Blockchain for E-commerce

Since 2008, when Bitcoin was created by Satoshi Nakamoto, crypto-currencies and blockchain technology have been increasingly settling down in our world. Limitations of Bitcoin's blockchain resulted in the appearance of a large number of blockchains such as Ethereum[2], which allows to create smart contracts in the Turing-complete programming language, EOS[3], using the dPoS protocol, increasing the throughput of the blockchain technology hundreds and thousands times. Blockchain technology is coming closer to the real sector of the economy and more and more people are talking about the possible use of blockchain not only in the financial sector.

Elementh has absorbed the best achievements of recent years in the field of blockchain, aiming at solving the problems of the modern world of e-commerce. Elementh is a blockchain for e-commerce, which is a register of ownership of goods with the ability to write specialized smart contracts and use of the nomenclature standard to quickly create various decentralized and centralized applications for e-commerce.

Content

  • Introduction to Bitcoin and Existing Concepts
  • Background
  • Alternative Blockchain Applications
  • Blockchain and E-commerce
  • Decentralized Marketplaces
  • E-commerce Issues
  • Elementh
  • System of Goods
  • Unified Nomenclature of Goods
  • The originality of Goods
  • Accounts
  • Transactions and messages
  • Blockchain
  • DPOS Protocol
  • Reward for the Block
  • The System of Tokens
  • Decentralized Goods Data Storage
  • Case Study
  • Partners
  • Team
  • Advisors
  • Market
  • Competitors
  • Product
  • Applications
  • Currency and Issue
  • Conclusion
  • References

Introduction to Bitcoin and Existing Concepts

Background

The concept of a decentralized digital currency, as well as alternative applications, such as property registers, have existed for several decades. The anonymous electronic money protocols of the 1980s and 1990s mostly depended on a cryptographic primitive known as the Chaumian Blinding[4]. Chaumian Blinding allowed the creation of new currencies with a high degree of confidentiality, but their main protocols could not be widely spread because of their dependence on a centralized agent. In 1998, b-money by Wei Dai[5]was the first proposal to introduce the idea of creating money by solving computational tasks, as well as to offer decentralized consensus, but in this proposal there was little information about how to actually implement it. In 2005, Hal Finney introduced the concept of reusable proofs of work, a system that uses ideas from b-money along with puzzles of the difficulty computable Adam Hackcash Hashcash[6]to create a concept of crypto currency, but once again it did not become popular, relying on centralized computing as a backend. In 2009, the decentralized currency was first implemented in practice by Satoshi Nakamoto[1], it combined established primitives to confirm ownership through public key cryptography with a consensus algorithm to track who owns the coins, known as "proof of work".

Alternative Blockchain Applications

The idea to take the basic blockchain technology and apply it to other concepts also has a long history. In 2005, Nick Szabo proposed a concept of proprietary rights protection with owner authorization[7], which describes how "new advances in replicated database technology" will allow the use of a block-based system to store the registry of someone who owns some land, creating a complex structure that includes concepts such as a manor, unfavorable possession and land tax. Unfortunately, at that time there was no effective replicated database system, so the protocol was not actually implemented in practice. However, after 2009, as soon as Bitcoin's decentralized consensus was developed, a number of alternative applications quickly emerged.

Disadvantages of Bitcoin's smart contracts, first of all, the absence of the Turing-complete programming language, led to the appearance of the Ethereum blockchain, a specialized blockchain that allows to write Turing-complete smart contracts. Ethereum plans to switch to the PoS protocol in the future, but currently it is still working on the PoW protocol, which affects the speed and cost of transactions in the system. A promising alternative will be the EOS blockchain, which is currently being developed. It provides the ability to write smart contracts, works on the dPoS protocol and makes it easy to create various decentralized dApps applications based on its own blockchain.

Blockchain and E-commerce

Since the advent of blocking technology, many people have been trying to link it to commerce, mainly in two formats: the creation of decentralized marketplaces, such as OpenBazaar, Syscoin, Particl, etc .; and payment systems using crypto-currencies in stores, such as Monetha, TenX, Plutus, and others. While the second group, basically, makes a replacement for PayPal and rather refers to the financial sector, decentralized marketplaces try to combine blockchain and e-commerce.

Decentralized Marketplaces

OpenBazaar was founded in 2014 and at the moment you can find 1259 products there. It works on the Bitcoin basis using IPFS for data storage.

Syscoin is being currently tested and is based on Bitcoin too.

Particl is still being developed and at the moment it's just a wallet for storing and transferring their tokens.

All existing decentralized marketplaces inherit the shortcomings of the usual online stores and online marketplaces, i.e. lack of a standard of nomenclature, lack of information on different product in a single card and of guarantees that the seller does have the goods presented on the online storefront.

