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Differentiating Blockchain Technology to optimize Processes quality in Industry 4.0

Differentiating Blockchain Technology to optimize Processes quality in Industry 4.0. Prof. Dr. Tessa T. Taefi First Author : Nico V. Vafiadis University of Reutlingen, Germany IEEE World Forum on Internet o Things , 15.04 – 18.04.2019, Limerick , Ireland. Introduction.

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Differentiating Blockchain Technology to optimize Processes quality in Industry 4.0

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  1. DifferentiatingBlockchain Technology tooptimizeProcessesqualityin Industry 4.0 Prof. Dr. Tessa T. Taefi First Author: Nico V. Vafiadis University of Reutlingen, Germany IEEE World Forum on Internet o Things, 15.04 – 18.04.2019, Limerick, Ireland

  2. Introduction Why Blockchain Technology? • Study in Jan 2017 • 266 decision makers of German Mittelstand • 64% “Blockchain has no meaning to me” • 19% “Heard, but not looked into topic” Figure 1: Own work based on Kopp /2017) / Nördinger (2017) Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  3. Introduction Industry 4.0 • Blockchain in Industry 4.0 processes • Establish trust • Store transactions reliably • Increase security against intruders • More effectiveand agile productionprocessesandsupplychains Figure 2: Connected Industry , Source: Mattes (2018) Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  4. Research FIELD Which of the current blockchain methods is the most beneficial in order to increase the process quality in industry 4.0? Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  5. State of theart Blockchain Technology Basics Encryption of the block andchainingwiththeblockchain Initiation of a transaction Transfer tothenetworkanddistribution of thedata Examination of thetransactionthroughvalidationthroughconsensusmechanism Completion of thetransaction Figure 3: Based on Neugebauer (2018) Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  6. State of theart Network Architecture of the Blockchain Technology Central NetzworkArchitecture DecentralizedNetzworkarchitecture Distributed Network Architecutre Figure 4: Based on Hofmann (2018) Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  7. State of theart – Public, private & consortiumblockchain Public Consortium Private Organizational Form Distributed Database Authorizationfree Extension requiresauthorization Properties Private Access Public Access Figure 5: Based on Neugebauer (2018) Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  8. State of theart Consensus mechanism Proof of Stake Mechanism (PoS) Proof of Work Mechanism (PoW) Proof of Authority, Proof of Activity, Proof of Importanceetc. Source: Verhoelen (2017) / De Vries (2018) Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  9. State of theart: Blockchain “Generations“ Blockchain I CryptoCurrencies (Bitcoin, Litecoin etc.) DecentralizedApplications in thefinancialsector (Ethereum etc.) Blockchain II Blockchain III DezentralizedApplications & Inclusionintothe Corporate World (IOTA etc.) Investigative questions What are the benefits and drawbacks of the different blockchaingenerations with regard to process quality in the German industry 4.0? Which of the current blockchain technologies best addresses the named drawbacks? Source: Prinz & Schulte (2017) Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  10. Method: Overview Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  11. Method: LiteraturereviewProcess Identified 130(Reading Titles) From Reference List: + 20 References Elimination 92 not relevant 38 Phase 2 58 Elimination 5 Digitization 18 Industry 4.0 Phase 3 35 Included 8 Research Papers, 12 Books, 6 Magazines/Newspaper Articles Elimination 9 Crypto Currency Nico Vafiadis & Tessa T. Taefi

