How Cryptocurrency is killing the application of blockchain technology

Misinformation leads to fear.

I have worked in freight forwarding for 20 years, and for the last 5 years I have focused purely on how new technology can be applied to the logistics sector.   In this role I have seen and applied many technologies and process improvements within our group of companies, blockchain being one of them. 

When we think about blockchain technology most people automatically think of cryptocurrency, which then send them down a rabbit hole of volatile markets, dark web transactions, hackers and ransomware. These things are not in dispute, but they are not blockchain, they are simply an application of the blockchain technology. 

So, let’s take a step back, what is blockchain? Put simply, it is the keeper of records that can be updated by multiple sources, each time stamped, each connected, each combining to form an immutable pool of data relevant to a transaction. These transactions are written to clusters of computers, each node (computer) in the cluster contains a block of data (BLOCK). These blocks of data are secured use cryptography (CHAIN). Together these blocks of data connected and encrypted via cryptography form a BLOCK-CHAIN.

Why is this relevant to supply chain? Well, we have trust issues. Our entire industry and processes are built around a very simple problem, we don’t trust anyone. Original bills of lading, letters of credit, indemnity letters, and Telex Releases are all ways of one party protecting themselves against another party because there is no trust. 

If blockchain (with other new technologies) is applied, we could see possible solutions where trust is no longer relevant but simply a side effect of the solution. Imagine a supply chain where the buyer and seller agree upon terms and this is written to a blockchain. The buyer agrees to pay once goods are received at their warehouse in Melbourne, Australia. Once agreed these terms are immutable (unable to be changed). The seller is compelled to attach an IoT enabled device to the goods as part of the agreement, so tracking can be feed back to the blockchain to verify goods are moving. 

The Buyer can now verify goods in transit and the route they are taking. If the are tampered with or diverted more information is written to the chain. We can start to build a story of where the goods have been and how they got there. 

The Seller can verify when the goods arrived at the buyer’s warehouse and payment can be enabled. Verifying the location of the goods could up the blockchain which could push an automatic payment directly to the seller. The Payment status would be written to the transaction closing out the transaction. 

This is just one simple use case where the seller no longer needs to hold the original bills of lading at origin for fear they will not be paid by the buyer at destination. The seller can trust they will know when the goods arrive at warehouse and trust that the payment will be made. Imagine the reduces in demurrage for the importers around the world.. 

Blockchain technology does have a significant role to play in the new world but it will not be the golden hammer either. Blockchain technology combined with things like IoT, and machine learning could change our mind set though. We may not need to trust our partners as much as we trust the technology and the immutable records it holds. 

— Brendan Borg, Group CIO