It is important to note that all decentralized marketplaces are not potential competitors, but partners of Elementh blockchain.

E-commerce Issues

Historically, the EAN / UPC code is most commonly used in commerce[8]. Originally, the American UPC system was developed, containing 12 digits for the encoding goods and it gained such popularity that European countries focused on it. However, the entire range of codes was already involved in encoding goods of the USA and Canada while the goods and firms were exclusively registered in the USA. The developers of the European encoding EAN-13 faced a serious task - to extend the range of codes and organize an independent US registration system ensuring maximum compatibility with UPC encoding. The solution was to add the thirteenth digit to the leftmost position (it is usually indicated by the Arabic digit to the left of the barcode) using 12 digital templates like in the UPC. At the same time, it was possible to maintain the backward compatibility of EAN-13 with the UPC coding - the latter became a subset of the EAN-13 coding with the first 0 digit.

UPC codes were standardized and registered by the UCC (Uniform Code Council, Inc.) in the United States and the Electronic Commerce Council of Canada (ECCC) in Canada. In 2005, these organizations merged with the European Association of EAN and formed the global standardization organization GS1[9].

This code was primarily created to automate the trade of goods produced by a great number of enterprises, so the issue of internal content was also important for standardization and regulation in order that different enterprises could not assign the same code to the product. Each newly produced type of goods was supposed to have its own unique code, and this was the main idea of the entire system. That means that if, for example, a manufacturer produces jeans, then jeans of different colors, sizes, cuts, should have different codes. Thus, if we have, for example, 10 colors, 50 models, 20 sizes, then we need 10,000 codes to encode them.

In its turn, same goods by different manufacturers, also had to have a different coding. All this was important for the automation of accounting in trade, automatic control of stock balances in warehouses, store shelves and so on. The theoretical maximum of the GS1 code is 100 billion different types of goods (11 digits). It would seem like a huge number, but theory does not always correspond to practice, and the current situation shows that during more than 30 years of the system's existence these codes have not been sufficient. This is due to their unbalanced and wasteful spending. Initially, 11 digits of code were distributed as follows:

  1. digit for the prefix;
  2. digits for the manufacturer's code;
  3. digits for the item of goods code.

That means that theoretically the system implied up to six hundred thousand enterprises (one hundred thousand per prefix), each being able to code up to one hundred thousand items of goods produced by it.

Thus, to date, situations where different goods can have the same barcodes or the same item can have different barcodes are not uncommon. The situation is being made even worse by the fact that retailers often simply print their own barcodes for a variety of goods sold by weight, thereby completely destroying the whole meaning of unique bar codes.

In addition, one should understand that a barcode identifies a product, not a specific SKU (Stock Keeping Unit). To understand the latter additional parameters such as serial number, excise and other types of unique identification of a specific SKU are needed.

Finally, barcodes are often not entered in the ERP system of wholesale companies, and each participant in the sales chain uses his own unique articles for different types of goods.

Elementh

Elementh's goal is to create an alternative protocol for the development of decentralized applications used by e-commerce, providing a standard quality nomenclature, guaranteeing ownership of a particular product and the ability to create specialized smart contracts for e-commerce. Elementh will achieve this by creating a blockchain with a built-in Turing-complete programming language, allowing everyone to write smart contracts and decentralized applications, enabling the use of unified product cards, e-commerce transactions and the transfer of ownership.

System of Goods

Along with the system of tokens, Elementh has a system of goods, which can also be used in a large number of applications, such as tracking the movement of a particular item from its creation to the current owner, tracking original goods and detecting counterfeit goods. Unlike the system of tokens, the system of goods also provides for the ability to "issue" a particular product at a particular address, indicating all possible item's data (such as name, manufacturer, bar code, etc.). And if identical goods are already present in the blockchain, the issuer will receive a message about it, and he will have the opportunity to indicate how many items of goods he wants to "issue".

If an item has a serial number, it is possible to specify it when the transfer operation is being performed. To provide protection against data forging, only the hash of the serial number is fixed in the system, therefore only the person who knows the initial number has the ability to make a valid transaction. In the absence of a serial number at the moment of "issuing" goods, the system generates it randomly and the holder is able to use it to identify a particular item of goods by printing out the QR code on the package, writing it in an RFID tag or in any other convenient way.

Unified Nomenclature of Goods

Each supplier / distributor / seller in the world has its own data format for goods, and, more importantly, its own nomenclature. Their number is huge and growing every day. For example, let's have a look at the search output in google.shopping for "iphone 7 256gb red":


As you can see, each store has a different name for the product, while the search results also present another iPhone model, followed by the iPhone 7 256gb of other colors and so on. An obvious solution to this problem is the creation of a unified nomenclature of goods that will allow users to see offers on the product of interest on one merchandise card and stores to choose suppliers that are most beneficial to them.

