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Photo by Tom Fisk
Many industries are experiencing rapid growth thanks to the seemingly overnight advancement of new technologies. Artificial intelligence, for example, has swiftly gone from a vague possibility to being a major component in numerous digital systems and processes. Another technology that has somewhat snuck up on us is blockchain.
Many people associate blockchain with cryptocurrency. However, while blockchain was primarily being used as a decentralized ledger to secure and confirm cryptocurrency trades, it is now being used in numerous other applications across a range of industries.
Blockchain-as-a-service, for example, is offered as a third-party management of cloud-based networks for companies building blockchain applications. And as a whole, many industries are starting to use blockchain for securing transactions such as the shipping and logistics sector.
What is blockchain and where did it all begin?
Blockchain is quickly becoming the new must-have technology, but like any new tech, it has seen an interesting evolution from where it started to where it is today.
Blockchain was first created to make the trading of digital currency more secure. The concept was to have a decentralized currency that could easily be tracked without relying on banks. Thus, blockchain was invented as a public ledger that stored all information in blocks, with each block representing a transaction. Each new block that was created would then include a sequence from the previous block, which would then link or chain all of the blocks together.
This blockchain technology is what makes transactions or the exchange of information so much more secure because blocks are difficult to replicate or change. If someone wanted to replicate or change one block, they would have to change all the previous ones that it is linked to as well.
Once other industries realized the genius of the concept, they started adopting it as well. Financial institutions, for example, which of course, are founded on the idea of transactions and exchanging of money, quickly saw the appeal of using blockchain. Fintech companies, in particular, that had their sights set on building finance systems of the future were early adopters of blockchain technologies. Many of these same businesses are now combining blockchain technologies with mobile tech offerings, among others, to increase efficiency.
Now, we are seeing what is being called “blockchain scaling,” which is the newest innovation using blockchain. Traditionally, every computer in a network must process every transaction, which is slow. But with blockchain, the process can be scaled and accelerated without sacrificing security.
Today, a scaled blockchain is believed to be fast enough to power our more advanced technologies that store and exchange data and information, like the Internet of Things (IoT). This makes blockchain ideal for any number of industries, not just cryptocurrency trading and banks.
How blockchain is revolutionizing transportation, shipping, and logistics
If there is one process that encompasses transportation, shipping, and logistics, it’s the supply chain. And supply chain management, like numerous other processes, has seen a sudden growth with digitalization and the adoption of new technologies that allow for optimization and fewer inefficiencies.
Supply chain processes rely on the linking of various systems to coordinate the manufacturing and shipping of products. In other words, a wealth of data is being shared and transferred throughout the supply chain process, making this an ideal sector to use blockchain technology.
The global shipping industry has long faced a number of issues that result in delays and other errors, which can come at high costs. With blockchain, however, shipping companies will have the framework to mitigate these issues and speed up operations.
In particular, the U.S. Department of Transportation Maritime Administration reports that blockchain can help with the following to increase shipping efficiency:
- Shipment tracking;
- Smart bills of lading (B/Ls);
- Smart contracts.
For example, a lack of real-time information availability and poor tracking capabilities leads to high volumes of canceled orders and cargo loss, which can cost companies thousands of dollars. But these issues can be solved with blockchain technologies.
Delays related to B/Ls are another problem. A B/L provides all the necessary information for the processing of a shipment from carrier to shipper, serving as a receipt, contract, and document of ownership. But traditionally, B/Ls can take days to arrive but are needed for a shipment to be processed.
Fraud is also a concern, as B/Ls can easily be modified and forged. Blockchain, however, enables the digitalization of these documents and speeds up the process of exchanging data throughout the entire shipping process, creating an overall more efficient shipping system.
The transportation industry is also expected to benefit greatly from blockchain. The implementation of this technology in the freight industry is slow-moving, but once it happens, it will benefit carriers in various ways. Such changes with blockchain that are expected include:
- Enabling carriers to connect to a permissioned blockchain network;
- Carriers soliciting freight from third-party providers more easily, through a connected blockchain network;
- Blockchain networks matching carriers with available trucks to loads;
- Faster generating and sending of smart contracts;
- Faster and more secure shipment tracking;
- Faster generating and sending of invoices so carriers can be paid more easily.
As a whole, blockchain can increase efficiency across the freight and transportation sector while also reducing administrative burdens and increasing transparency.
The aviation sector is another industry that deals in transportation and shipping, where blockchain has captured interest. It can help with security and identity management, baggage management, ticketing, maintenance orders, loyalty programs, and more. Any process that involves sharing data or information, which is most processes these days as everything is digitized, can benefit from blockchain technologies.
As a final note, it’s important to understand that, for all the advantages of using blockchain, the implementation of any new technology comes with risks. Though people sing the praises of blockchain for how secure it is, it’s not foolproof.
Cybercriminals, for example, get more clever with every passing day, and they can and will find ways to compromise blockchain technology. This is not to say that the shipping and transportation industries should avoid blockchain, but rather that when implementing this new technology, companies should make cybersecurity a priority.
To ensure blockchain is the most efficient, it’s necessary to first understand all the risks that come with it to mitigate issues going forward. Only then can shipping and logistics companies truly benefit and revolutionize their industries using blockchain technology.