Blockchain-based labelling

Udmurtia Engineering Cluster, which combines fifteen defense industry companies including Kalashnikov Group, signed an agreement with Perm’s SLT Center on testing a blockchain technology with the aim to employ it in regulating commodity turnover, paperflow and labelling. Invest Foresight learnt the details of the deal from Vladislav Savin, an SLT Center founder. The fact of the deal was also confirmed by Andrei Aristov, Director of Udmurtia Engineering Cluster Management Company. If implemented, SLT Center’s project will help cluster participants save millions of rubles yearly.

Technology

The cluster is made of fifteen companies: Kalashnikov Group, Techcrim, Izhevsk Electromechanical Plant Kupol, Sarapulsk Electric Generator Plant, Sarapulsk Radio Plant, Progress Research and Technology Institute, Unmanned Systems, Elecond capacitors manufacturer, STM engineering company, Horizon technology services provider, Donvard hydraulic equipment manufacturer, Vektor plant, Innovative Industrial Company, Gidrosystemy scientific and production association. Next April they will start testing a blockchain-based company management system, designed by SLT Center. Andrei Aristov told Invest Foresight that some of Udmurtia Engineering Cluster companies have signed agreements with SLT Center.

Nowadays many companies label their products and use barcodes to be able to report to fiscal authorities on production/revenue scopes. The problem is though, that labels can be counterfeited. According to the International Chamber of Commerce, revenues from selling counterfeits reach some 5-7% of global trade. To avoid that, a blockchain technology can be used where data is compiled and stored as decentralized accounting records while the parties to smart contracts become capable of auditing contracts along their entire chain from raw materials to manufactured goods.

SLT Center offers Udmurtia Engineering Cluster participants to test for some three to four months labeling and other management decisions, all based on blockchain technology. For that, it intends to use Ethereum blockchain testing network. Open data will be available to all network participants, while confidential data protected as defense secrets will be kept in a private blockchain. Which particular data is to be regarded as open or confidential, will be decided by the participating companies. According to Andrei Aristov, defense production will not be shifted over to blockchain. Testing will be free. Once the tests are completed, SLT Center will add cluster companies to its blockchain consortium employing POS/POW hybrid technology.

“We digitalize the entire production chain of an enterprise from raw materials to ultimate products. Once we have digital identification of executives, the problem of inner corruption will be solved, as it will be apparent where residues of raw materials and ready made products go”, Vladislav Savin says.

“For us, it is important to monitor products quality. Smart contracts allow that”, Andrei Aristov explains the need for the blockchain implementation.

Management Uberization

The price of SLT Center’s blockchain for Udmurtia Engineering Cluster companies is not yet known. But SLT’s blockchain eliminates costs of purchasing barcodes and labels scanners, for example, which are priced between RUR 50K ($870) and 300K each. Equipment for applying such codes or labels costs even more, up to $40K. The said scanners are in demand from manufacturers, logistics companies and supervising agencies. The scanners are manufactured by Avtomatika Concern, a company within Rostec government corporation, while labels with cryptographic protection are produced by Prospect Technologies Development Center, a company within Rostec owned by billionaires Alisher Usmanov and Alexander Galitsky. Each label costs RUR 15 to 25. SLT Center offers to substitute expensive scanners with special computer and mobile applications of its own design. In case data on a company is put in blockchain, there will be no need to purchase special label scanners, submit requests regarding labelling of a certain good and to wait for ten to twenty days to be supplied the requested data. Entering data on goods labeling into an SLT Center blockchain will cost RUR 0.50 ($0.0085) to RUR 5. The cost of a barcode scanner is substantially higher than the cost of entering a barcode into a blockchain. Besides, blockchain allows monitoring the goods circulation. Nowadays, to make a deal one needs a notary. SLT Center’s blokchain eliminates that need while a deal validation will cost a few pennies.

“That is how company management Uberization takes place”, Vladislav Savin explains.

The company plans to develop cooperation with Promobot robots manufacturer. SLT’s blockchain will allow Promobot to fully digitalize all components of its robots, thus facilitating rectification of any problems with their operation.

Project support

Vladislav Savin is a designer and founder of SLT Center from Perm. He is also Deputy Chairman of the Youth Entrepreneurship Committee at OPORA Russia public association for small and medium-sized entrepreneurship, while his sister Natalia Savina, a member of the SLT Center team, is chairing the committee. Another member of the team is Oleg Kivokurtsev, Promobot cofounder and Business Development Director. SLT Center is an independent entity which is not a part of any large corporations such as Rostec.

How could a small company from Perm, a startup in fact, establish partner relations with the major defense industry companies from Russia’s Udmurtia? Savin mentions his progressive decision and a growing strong community, with its members living worldwide, in Toronto, for instance. Late last year the head of SLT Center met with Alexander Svinin, Acting First Deputy Chairman of the government of the Republic of Udmurtia, and told him how a blockchain technology can help companies save sizeable money and generate new taxes. SLT Center is building up cooperation with the authorities of Perm Region and Republic of Tatarstan. In Udmurtia, it is intended to launch a large cryptomining center. The idea is supported by the authorities of the republic, possibly, because they are more aware of the blockchain technology.

Vladislav Savin is now in a search of investments to further develop his blockchain labelling project. Unlike Rostec, SLT Center intends to promote the decentralized labelling option.

By Natalia Kuznetsova