  12. MethodS:Qualitytivecontentanalysis • Dezentralized Database • Proof of Mechanism • Smart Contracts • Sharing Economy • IOTA • Ethereum • Integration of Blockchain in Industry 4.0 • Prozess OptimizationthroughBlockchain Increasing Efficiency through Blockchain Supply Chain Optimization Blockchain andLogistics Bitcoin – Indutry4.0 Relevance Security againstmanipulation Create Confidence Customer Satisfaction Error-proneness of Machines Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  13. Results: Gap in literatureProcessquality vs. Productquality Quality Time Costs Disruption Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  14. Results: SWOT ANALYSIS Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  15. Results: Hypotheses On reasonsforprocessoptimization potential:The design of theanyblockchaingeneration, it’snetworkarchitectureandunderlyingconsensusmechanismallowtheprocesseswithinindustry 4.0 tobemoreefficientbyenablingsaving potential; ensuringtamperresistanceandprovidingtransparency. On blockchainas a global an cross-company architecture: Through the global disposition of theblockchain, corporateboundariesbecomemore transparent andmake global tradingprocessesmoreefficient. On increasingefficiencyby smart contracts: Transactions areexecutedthroughtheblockchain in an automatedway (smart contracts) and in real time, whichcanincreasetheefficiency of thesupplychain. On thescalability potential of zero-fee transactions: Zero-fee-transactions and high scalability, such asf.e. IOTA, have a future in theindustry, andmayhelptoimproveprocessquality. On theweakness of high power consumptionThe high power consumptionmakestheblockchaintechnologyuninterestingfortheindustry. Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  16. Discussion: Interviews On reasonsforprocessoptimization potential • IntervieweeI : • I1 cannotconfirmthehypothesis • The consensusmechanismensurestamper-proofprocessing of thevalues • Biggestchallengeisthetransmission of thedatafromthesensortotheblockchain • Implementation of a kind of professional consensusmechanismthatisabletocompareinputvalues. • Interviewee II : • Cannotprovide 100 percentcertainty. • Consensus mechanismcomplicates internal andexternalmanipulationsto a maximum. • Tamperevident securitycanbeensuredby a solid IT securityconceptwith a solid dataprotectionratingand a hardened IT infrastructure. • Proof authorityconsensusmechanismgovernedby a consortiumwith a distributedconsensus. • Thorugh Private Bitcoin Protocol stackscantransactionsbevalidatedfaster. Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  17. Discussion: Interviews On thescalability potential of zero-fee transactions • IntervieweeII • A private orconsortium Ethereum blockchainmayprovidethe same zero-fee-transactions • Transactions can also runoff-chain (Allowstransactionstobehandledfree of charge) • Zero-fee-transactions onlyprovideusecases in thefield of publicblockchains • A blockchain in Industry4.0 shouldthereforebesetup in a private operatingenvironment in ordertobeabletoadapttheblockchaintothespecificusecaseasmuchaspossible. • Acombination of Blockchain andTangle canbeintroducedtothemarketforeliminatingtheinefficiencies of bothtechnologies. • IntervieweeI • Tangle principleis not abletoprovide a completeproof of manipulation • Amajorweaknessistheuse of a centralserver • Zero-free-transactions will permeated, - a system must earnmoney • The tangleprincipledoes not make sense in theindustry, but addressesissuesthattheblockchaintechnologycurrentlycannotsolve • A problem of theblockchaintechnologyisthe large amount of datathatparticipantshaveto hold in a blockchain. • IOTA andtheunderlyingtangleare a goodapproach in thearea of embeddeddevices.

  18. Conclusion • Cross-company processes: anyblockchaintechnologiesmayimproveefficiencybyimprovingdataimmutability (especiallygeneration I withPoW) • Further efficiencyimprovementsbyimplementingautomated smart contractsofgenerationII • IOTA is not necessarilythebestsolutionin anycase, withregardstoprocessqualityimprovements • cankeep a large amountofdataand still ensure a high scalability. • isusing a centralserverwhichis vulnerable toattacks. Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  19. Conclusion Further research Contributiontoscience: • Collecting evidence & discussing impact of blockchain on industry 4.0 Implicationforpractitiers: • To improve the efficiency of in-company production processes, factory automation more relevant than implementing a blockchain. • Ensuresensordatatoreachledger in a tamper-freeway. – Overall IT securityconcept Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  20. Thankyouforyourattention! Differentiating Blockchain Technology to Optimize Processes Quality in Industry 4.0 Nico Vafiadis & Tessa T. Taefi

