GRC Viewpoint

Supplying the US Military with Crypto

How Decentralized Finance Systems can Optimize Military Logistics

Military Logistics and Supply

Each branch of the US military provides transportation and supply through commands that serve their associated branch; the US Navy’s command is named the Naval Supply Systems Command (NAVSUP) and is allocated $6.6 billion annually to handle $43 billion in inventory. In order to handle assets securely and effectively the command must be able to handle the following objectives:

  • Manage Assets
  • Process Customer Orders
  • Coordinate Funding
  • Schedule Management
  • Contract for Repair Services
  • Validate Requirements and Policy Expectations
  • Procurement Planning
  • Solicitation of Offers
  • Contractor Management
  • Develop Allowances based on Normal or Contingency Operations

These functions require coordination and transactions between multiple stakeholders and departments. The US Military is facing an issue in supply and repair of its fleet that can be optimized by Distributed Ledger Technology (DLT) and Smart Bills of Lading(SB/L).

Distributed Ledger Technology (DLT)

The main aspect of DLTs that implementers attempt to take advantage of is the ability to allow simultaneous access, validation, and record updating in an immutable manner across a network that’s spread across multiple locations. In today’s militaries we can recognize that most of the procurement and supplying of arms, food, and resources to the warfighter and the supporting actors is done through a series of microtransactions between the supplying and receiving agents.

As the allocation of resources is dispensed across branches, commands, units, platforms, soldiers, and contractors they are batched together in a series of microtransactions between the layers of structure within the organization. For example, in 2022 the DoD allocated 1.1 Trillion dollars to its budget; these 1.1 trillion dollars are distributed across 26 branches of the military. Within these branches there are further layers of structure that will be allocated a fraction of the branch’s total resources. These delegation of resources are represented in dollars within a transaction format for oversight of appropriation. These allocations are not simple and come at a cost; we can recognize a financial burden has taken place in simply distributing funds.

Permissioned Network

The US Military has 1.4 million enlisted; maintaining secure access logistics, finances, and supply across that many stakeholders, as well as others not directly enlisted is nearly impossible and highlights the need for a distributed ledger. Permissioned ledgers hold advantages and disadvantages that are separate and distinct from those of permissionless ledgers. One disadvantage is the loss of centralization; which for an entity such as the military, is a feature not a bug. The key features of a permissioned ledger apply well to a military supply chain use case and are the following:

  • Non-anonymous Stakeholders
  • No single authority
  • Controlled transparency only within network
  • Incremental but limited decentralization
  • Stronger Information Privacy

Smart Bills of Lading (SB/L)

Bills of Lading (B/L) are forms that detail the amount, types, and destination of goods within a shipment; they serve as receipts, contracts, and documents of ownership. International fraud is an issue with traditional B/L, as they arrive after the cargo and can be modified with an inaccurate description or forged paper documentation.

If instead a Smart B/L is stored and transmitted on a distributed ledger the transparency, speed, and legitimacy of such transactions will be higher; more effectively supplying the warfighter and maintaining a valid common operational picture of logistics. The B/L could hold all the itemized requirements on the ledger, but may need to make use of non-fungible tokens, or NFTs, to represent ownership of the items within the B/L. These B/L would be forms of Smart Contracts, which are initiated on public ledgers to securely transfer cryptocurrency and NFTs representing physical assets across parties. The contract would describe the terms of ownership and transaction of the supply.


  • The US military’s supply chains are difficult and complex systems that are currently not functioning as optimally as desired.
  • The US Military’s current state of supply chains effectively runs on a completely transactional format from initial DoD budgeting to distribution of line items
  • Using a permissioned network would induce centralization but maintain security within the ledger
  • Smart Bills of Lading and NFTs will be used to transfer ownership of supply

A completely decentralized economy does not function without a respect for property shared by all members. When property rights are ignored the weakest individuals are taken advantage of. When this occurs a funding effort will be supported by the citizens for a military to maintain said rights. These protections would supposedly provide the ability for commerce to flourish and for individuals to gain wealth. We cannot be sure what the future of Decentralized Finance holds, but we can be sure that not every network will be completely decentralized, similar to how economies of scale functioned yesterday and function today. 

By Kourosh Khoylou, Founder at ZAYUK LLC

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