Blockchain Technology Drives the Success of Supply Chain System (A case of Algorand Blockchain)

Blockchain Technology Drives the Success of Supply Chain System (A case of Algorand Blockchain)

By xqanxxx | xqanxxx | 28 Sep 2020


Blockchain technology is a driver of success for most of the sectors it has been introduced as a solution including the supply chain system. Its remarking results have served as a catalyst to inspire manufacturers and consumers to adopt it. Sometimes, the entire supply chain, from raw material providers to the final users, becomes part of the blockchain-based supply chain system.

The blockchain eliminates the main problems affecting the traditional supply chain that relates to security, cost, scalability, and risk. This is because with the blockchain-based supply chain there is high transparency, open participation, and efficiency. One specific blockchain that has created a lasting solution to most problems affecting the traditional supply chain is the Algorand blockchain protocol.

Basically, the Algorand blockchain is based on permissionless, Pure Proof of Stake (POS) protocol, with its main features being open participation, scalability, transaction finality, and security. These features offer solutions to the trilemma (security, scalability, and decentralization) which is perceived as rendering the existing supply chain systems ineffective.

The question is: How have the blockchain helped in solving these problems? Let us look at a few of the solutions.


The traditional supply chain system faces the problem of scalability when the network increases. Some businesses cannot get raw materials and other supplies on time because of the long-time taken to process payments. As a result, the users cannot get the goods and services on time because of delays in the payment system. We know how our payment systems operate. Just the parties involved in a payment transaction slows the entire process and yet to talk of the exorbitant fees.

When raw materials and other inventories are not received on time, the manufacturing processes are slowed down. However, the blockchain helps in swift processing of payments.

Despite that, primitive blockchains are scalable enough and as a result, make the execution of transactions take a little time. For example, the bitcoin and the Ethereum blockchain do not exceed 800 transactions per second. However, the Algorand offers the best solution since it can process over 1 000 transactions per second. Algorand achieves this by using its smart contracts, standard assets, and atomic transaction functionalities. 

On Algorand, parties involved in the supply chain can use smart contracts to create new business models such as automated execution of payments to all people involved throughout the entire chain at a lower cost. Members of the supply chain can also issue an asset which is customizable to meet their business demands and specification. These assets (ASAs) can then be sent nearly instantly and in small units to every member of the supply chain without relying on any entity.

Risk reduction

One problem faced in the supply chain is the failure by certain parties to deliver the agreed or standard raw materials or merchandise. This results in companies producing substandard products or services. When products are substandard, there is a risk of loss as consumers may not buy them. The sellers may resort to reducing prices, whereas some goods may go badly.

Using intermediaries in the traditional supply chain results in delays in the supply of raw materials and merchandise. This is because of the use of escrow services by some parties to avert cheating or supply of substandard products.

However, with the blockchain, delays and substandard deliveries are avoided. For example, Algorand uses its smart contract Layer-1 (ASC1) to facilitate efficiency and compliance. ASC1 automatically enforces custom rules and logic that deal with how assets, goods, and services are delivered. So, the merchandise and other supplies are provided as per agreement or standard. The Algorand blockchain can be leveraged and used to verify, track, and monitor the source and movement of raw materials. This ensures transparency as data of an item can be verified by all parties who have permission. 

Using a trustless execution contract on the Algorand blockchain means that suppliers can overcome existing barriers in delivering goods to consumers with speed, lower costs, and fewer complexities.

Cost reduction

As you can see, using blockchain technology in the supply chain has led to lower operating costs. The blockchain ensures that there is an elimination of paperwork. It also streamlines administrative processes. For example, the use of auditing, escrow service, and intermediation are eliminated.

All record keeping is done on the blockchain, resulting in lower costs. For instance, Algorand’s layer1 smart contract provides a secure and quick way of carrying out common everyday transactions. It cost less to send brotherless micropayments to members in the chain due to the nature of the Algorand blockchain these tools are built on. 


Security risks exist when other parties alter or tamper with information. This may cause fraudulent transactions.

With the Algorand blockchain, every user takes part fully through voting. Every participant has the right and capacity to propose and vote in the system. This avoids manipulation by some parties. The Algorand Pure Proof of Stake Protocol does not allow a small fraction of users to change the system.

The security of the system rests on most users. Amendments can only be made based on the honesty and integrity of the majority. As you can see, Algorand ensures that there is decentralization, scalability, and maximum security.

The rekeying feature of Algorand helps to ensure that security exists since it allows a user to change his/her private key yet maintaining the same public key. This is important to ensure that the private key is safe, as it is used for authentication of transactions.  


Now, it is clear that the blockchain has brought security, scalability, transparency, risk reduction, open participation, efficient payment system, and transaction finality in the supply chain system.

On the other side, the key features of Algorand’s blockchain are outstanding in enabling these benefits. Its smart contract, standard assets (ASA), and atomic transfers, create a fireproof solution to the trilemma of security, scalability, and decentralization.



If I was a writer I’d have a better Publish0x bio quote


Your favourite cryptocurrency and blockchain related news repo!

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.