  21. References • De Vries, A. (2018,) https://www.cell.com/joule/fulltext/S2542-4351(18)30177-6, accessed 06.07.2018 • Mattes, B. (2018) based on : https://www.handelsblatt.com/unternehmen/industrie/bernhard-mattes-vda-chef-fordert-in-dieselaffaere-aufarbeitung-der-fehler-der-vergangenheit-/22669536.html?ticket=ST-2413073-DHblnRc7q2zHB50gYYU7-ap2 , accessed 05.07.2018 • Neugebauer, R (2018). Digitalisierung – Schlüsseltechnologien für Wirtschaft & Gesellschaft., p. 313 Springer. • Nördinger, S. (2017) based on: https://www.produktion.de/specials/revolution-blockchain/darum-passen-blockchain-und-industrie-4-0-zusammen-278.html , accessed 05.07.2018 • Pohlmann, N. (2018) Speech at Hannover Fair Industrie 4.0 on 25.04.2018 • Prinz, W. & Schulte A. (eds.) (2017) Blockchain - Technologien, Forschungsfragen und Anwendungen. https://www.aisec.fraunhofer.de/content/dam/aisec/Dokumente/Publikationen/Studien_TechReports/deutsch/FhG-Positionspapier-Blockchain.pdf, accessed 06.07.2018 • Verhoelen, J. (2017) https://blog.codecentric.de/2017/10/konsens-mechanismen-blockchain/, accessed am 06.07.2018 • Zillmann, M. (2016). Lünendonk-Whitepaper. (L. GmbH, Hrsg.) Von Keine Industrie 4.0 ohne Digitalisierung der Supply Chain, http://luenendonk-shop.de/out/pictures/0/lue_whitepaper_lhis_sc_f300816_fl.pdf

  22. References (Figures) • Figure 1: Based on https://coinmarketcap.com/currencies/bitcoin/, accessed 06.07.2018. • Figure 2: Based on https://www.logistik-heute.de/Logistik-News-Logistik-Nachrichten/Markt-News/15154/Was-Industrie-4-0-und-Logistik-4-0-fuer-die-Mitarbeiter-bedeuten-Arbeit-4-0- , accessed05.07.2018. • Figure 3: Based on Neugebauer, R (2018). Digitalisierung – Schlüsseltechnologien für Wirtschaft & Gesellschaft., p. 313 Springer. • Figure 4: Based on Hofmann, E. (2018). Supply Chain FinanceandBlockchainTechnology, p.36. Springer Briefs in Finance. ISBN 978-3-319-62370-2 • Figure 5: Based on Neugebauer, R (2018). Digitalisierung – Schlüsseltechnologien für Wirtschaft & Gesellschaft., p. 317. Springer. • Figure 6: Basedon https://www.kreditkarte.net/wissenswertes/smart-contracts/

  23. Additional References (Literaturereview) • Bheemaiah, K. (2017). The Blockchain Alternative, pp. 58–65.Paris: Springer. • Heuermann, R. (2018). Wirkungen und Erfolge der Digitalisierung. In M. T. Roland Heuermann, & C. Bressem (Hrsg.), Digitalisierung in Bund, Ländern und Gemeinden, pp. 222–224. Bonn: Springer. • Hofmann, E. (2018). Supply Chain FinanceandBlockchain Technology. In U. M. Erik Hofmann, Concept—Where Are theOpportunitiesofBlockchain-Driven Supply Chain Finance? pp. 67–71. Cham, Switzerland: Springer. • Hofmann, S. (2018,) https://www.mm-logistik.vogel.de/blockchain-technologie-einfach-erklaert-definition-anwendungen-a-676163/, accessed 06.07.2018 • Karakatsis, A. (2018). 7 Gründe, wieso sich Blockchain mittelfristig auch bei Ihrem Unternehmen durchsetzen wird! Digitale Welt , 69 – 70. • Kenning, P. et al. (2018). Was steht im Fokus der Verbraucherforschung angesichts der Entgrenzungen des Konsums? In Kenning, P. & Lamla J. Entgrenzungen des Konsums, p. 135. Düsseldorf: Springer. • Kopp, K. (2017) based on von: https://www.produktion.de/specials/revolution-blockchain/bosch-blockchain-hat-hohe-strategische-bedeutung-121.html, accessed05.07.2018 • Morabito, V. (2017). Business Innovation throughBlockchain, pp. 88–91 Springer.

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