OneSmart contract of the most exciting topics to emerge in the blockchainBlockchain ecosystem is the smart contractSmart contract. A smart contract is a computer program whose code is stored in a distributed blockchainBlockchain structure and that directly controls digital assets without relying on a third-party intermediary.

OfConsensus mechanism one blockchain’sBlockchain most prized features is the consistency, hence security, it provides to the stored data. Consistency is achieved through consensus mechanismsConsensus mechanism, the most common of which is Bitcoin’sBitcoin Proof of WorkProof of work (PoW) mechanism.

Chapter 6 introduced the concept of symmetric cryptography. As the name suggests, a symmetric encryptionSymmetric encryption scheme uses the same key for both encryption and decryption; the key is known to the sender and recipient of the message but must remain unknown to anyone else. To communicate secretly, a sender uses an invertible cryptographic function to encrypt a plaintextPlaintext m with the key k and then sends the resulting ciphertext c to the recipient.

A blockchainBlockchain is a ledgerLedger of blocks of information (e.g., transactions, agreements, etc.) that are stored sequentially across a networkNetwork of computers. Rather than a simple algorithm, blockchainBlockchain is a technology construct and an enabling protocol that facilitates a decentralized brokering of data among participants, i.e., its revolutionary properties do not derive from what blockchainsBlockchain do (i.e., store data securely), but from the manner in which they are used and implemented (i.e., trustless and decentralized).

BitcoinAnonymity isBitcoin the world’s most transparent payment method in the sense of transaction traceability: Any transaction that occurs on the networkNetwork can be traced to its origin, and any account that was ever linked to any bitcoinBitcoin or fraction of a bitcoinBitcoin is similarly traceable.

This book provides a comprehensive introduction to blockchain and distributed ledger technology. It includes detailed step-by-step exercises to help readers launch their own Blockchain, and presents shortcut guidance to develop distributed ledger technology applications.

Cryptology is the science of encrypting and decrypting information and the methods employed to those ends. Cryptography (from the Greek “kryptós,” meaning secret or hidden, and “gráphein,” meaning writing) is a subset of cryptology that describes the creation of methods for encrypting information so it cannot be understood by unauthorized parties. Steganography refers to methods for disguising the communication channel over which cryptographically encrypted messages are sent.

We study a supply chain distribution system and investigate experimentally operations of markets where retailers can trade digital claims (tokens) on the supplier’s capacity. Subjects play the role of retailers, have heterogeneous valuations of goods, face random demands, and buy tokens on the supplier’s capacity. Following demand realization, retailers trade tokens with each other in markets implemented as double-sided, single-price, blind, batch auctions. We compare six behavioral treatments, featuring two wholesale prices and three market sizes. As expected, markets reduce leftovers and shortages. Interestingly, market-clearing prices are anchored to wholesale prices and do not signal the value of goods in large markets. Players deploy novel ordering and trading strategies that differ from the transshipment literature. We identify strategies by applying unsupervised machine learning algorithms. In one strategy, players buy a few claims and, after demand realization, use the market to satisfy it. Other players buy more claims than the maximum demand and, once demand is known, sell their excess on the market. Both strategies reduce costs from demand uncertainty but expose players to liquidity and mistakes risks. A third strategy, in which players order from the supplier initially as if expecting the market to be cleared cooperatively, is more profitable. This strategy diversifies demand and market risks. The introduction of markets causes the “pull-to-the-mean” effect and increases order variability. Thus, markets can cause the Bullwhip Effect. Retailers’ and the supply chain’s average profits are higher with markets, but suppliers with low wholesale prices suffer from lower revenues because of the pull-to-the-mean effect. This paper was accepted by Elena Katok, operations management. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.03771 .

This paper describes the blockchain-enabled token trading game for supply chain management, a web-based supply chain simulation. The game uses blockchain technology’s concepts to create virtual markets for supplier capacity trading among retailers, in which participants take on the role of a retailer, have different valuations for products, and submit an order before knowing their demand; after demand realization, participants trade tokens (claims on the supplier’s capacity) among themselves using virtual markets to maximize their profits. The game provides participants with firsthand experience with how blockchain technology can be used in practice, thus serving as an interactive pedagogical tool. More generally, the game is intended to help supply chain management and blockchain technology students and executives understand the challenges of serving uncertain customer demand and the role of virtual markets in providing an effective remedy for reconciling supply and demand, thus improving supply chain performance. Supplemental Material: The supplemental material is available at https://doi.org/10.1287/ited.2023.0015 . The Teaching Note and PowerPoint presentation are available at https://www.informs.org/Publications/Subscribe/Access-Restricted-Materials .

This chapter explores the potential of distributed ledger technology (DLT) in addressing supply chain shortages and competition for scarce resources. Specifically, we assess the effect of strategic information sharing on supply chain efficiency and the creation of virtual markets to improve supply chain performance. To facilitate this research, we designed a simulation platform called DISASTER (DLT In Sourcing And Strategic Trading Experimental Research), which hosts web-based, dynamic, and customizable supply chain simulations that leverage concepts of blockchain technology, and permit capturing of information regarding players’ ordering strategies and behavioral traits. In this chapter, we describe the DISASTER platform and discuss two selected DISASTER simulations that probe supply chain retailers’ order behavior: the first investigates the role of information sharing among competing retailers; the second allows for the trading of tokens among competing retailers. In the first simulation, we find that decision makers act more strategically and closer to Nash equilibrium predictions as more information about historical orders of competitors is shared; however, the observed outcome is not invariably an improvement in efficiency as measured by profits across participants. In the second simulation, we observe that initial order quantities remain unchanged as compared to the baseline (non-trading) scenario, despite the possibility to trade on virtual markets; however, over time, more equitable distribution of inventory is achieved, and the supply chain efficiency as measured by profits increases. Our findings highlight the value of empirical research and management games in shedding light on the role of decision makers’ behavioral characteristics and investigating real-life supply chain challenges and the potential of adopting blockchain-specific capabilities in that space.

Information-sharing facilitates the coordination of supply chains and can be essential for enterprises' survival. Studies have shown that supply chains benefit from the availability of aggregated information (e.g., inventory levels), as that would facilitate planning, inform decisions, and limit the emergence of operational distortions that result from the bullwhip effect and inefficient inventory allocation. Despite this, the degree of supply chain transparency within and across companies remains deficient at best, even as advancements in information and communication technology have facilitated secure information-sharing. What is more important is that companies have a direct incentive not to share certain operational attributes (e.g., inventory levels or sales, order sizes, wholesale prices). The issues resulting from technology limitations and irrational ordering- and allocation processes were brought into acute focus during the 2020 COVID-19 (C-19) pandemic, manifesting as persistent and global disruptions in supply operations and delivery delays. This chapter outlines promising approaches and methodologies for resolving these chronic shortcomings by leveraging both distributed ledger ("Blockchain") technology (DLT) and the newly emerging capabilities of fully homomorphic encryption (FHE). By employing zero-trust information-sharing, we present an approach that combines DLT with FHE to bridge information-sharing limitations in hyperconnected supply chains without compromising data control. The chapter also introduces real-world applications of both DLT and FHE to illustrate their transformative potential. We conclude by highlighting the practical benefits of implementing both technologies, as well as the implications for broader adoption.