Blockchain Scrapheap
The Tech Monitor reports IBM and Maersk Scrap Blockchain Trade Platform TradeLens
IBM and logistics company Maersk have called time on TradeLens, the blockchain-backed supply chain platform that came online for the first time in 2018, citing a “lack of global industry collaboration” for its demise. It is due to cease operations early next year, and the second IBM-backed blockchain trade platform to get the chop this year.
TradeLens was designed to be an industry-supported supply-chain data, document, and analytics platform that could be used by importers, exporters and anyone else involved in global trade, making use of distributed blockchain technology for its backend.
The document-sharing platform helped simplify workflows through a set of digital supply-chain visibility, collaboration and analytics tools. As well as IBM and Maersk, the project had support from a number of carriers, customs organisations, banks and transport providers to create an information ecosystem.
IBM says the platform saved companies on the blockchain about 20% in documentation costs and reduced the shipping time for goods by as much as 40%, thanks to more transparent records that were more secure due to the immutable nature of the blockchain technology. It wasn’t an ideal solution though as it came with privacy and scalability issues that relied on extensive industry collaboration for full operational success, something that both IBM and Maersk struggled to attract.
It isn’t the first time IBM-backed blockchain technology has faced the chopping block. Finance platform we.trade ran out of funds earlier this year and was forced to shut down. The blockchain-based trade finance platform was backed by IBM and 12 of the biggest names in finance but failed to raise additional funds.
Has Blockchain Failed?
No. But it has failed so far. This happens frequently with new technology.
The Journal of Shipping and Trade discusses the advantages and disadvantages in a Review of Studies of Blockchain Technology Effects on the Shipping Industry by Kelly Gerakoudi-Ventouri.
The article is licensed under a Creative Commons Attribution 4.0 International License. I made no changes to the snips.
There is much more in the article. I went for a balanced approach showing the advantages and the problems with technology adoption.
Decision-making is being increasingly supported by artificial intelligence and autonomous systems (Calvaresi et al. 2019). A decentralized system (e.g., blockchain) helps to address agency and coordination problems by offering flexibility when sharing information (Perera and Czachorowski 2019). It enables decentralized, fast, and transparent sharing, solves problems of communication inadequacy, and makes decision-making simpler and quicker (Lafarre and Van der Elst 2018; Tsiulin et al. 2020).
Decisions based on blockchain technology are also executed much faster than conventional approaches (McCook 2018). For example, the use of smart contracts offers an automated mode of decision-making based on predetermined parameters agreed upon by actors (Van Rijmenam et al. 2018). Accordingly, shipping industry players are increasingly becoming convinced of the effectiveness of collaboration and collective decision-making for their sustained growth (Diordiiev 2018). Nevertheless, cooperation among parties involved in shipping transactions remains complex (Jain 2018), and extensive collaboration often encounters difficulties regarding issues of privacy, security, and confidence (Yang et al. 2019).
Information asymmetry is a noteworthy problem in the shipping industry, partly because the generated information is often used by different parties (Mattila et al. 2016). However, some parties do not create useful data, resulting in information gaps (Mattila et al. 2016). Blockchain technology helps shipping industry third parties, such as banks, freight forwarders, and agents, overcome this problem (Jugović et al. 2019). Data cannot be edited or deleted from a blockchain, and they are secure and independent of any single computer node. Thus, the need for administration is eliminated (Jain 2018). The initial purpose of blockchain technology was to provide confidential information on financial transactions without interference from third parties (Jović et al. 2019). The fact that a blockchain eradicates the role of third parties makes the technology comparable to and compatible with the internet (Van Rijmenam et al.
The shipping industry is not only competitive, but it can also be regarded as technology- and information-intensive (Filom and Van Hassel 2020). However, the industry is characterized by several inefficiencies in its operations and execution of transactions. The research results (Fig. 3) indicate that there is a requirement for a large amount of documentation, and the processes are rather rigid and complex (Di Vaio and Varriale 2020).
Code Map of Shipping Industry Code
Advantages of Blockchain Technology
Figure 4 suggests that blockchain might present a radical solution to the above-mentioned challenges faced by decision-makers, and it promises to be applicable to many industries (Huhmo 2018).
With its application, a single digital ledger could solve the problem of collecting, storing, and analyzing all the data available in the shipping industry (Jugović et al. 2019). Ocean carriers would benefit the most from the technology through instant sharing of data that would enhance the entire supply chain (Nga et al. 2020). Stakeholders would have instant and secure information about shipping operations (Jain 2018).
Blockchain technology also enables the possibility of exchanging information based on trust and transparency (Loklindt et al. 2018), relying on consensus and cryptography to prevent fraud (Jović et al. 2019). It is distinguished by objectivity and trust, and thus, competes with even the most trustworthy industry participants (Beck et al. 2017). Furthermore, it fosters a sense of trust in the sharing of information, resulting in faster, cheaper, and easier business transactions (Huhmo 2018).
