Blockchain – A look at future technologies

Some of the shine seems to have come off one of the top next-generation technologies of recent years: blockchain. Is this simply because of disillusionment among those who have been speculating with the cryptocurrency Bitcoin? Perhaps. But the world-renowned digital currency is just one use case for what is still a remarkable technology.

Blockchain is a particular form of distributed ledger technology (DLT), a generic term that describes various forms of database structures without a central administrator. Blockchain and Bitcoin were both invented by a certain Satoshi Nakamoto, who published the famous Bitcoin white paper in November 2008. But this name is only a pseudonym. To this day, the person or group of people behind Satoshi Nakamoto remains a mystery.

A blockchain is an IT concept that ensures the trustworthy exchange of information, transactions, and values. The technology is built on hash functions, which act as a cryptographic procedure, and decentralized validation and storage nodes. This means data is distributed redundantly—in other words, many copies of it are stored in different places—among the participants of a blockchain network, with no need to store data centrally. The name blockchain comes from the technology’s underlying structure of data blocks that are chained together using cryptographic mechanisms.

The hashing procedure then ensures that once data blocks have been formed, they can’t subsequently be changed without this being noticed immediately by all parties involved in the blockchain. The data chain could also be described as a set of transaction documentation that is strung together chronologically. The data is stored redundantly on as many nodes of a blockchain as possible, all connected via the internet. These nodes create, store, and verify the blocks of a blockchain. Different proof procedures (e.g., consensus among the majority of nodes in a blockchain) govern whether a new block of data may be written to the blockchain. This ecosystem does not require a central database or central administration.       

Blockchain technologies have an attractively simple concept. But besides Bitcoin, the Ethereum platform, and some other smaller solutions outside the financial sector, no really big blockchain-based innovations have emerged so far—including in logistics. Why is that? Perhaps because even with their decentralized blockchain structure, in many cases such solutions need a central driver and coordinator—not from a technical perspective, but from an organizational one? And because it’s hard to find someone who fits the bill, as they have to be neutral and free of vested interests so as not to scare off participants in this blockchain ecosystem?

Potential for logistics

Despite these as yet unresolved fundamental problems, there are a number of interesting potential applications for distributed ledger technologies, especially for documents (currently often still in paper form) containing sensitive information or even (ownership) claims relating to transported goods. It would be a big step forward for the digitalization of logistics if such documents were managed autonomously and had a traceable history, independent of the actions of third parties. This could well become a reality for things like dangerous goods accompanying documents. 

The aim would be to digitalize the cross-company exchange of information between dangerous goods stakeholders. One way to do this is through a blockchain-based electronic transport document that is updated and documented stage by stage at each loading and unloading via interaction with the blockchain. This is currently the subject of intensive research. Dachser is also supporting various activities together with customers and partners, in particular with the European Blockchain Institute, which is currently being established, and with Fraunhofer IML. Together, the three organizations are investigating the feasibility of such use cases and build prototypes.

To detect as many relevant legal considerations as possible, industry and academia must first demonstrate the feasibility of the idea and identify necessary changes. And to avoid a situation where individual companies subsequently create isolated solutions, a joint approach should be taken involving several companies and industry associations as well as policymakers, authorities, and organizations with a safety focus such as the police and fire departments. Incidentally, thinking far ahead, the latter also stand to benefit from a blockchain-based dangerous goods ecosystem. Should a dangerous situation occur, the police and fire departments could quickly and easily access key information on the dangerous goods transport involved as well as up-to-date status data on the shipments it was carrying. Armed with this information, they could then initiate even more targeted action, since they would know which dangerous goods were still on board the vehicle and which had already been unloaded. This ought to further increase safety in the transport chain.

There is also potential to use blockchain for customs documents or delivery notes. In sea freight, blockchain-based bills of lading could provide a transparent and tamper-proof event history to the actors within an ecosystem, enabling not only connectivity for physical objects (shipments) but also the transfer of values and original documents.

From an industry and company perspective, the most important thing is to solve the governance problem. This primarily refers to cross-enterprise decision rights and responsibilities that have a significant impact on incentives to participate in a blockchain-based ecosystem. More work is needed here to determine the best way forward and explore how to address this issue. One possible solution could be a standalone, neutral legal entity that hosts an ecosystem comprising both business and regulatory actors.

Blockchain technology remains a relevant future technology for the digitalization of logistics. However, it should not be implemented as an end in itself. Unfortunately, this is something many actors forget whenever a new project is launched. At the end of the day, blockchain-based innovation must add significant value over existing solutions. And most importantly, the challenges posed by the unfamiliar blockchain-based enterprise ecosystem should not be overlooked. After all, blockchain isn’t just a technology—it’s a new way of collaborating in the supply chain. And this needs to be learned, tested, and proven in practice.