to specific shipments of material. This would allow companies to really know what is going on in their supply chain, and who they actually receive material from; and
- Spread the cost away from the mines and provide a positive incentive to participate in the system as a responsible supplier
We raised our first funding round and built up the team by mid-2018, and are now launching our first projects.
What data security issues can the use of blockchain throw up and how does the Minespider protocol mitigate them?
The biggest one is the balance between transparency and privacy. Supply-chain data is sensitive, and not everyone needs to know everything, but it is important that we have a level of transparency that gives everyone confidence that their materials were sourced in responsible ways. We do this by creating a data ‘certificate’ which consists of three parts:
- Data you want visible to everyone downstream from you in the supply chain, such as certificates and licenses;
- Data you want visible only to your customer, and would like to prove has not been altered, such as bills of sale; and
- Links to the ‘visible’ information to all of the suppliers before you in the supply chain.
This certificate is in a database but is linked to a record on the blockchain which stores the unique identifier as well as how much metal they have purchased or have produced, along with the grade. This allows the digital certificate to be valid for the shipment and keep a record of its journey through the supply chain.
Even though the data certificates are stored publicly, they use a nested encryption that ensures that only the data owner can read the certificate; I often describe it as a Russian doll, or an onion.
The certificate is encrypted with the public key of the data owner, starting at the mine. Each member of the supply chain is able to decrypt the ‘visible’ layer of information from the suppliers before them, add their own certifications and due diligence information, and then re-encrypt the certificate with the public key of their customer, and so on. This means that even though the certificate is stored in a very public way, only the data owner can read it.
We feel this was the right approach because of the international nature of mineral supply-chains. If you give access to regulators… which ones? Best to have the data be self-sovereign, and then regulators can request it as needed from companies.
The biggest data security issues are always going to be the humans involved with the system, like any other data system. It’s easier to request data than to hack it.
What kind of reaction have you seen from both miners and end users since introducing the protocol?
There has been a steady increase in interest since we started in 2017, and I think audit fatigue is one of the strongest reasons for this. Downstream manufacturers want to protect their brand and be compliant so they will audit the smelters they find in their supply chain to make sure they are responsible.
This means a smelter who is trying to be responsible can be audited multiple times a year by various downstream brands who do not share data. Simply by putting this data on the blockchain and including it in mineral shipments, we can significantly reduce the time and cost burden placed on these mineral sources.
What’s next for Minespider? Are there any new features that you are looking to add?
In the near future, our focus is on traceability and on demonstrating that this can be done on a public blockchain and at scale.
We will be announcing more pilots and projects in the coming months that will focus on shared learnings and multi-stakeholder governance, as well as how to take what we have learned for large players and applying it to small-scale and artisanal miners to ensure they have continued access to global mineral markets.
We also have a few applications in other industries that are building solutions and DApps on the Minespider protocol. One of them is called ChemChain, which is tracking hazardous chemicals.
How do you see blockchain helping to shape the mining industry of the future?
Going forward there is a lot of room for creativity, and traceability is just the tip of the iceberg. At minimum, we should expect the raw materials that go into the products we purchase to come attached to the story of where they came from and under what conditions they were produced.
Blockchain technology makes it a very realistic and reasonable expectation for the future of mining.