Skip to content

The benefits of NFTs for Configuration Management

Time for a different topic than the CM Baseline, but definitely a topic worth exploring when trying to understand the future of CM. But before diving into Non-Fungible Tokens (NFTs), it is required to know what a blockchain is.
“A blockchain is a growing list of records, called blocks, that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree, where data nodes are represented by leafs). The timestamp proves that the transaction data existed when the block was published to get into its hash. As blocks each contain information about the block previous to it, they form a chain, with each additional block reinforcing the ones before it. Therefore, blockchains are resistant to modification of their data because once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.”
Source: Wikipedia
 
There are different types of blockchain. The most well-known type is proof of work, which is the basis for most cryptocurrencies like Bitcoin. Another type that is gaining in popularity is proof of stake. To learn more about the difference between Proof of Work and Proof of Stake, check out this youtube video by BlockGeeks.com
 
 

What are NFTs?

An NFT is a Non Fungible Token. But what is it? According to Wikipedia:
 
“A non-fungible token is a financial security consisting of digital data stored in a blockchain, a form of distributed ledger. The ownership of an NFT is recorded in the blockchain, and can be transferred by the owner, allowing NFTs to be sold and traded. NFTs typically contain references to digital files such as photos, videos, and audio. Because NFTs are uniquely identifiable, they differ from cryptocurrencies, which are fungible. The market value of an NFT is associated with the digital file it references.”
Source: 
Wikipedia
So a Bitcoin is fungible because it is not uniquely identified. In other words, it is not ‘serialized’. But an NFT is uniquely identified (serialized, if you will). So if you trade one Bitcoin for another, basically nothing changes. But something will have changed when you exchange an NFT that represents a pokemon collectors card for the same card but a different serial number (a different NFT). Initially, you had a card with serial number 123, and now you have the same card but with serial number 456.
 
The blockchain for bitcoin transactions would state Martijn buys 1 bitcoin on 1/Jan/2022 (Block 0) and on 1/Mar/2022 (Block 1), Martijn buys 19 bitcoins, and on 1/Apr/2022, Martijn sells 5 Bitcoins (Block 2).
 
Whereas a ledger for NFTs would state that you own the, in this case, the Pikachu Pokemon Cards (as shown below). In Block 0, it says that John minted the Pikachu Pokemon Card with token id 123 and that it was sold to Martijn, who now owns the Pikachu Pokemon Card with unique id 123. When Martijn sells the Pikachu Pokemon card with token id 123 in Block 1 to Jane, the card is owned by Jane. When Jane sells their card to Kate, Block 2 states that Kate now owns the Pikachu Pokemon Card with id 123.
 

How is this relevant for CM?

Now imagine your company starts working with design suppliers and these suppliers sell designs as NFTs. Or you buy software that you embed in your product, and the license uses NFTs.

In a sense, the NFTs become referenced in the product’s configuration. In the first example, the NFT is part of the design documentation. In contrast, the NFT of the software license, as mentioned in the second example, belongs to a specific instance. The NFTs blockchain will ensure the integrity and traceability of the product’s design documentation or software licenses.

Another way it can impact CM is when NFTs are used to record maintenance data of an asset. For example, Alfa Romeo announced on 8 February 2022 that it will introduce NFTs in its new subcompact hybrid SUV Tonale to track and store maintenance records. Increasing transparency on the maintenance done on the car. However, a car has a VIN, so updating maintenance records and tying them to the car is not hard. The ownership is linked to the VIN. Especially if the blockchain is private, this leads to a disadvantage for the customer because it forces the customer to go to the dealer for maintenance. Other garages will not be able to update the maintenance records this way. Customers can opt-out of using the NFT, according to Alfa Romeo.

There are examples where NFTs might be more useful, as the SITA (a  specialist in air transport communications and information technology) proposed as a founding member of the MRO Blockchain Alliance. In a white paper, SITA proposes a digital passport for serialized parts to enable full traceability across companies involved in aircraft maintenance. Instead of each company having only their view on the serialized part, essential information about its usage and condition is recorded in a blockchain (the digital passport). While MRO Blockchain Alliance focuses on aircraft maintenance, the same is valid in different industries like automotive or defense or any other industry where Maintenance, Repair and Overhaul are applicable. Even for consumer products, this can become very relevant. Imagine you need to repair your Macbook Pro, and you want to go to your local repair shop. How do you know the parts used are original Apple spare parts? With a digital passport, this becomes easier to verify. 

From a CM perspective, this will mainly impact Status Accounting and Auditing.  Status accounting will have to deal with blockchain technology; you are no longer updating the in-house records; you are updating the digital passport that is part of the blockchain, which has a lot of different stakeholders. Functional and Physical Audits will be easier to do based on a digital passport. The benefit is that the blockchain improves the transparency and traceability of serialized parts. It removes the gap in traceability and reduces mistakes or even tampering with parts. There will be a digital passport that explains its usage, any repairs, and condition and refers to the warranty and certificates of the part. All essential information is available for all stakeholders. If you want to buy used parts or if you are the owner of an asset that will be repaired with used parts. It promotes trust throughout the supply chain. But also valuable for stakeholders in the supply chain that want to sell an upgrade, as they exactly know what the status quo is and can verify what upgrades are possible or even tailor an upgrade to a specific asset. 

Conclusion

Using NFTs for products/parts is still in its early days, so there is still time. However, technology moves fast, and there are already marketplaces for NFTs like OpenSea or games using NFTs. It is a matter of time before you will be asked how to deal with NFTs for status accounting. And perhaps other use cases exist that have not yet been discussed. Feel free to share. 
Header Photo by olieman.eth on Unsplash

Leave a Reply

Your email address will not be published.

I accept the Privacy Policy

This site uses Akismet to reduce spam. Learn how your comment data is processed.