Blockchain technology can revolutionize industries that are as unusual as they are essential – from the flow of goods in global freight traffic to the diamond supply chain.
Real hype has erupted around cryptocurrencies such as Bitcoin and new virtual clones on specialized exchanges. There are half a dozen obscure startups with initial coin offering (ICO) plans for every venture capitalist. This is reminiscent of a modern variant of the Amsterdam Tulip Crisis.
In all the din, the underlying blockchain technology is completely lost. The seemingly trivial applications of the digital ledger of crypto transactions could change our lives the most. We will not find these applications on any stock exchange, and they will not make anyone rich overnight. But they could enable much-needed change for some industries as unsexy as they are vital.
There are, for example, new transfer channels for real estate titles, container management in freight traffic, determining the origin of conflict minerals, or secure supply chains for our food. Much more is conceivable. So what are we talking about? Essentially, blockchain is a secure decentralized database structure that spans multiple computers, each with access to the same record of all transactions. Manipulations of individual blocks by individual participants would therefore be pointless. “Crypto” stands for the protocols that allow participants in a network to exchange information securely – for example, to transfer assets – and which makes the block of a transaction immutable once it is completed.
Fraud Protected Space
Blockchain can transform these industries for three reasons: First, the technology is well suited for transactions that require trust and permanent verification. On the other hand, blockchain is based on the cooperation of many different parties. Where it is operated with open software, one avoids the problem of the logic of collective action – when individuals act cautiously and not for the benefit of the group – in contrast to a single company that would introduce a new standard for its use.
The third reason is the hype mentioned: The excitement surrounding cryptos gives blockchain the visibility it needs to become attractive to developers and users. The buzzword can prompt companies to invest heavily in modernizing administrative and logistics processes instead of continuing to act according to the motto “as long as nothing’s broken, I don’t need to fix anything.”
It’s a bit like the buzzword cloud. Some said the cloud was nothing more than someone else’s computer. However, many industries drew from these new processes, new business models for services, disruptive startups emerged, new departments with ecosystems of their technologies developed in companies. Blockchain has comparable potential.
Let’s take the logistics industry. Of all the goods that retailer sells, 1.1 million are already on a blockchain: from soup chicken to almond milk. The technology traces the supply chain from the manufacturer to the store shelf. The world’s largest container shipping company, Maersk, also uses IBM technology to track the shipment of goods, which, including customs clearance, is becoming faster and easier. While these projects still represent a fraction of the follow-up these companies face, they tend to be increasing in these organizations and their industries.
Whether blockchain will ultimately prevail as technology or movement and overcome hurdles that generations of software engineers have failed to overcome is not yet clear. It is skeptical that blockchain is growing step by step and not sweeping away like a revolution. Sometimes it’s just a marketing tag for systems that differ little from traditional databases. But where it works, the potential of the technology that brings fundamental advances can be redeemed – just as new standards for data transmission in networks led to the Internet. In concrete terms, it could become the basis of everyday processes: how we choose, who we connect with online, what we buy.