Efficient Traceability Systems with Smart Contracts: Balancing On-Chain and Off-Chain Data Storage for Enhanced Scalability and Privacy

Abstract

The growing importance of traceability in supply chains requires robust, transparent, and efficient systems to ensure the integrity and authenticity of product journeys. This paper presents a comprehensive characterisation and data model for a generic blockchain-based traceability system, highlighting its implementation using smart contracts on Ethereum-compatible networks, as the Ethereum Virtual Machine (EVM), with its pioneering implementation of smart contracts and its extensive ecosystem; it provides a robust environment for developing decentralised applications. We discuss the advantages of using blockchain technology to notarise traceability activities, ensuring immutability and transparency by exploring two main scenarios, namely one where hash keys (i.e, cryptographic digests) are stored on-chain while detailed data remain off-chain, and another where all traceability data are fully stored on-chain. Each approach is evaluated for its impact on scalability, privacy, storage efficiency, and operational costs. The hash key method offers significant advantages in reducing blockchain storage costs, enhancing privacy, and maintaining data integrity, but it depends on reliable off-chain storage. Conversely, the full on-chain approach guarantees data immutability but at a higher cost and lower scalability. By combining these strategies, a balanced solution can be achieved, leveraging the strengths of both methods to provide a reliable, efficient, and secure blockchain-based traceability system, which is illustrated with a practical implementation to support traceability in the timber sector in Galicia, Spain. This paper aims to provide valuable insights for researchers and practitioners looking to implement or enhance traceability systems using blockchain technology, demonstrating how smart contracts can be effectively utilised to meet the demanding requirements of modern supply chains.