Just as online shopping has disrupted the traditional retail arena, blockchain technology is promising to do the same in some of the world’s biggest industries – and one of these is freight and logistics. ‘Blockchain disruption’ is set to be a hot topic in our industry in 2018. That’s why we’re keeping our eye on it – as you should too.
Here’s the lowdown on one of the biggest developments to hit the digital world.
Let’s start with something you’ve probably heard of…
Bitcoin – the biggest of an exploding arena of virtual or cryptocurrencies. Bitcoin value recently soared from $900 to $7,000+ in just one year, causing the world to sit up and listen.
A cryptocurrency is an electronic cash system which allows you to pay for things online. It exists in the network only, having no physical form (ie, no banknotes, coin, gold bars etc).
It’s the way a cryptocurrency is set up and managed which is the interesting thing. Cryptocurrency is entries in a database, which can’t be changed without fulfilling very specific conditions. That’s broadly how traditional banks work, but they use a ‘central hub’ approach. With cryptocurrency, instead of a bank managing transactions through their centralised system, and dictating terms, the management is decentralised and the transactions take place across a network of computers, which, critically, belong to no single entity. That decentralised, secure database – made up of building blocks which power these new cryptocurrencies – is the blockchain.
Still with us?
Bitcoin is the first and most popular cryptocurrency, but get ready to hear a host of new names in this field – Ethereum, Ripple, Litecoin, NEO, Tether to name but a few – in fact there are already over 1,000 cryptocurrencies on the internet.
It’s worth saying, cryptocurrency still has a way to go to achieve the stability of traditional currencies. It’s volatile at the moment and because of its anonymous nature, it has developed a somewhat shady reputation for being the currency of cybercryminals and dealers in dodgy stuff. But absolutely don’t write it off. It will mature, and quickly too.
So… to the blocks and chains
You can think of blockchain as a digital ledger of transaction, a shared or ‘distributed’ database, not stored in any one location. It’s the opposite of putting all your cash under the mattress – or even in the bank. Verifications are done automatically – securely, and instantly – across the network, with none of the vulnerabilities associated with the traditional centralised approach.
A block is a segment of the ledger, a record of transactions. Once it’s full, it augments the main database and a new block is generated. Thus the database grows, block by block. All the blocks are connected in a chain, across the network. The way blockchain technology is designed, the database is constantly updated and transactions are tamper-proof and cannot be deleted. The blockchain database is a distributed service, shared by all the nodes in the network. As each of the blocks contains a full copy of the database, there’s a level of robustness that doesn’t exist in traditional banking set-ups.
Why should you care about all this?
Blockchains, which use what’s known as ‘distributed ledger technology’ (DLT), are beginning to show up in different commercial applications. Beyond the verification of monetary (cryptocurrency) transactions, it is possible to insert documents into the blockchain, and create an indelible, audit-trailed end-to-end record.
So now we’re talking not just currency transactions, but the processing of documentation. Do you begin to see the applications in global freight forwarding and logistics?
Blockchain for the supply chain
Freight forwarding and logistics is a complex business, dependent on documentation. Consignments already criss-cross the globe in a way which bears many of the characteristics of the blockchain: via a network of routes, through hubs or nodes, passing from one entity to another – manufacturers, shippers, carriers, distributors and retailers.
Until now, the system has relied on hand-offs between the various entities. That’s because the technology hasn’t existed to effectively co-ordinate that end-to-end journey automatically. Blockchain offers the solution. In fact, for complex processes such as order fulfilment and delivery across the globe, it could be the perfect solution. It has the potential to manage not just the journey, but all the documentation, contracts and compliances, as well as every kind of challenge along the way, including addressing fraud, theft and those too-familiar communication issues.
One blockchain platform already establishing a name for itself in freight and logistics is ShipChain. Systems like this are set to revolutionise the way the global supply chain works.
In freight and logistics, blockchain technology has the potential to deliver a host of benefits, including enabling a unified tracking process, driving efficiencies, reducing theft, creating transparency, increasing competitiveness, and opening the door to commercial opportunity for the smaller carrier businesses.
That’s why you need to be keeping an eye on blockchain.
At CCL, we always have our eye on the future. We’re making it our business to stay in touch with developments in blockchain technology, particularly as it relates to the freight and logistics sector. We’ll be aiming to keep our clients up-to-speed on the way blockchain is being applied, and the opportunities this presents as this game-changing technology matures.