One of the key features of Elementh is the availability of a unified nomenclature. To ensure that the merchandise cards are as complete and accurate as possible, and to reduce the likelihood of creating duplicate cards, the cost of creating and using the card will be different. To create a merchandise card a participant will have to pay, for example, 1 EEE (the price will be set by voting of delegates). At the moment when the owner adds the item to the system, he is offered to use an existing card or create a new one. The use of an existing card costs 100 times less than the creation of a new one (for example, 0,01 EEE). The cardholder receives a reward for each owner of goods that uses his card, as well as for making a transaction using this card. Any participant in the system can supplement information in existing cards, and the cardholder can accept or reject the proposed changes.

The originality of Goods

Goods in the system exist in a single copy and if an item with the same serial number is added to the system, any dApp can notify the buyer that the origin of the goods is unknown. If the chain of ownership comes from the manufacturer, the confirmation of the originality of the goods will be throughout the entire network.

Accounts

Account is one of the basic objects in Elementh, it is used as identity of participants of the network. Each account has:

  • account balance of the internal cryptocurrency EEE;
  • information about ownership of goods.

All transactions in the blockchain is made by accounts.

Transactions and messages

Any action in the Elementh blockchain is called transaction. The most simple transactions is a transfer of EEE value between accounts and a define ownership for goods. Transaction can include structured message for receiver. Accounts may define scripts to handle messages when they are received. The combination of messages and automated scripts is a smart contract subsystem in Elementh.

Blockchain

Transactions in the chain of blocks must be safe, unambiguous and irreversible, and be carried out as quickly as possible to facilitate the reliability and decentralization of the system. In practice, the difficulties arise in two different aspects of this process: selecting a unique node for the production of the block and making the record irreversible.

DPOS Protocol

According to the concept of decentralized autonomous DAC companies, decentralization means that each shareholder has an influence proportional to the number of his shares and that the decision taken by voting of 51% of shareholders is irreversible and mandatory. The challenge is how to achieve 51% of the approving threshold in a timely and efficient manner.

To achieve this goal, each shareholder can delegate his right to vote to a delegate. 100 delegate with the largest number of votes delegated generate blocks according to a certain schedule. Each delegate is allocated a time frame for the production of the block. If he does not produce a block, then their turn is skipped, and the next delegate produces a block according to the list. All delegates receive a payment equal to 10% of the average size of the transaction commission. If the middle block contains a fee of 100 shares, the delegate will receive 1 share as payment.

It is possible that a delay in the network can lead to the fact that some delegates will not be able to generate their block in a timely manner, and this will lead to a split of the chain of blocks. However, in practice this is unlikely to happen, because a delegate can establish direct connections with other delegates preceding and following him in the chain. With this model, new blocks can be generated every 10-30 seconds and under normal network conditions, the splits of the chain of blocks are unlikely or can be corrected within a few minutes.

Reward for the Block

The blockchain that will use the Elementh software will be awarded with new tokens of the block manufacturer every time the unit is created. The Elementh software can be configured in such a way as to ensure that payment of the block manufacturers is restricted so that the total annual increase in the number of tokens does not exceed 5%.

The System of Tokens

The system of tokens can be used in a huge number of applications from binding to assets such as USD or gold to company shares. The system of tokens is easy to implement in the Elementh blockchain. In order to better understand what a token system is, you can imagine a database with only one operation: take X units from A and transfer them to B, under the following conditions, 1) A has at least X units before the transaction is made and 2) the transaction is confirmed by A. What is necessary to implement this system is the implementation of a smart contract with the above logic.

Decentralized Goods Data Storage

To store goods data, such as specifications, photos, EAN codes, serial numbers, and others, Elementh uses the IPFS protocol. IPFS (the InterPlanetary File System) is a content-addressable, peer-to-peer, hypermedia communication protocol. IPFS allows you to create fully distributed applications. It is aimed at making the World Wide Web faster, safer, and more open.

IPFS is a peer-to-peer distributed file system that connects all computing devices to a single file system. In a sense IPFS is similar to the World Wide Web. IPFS can be represented as a single bittorrent-swarm, which exchanges files of a single Git-repository[10]. IPFS is becoming a new important subsystem of the World Wide Web. Constructed correctly, it is able to complement or completely replace HTTP. It can also supplement or replace other systems.

Case Study

Jack, the owner of a small store, was told about the Elementh blockchain and the opportunities it provides. Jack had not sold anything on the Internet before. Having learned about the new possibilities, he decided that it was time to try selling their shoes via the Elementh blockchain, using special applications for sellers. Setting up a store turned out to be quite simple and took several minutes.