Problems of Blockchain Technology
Figure 5 presents some drawbacks of the new digital technology. With regard to the problems associated with blockchain, we should underscore the fact that this technology is still very new (Tsiulin et al. 2020). Owing to its immaturity, blockchain technology currently lacks applicable standards (Jović et al. 2019) and is susceptible to interoperability problems, which limits its wider adoption and application (Van Rijmenam et al. 2018). Furthermore, blockchain is presently energy intensive (Jović et al. 2019), resulting in high (but spread-out) operational costs. These challenges require careful consideration for broad acceptance of the technology in the shipping sector.
Discussion Review
The research findings from the review of existing studies reveal that the adoption of blockchain technology can enable more efficient and faster flow of data (Jović et al. 2019). The application of blockchain technology in the shipping industry may help reduce paperwork, while fast-tracking transactions (Yang et al. 2019) and reducing operating costs. It can lead to enhanced control of the supply chain and improved administrative efficiency (Jović et al. 2019). Moreover, the review of prior studies suggests, that blockchain may support the dissemination of real-time information on vessels and minimize shipping delays (Komathy 2018).
Another potential of blockchain that must be highlighted is the enablement of instant cargo tracking and accurate shipment prediction (Jugović et al. 2019). It facilitates the transparent sharing of information and digital transacting (Ølnes et al. 2017), and with its utilization of cryptography also offers the possibility of automated decision-making, which may change organizational design (Van Rijmenam et al. 2018). Furthermore, blockchain technology enables documents to be made available to all stakeholders in a fast and secure manner (Green et al. 2020).
However, following the summary of the extant literature, we may infer that there remain some issues and limitations to blockchain technology that are worthy of consideration to enable a more effective and efficient application of this novice technology in the future (Loklindt et al. 2018; Green et al. 2020). For example, its broad application requires a large amount of computing power (Jović et al. 2019; Singh et al. 2020), which could be concentrated in one country (Huhmo 2018). The power consumption implications should be addressed before the use of the technology becomes conventional (Van Rijmenam et al. 2018). As previously noted, blockchain technology is regarded as not yet fully developed because of the lack of appropriate standards and regulations (Jović et al. 2019) and is thus currently difficult to implement (Jović et al. 2019). The absence of a central authority and the immaturity of the system cause uncertainty among users (Jović et al. 2019). Moreover, some shipping players may not desire the transactional transparency of blockchain technology (Green et al. 2020).
Conclusion
The findings of this study reveal several reasons for the adoption of blockchain technology for more effective decision-making in the shipping industry. These include inefficiencies in shipping operations, difficulties of data sharing, and information asymmetry. Although blockchain technology is still immature, it promises to be a panacea to these problems. The Fourth Industrial Revolution involves innovative modes of designing, producing, distributing, and paying for goods and services of which blockchain technology constitutes an essential and exciting element. The technology is expected to become significant to industry and society, offering the advantages of decentralization, cost reduction, and improved efficiency. It can be used in other transportation industries to simplify operations, enhance decision-making, and contribute to organizational efficiency and competitiveness.
Blockchain Will Succeed Eventually
I have no doubt that blockchain offers advantages that will eventually succeed. But energy use is a huge issue especially with the original Bitcoin implementation.
With all the blowups in the crypto space, a question of trust is in play even it it is not really a problem in the base protocols.
IBM says the platform saved companies on the blockchain about 20% in documentation costs and reduced the shipping time for goods by as much as 40%
If that is really accurate, then is IBM short-sighted in scrapping two projects?
Perhaps or perhaps not. If IBM was developing an opensource project then it would pay all of the upfront costs with no long term benefits other than praise.
If it was developing a closed system, then perhaps it was doomed to failure in efforts to attract critical mass.
Technology is One Thing, Coins are Another
Regardless of whether IBM made the correct decision to exit, the technology is one thing, and price of the coins is another.
In my view, Bitcoin has failed as money and will never succeed.
That is where I strongly disagree with most Bitcoin and Ethereum advocates who say the coins cannot be separated from the technology. More accurately, the future is one of four things.
Four Paths Forward
- The existing technology and the coins will prove to be independent
- New technology will succeed, replacing Bitcoin and Ethereum.
- Mining costs (and the price of coins) will collapse.
- A cost-efficient Ethereum or Ethereum-Like technology succeeds and Bitcoin fails totally.
One way or another, the technology will succeed even if the coins proves to be little more than another speculative mania.
None of this has anything to do with the recent crypto space blowups, including FTX and BlockFi.
This post originated at MishTalk.Com.
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Mish
problem is that you can’t be too transparent to your customers, as they
will use that information to drive you out of business.”
well-defined service layers and interfaces between them … otherwise
you are locked into monolithic technology stacks controlled by
monopolistic parties. For block chain to succeed, it will need to split
up the services rendered.”