Governing the Blockchain

Abstract

The aviation industry is poised for substantial expansion, with forecasts predicting that passenger demand will double by the mid-2030s. This increase in demand presents both opportunities and challenges for various stakeholders within the industry. One sector anticipated to encounter difficulties is Maintenance, Repair, and Overhaul (MRO), particularly regarding data sharing within the supply chain for part tracking. Effective part tracking is essential as it entails crucial data that confirms the 'airworthiness' of parts, demonstrating their safety for operation. Currently, the absence of comprehensive inter-organizational maintenance record software impedes accurate tracking of aircraft parts. This lack leads to increased maintenance and communication costs for all stakeholders involved, as each party must independently verify parts history, often resulting in redundant work and additional pressure on profit margins.

With profit margins already under strain, aviation companies must innovate. One promising solution is blockchain technology, which has the potential to serve as an inter-organizational maintenance record system, facilitating the tracking and tracing of part histories and offering significant cost reductions. However, effective lifecycle tracking of parts requires a collective effort since multiple entities are involved at different stages of the lifecycle, making the formation of a data-sharing consortium necessary. The creation of such a consortium is further incentivized by the implementation of the Corporate Sustainability Reporting Directive (CSRD), which requires companies to disclose all activities related to both downstream and upstream value chains and assess their sustainability impacts. Despite the potential for cost reduction, increased efficiency in inventory management, and legal mandates, companies remain hesitant to join a data-sharing blockchain consortium. Research into similar industry data-sharing consortia indicates that one persistent barrier to success is the design of governance mechanisms within the consortium. Although extensive research on governance mechanisms exists, stakeholder participation in these data-sharing blockchain consortia remains low.

The objective of this research is to develop governance mechanisms that enhance stakeholder participation by taking into account stakeholder values. To achieve this, a value-focused thinking methodology is utilized, ensuring that stakeholder values are integral to the governance design process rather than relying on arbitrary arrangements. In addition to conducting a literature review to discover values, contact was established with the Independent Data Consortium for Aviation (IDCA). IDCA is a global consortium of leading aviation companies at all levels of the industry coming together to develop the foundation for allowing data to be shared in a non-competitive manner. Its objective is to create a more efficient marketplace where both waste and the time required to get to a common solution are minimized. A combination of participatory observations within the part-tracking work group of IDCA and interviews with high-level executives from the aviation industry is conducted to discover stakeholder values. Three contexts, 21 values and 11 sub-values, were identified for joining a data-sharing blockchain consortium. The three contexts are the data that will be shared and received, the stakeholders that will join the consortium, and the blockchain platform that will be used.

Adopting such a broad perspective on values has necessitated the prioritization of these values to create a clear roadmap for the governance design process. This approach ensures that the final governance designs are not only comprehensive but also practical, enabling effective and sustainable blockchain implementation for part tracking in the aviation industry. To obtain this ranking, a survey employing the Bayesian Best-Worst Method (BWM) was used to systematically analyse stakeholder values where 12 aviation stakeholders pertaining to the eight different stakeholder groups encompassing the full life-cycle of a part were received.

Survey takers ranked the data context as the most important, underscoring the value companies place on data as their primary resource, which was followed by stakeholder context. On the other hand, the blockchain platform was ranked the lowest in importance, which was also justified by the credal ranking calculations indicating it is seen merely as a tool for data sharing. Within the data context, the values of integrity, access control, confidentiality, and ownership emerged not only as the highest priorities but also as the most important values overall. This underscores the critical importance stakeholders place on data. These were followed by the values of trust, legitimacy, neutrality, compliance, and benefit equality within the stakeholder context. Completing the top ten, security within the blockchain context was followed by adaptability and tangibility.

Once these stakeholder values are identified, governance designs can be proposed to ensure their fulfilment. A benchmarking study was conducted on existing governance research to understand its definition, scope, and blockchain data-sharing initiatives in other industries. The literature review revealed that no unified definition or established mechanisms for blockchain governance currently exist. Therefore, the researcher established the following definition: "Consortium blockchain governance refers to the process and mechanisms that ensure the direction, control, and coordination of a blockchain platform to which stakeholders jointly contribute."

Given that consortium blockchain governance is a broad term, it is essential to keep its definition straightforward while supplementing it with specific mechanisms. To supplement this definition, a comprehensive table was developed that combines all previously identified mechanisms.Finally, five real-world blockchain consortia were investigated to understand how these mechanisms are designed and implemented in projects that have undergone piloting or advanced further.

The research was finalized by linking the eight most important stakeholders' values to governance mechanisms and, subsequently, governance designs. One example is Executive neutrality, which concerns the impartiality of the entity controlling a platform's direction. Stakeholders also, during interviews, have stated from past experiences that the executive body might not remain unbiased, leading to decisions that favour specific parties. Several governance mechanisms can ensure executive neutrality, including legal compliance, where decisions are based on industry laws and standards. However, due to the underdevelopment of data-sharing policies, industry standards, policies cannot yet serve as reliable benchmarks. Another approach is relying on ethical responsibilities, assuming all participants will adhere to principles of the greater good, though this might be overly optimistic in a profit-driven ecosystem. Since this value primarily revolves around the decisions made by the governing body, decision rights are identified as the most suitable governance mechanism and governance designs can be established.

Based on similar projects like VeChainThor and PharmaLedger, four governance designs were considered: Ecosystem members-led, Service Provider-led, Foundation-led, Independently Governed, and Foundation-led Ecosystem Governed. It was decided, based on the stakeholder value, that the foundation-led ecosystem-governed model was the most suitable, where a non-profit foundation directs the network's operations while being accountable to a board comprising ecosystem stakeholders. This model ensures stakeholder involvement and collective decision-making, maintaining executive neutrality. Finally, it is acknowledged that design inherently involves trade-offs. Therefore, selecting a particular design to address one stakeholder’s value can have ramifications on other values. Because of that, the design decision on other values is investigated. One potential downside is its impact on growth, as involving more stakeholders in decision-making can be challenging and may lead to resistance to adding new entities, potentially hindering growth. This method was employed for the other seven most important values that were identified through the BWM. However, it is important to note that this recommendation is based on the values identified through stakeholder interviews. If stakeholders prefer not to participate actively in the execution of governance duties, then a foundation-led, independently governed model would be more suitable. In this model, an independent non-profit entity would take on the responsibility of directing and managing the network, creating technology roadmaps, and providing necessary services, with limited direct involvement from the stakeholders.


In conclusion, to address the primary research objective of designing governance mechanisms that enhance participation in blockchain-based aviation part-tracking consortia, it can be stated that \textbf{there is no universally optimal governance mechanism design that enhances stakeholder participation; rather, this varies according to the values held by stakeholders within their specific context. As these values change depending on the context, it is recommended that decision-makers begin by investigating stakeholder values.} A value-focused thinking approach constitutes the primary contribution of this research, as it introduces a novel method of blockchain governance that prioritizes stakeholder values. By integrating these values into governance designs, a mutual understanding among consortium members is established, promoting more effective collaboration and decision-making. Furthermore, this research addresses a literature gap within the aviation industry, where blockchain consortiums have not been extensively examined.


For the initial phase of implementation, it is advisable to engage regulators to establish credibility, thereby fostering increased participation. Once a stable level of participation is achieved, the focus can then shift to examining the values of the stakeholders involved. Future research could assess the applicability of identified values and governance mechanisms in contexts beyond the aviation industry. Similar studies across various industries are important to ensure external validity. Additionally, further research could be conducted into how different mechanisms besides the one suggested in this research could fulfil stakeholder values and investigate the interaction among those mechanisms.