The trend of Blockchains includes the development, implementation, use, and management of decentralized, digitally recorded ledgers that are distributed across networks. By incorporating immutable and serialized recording, blockchain technology acts as a single source of truth for its users.
Blockchain technology came to public attention with news headlines capturing the meteoric rises and crashes of cryptocurrencies. In the background, however, particularly during the COVID-19 pandemic, logistics leaders in several industries sought applicable use cases for this technology in their supply chains; some organizations, including DHL, pre-emptively launched their own digital ledgers. Looking back, the blockchain technology market grew from 2015 to 2022 with a 65% global CAGR to a value of 7.3 billion USD. From 2022, the market is anticipated to boom with an 86% global CAGR to a value of 1.4 trillion USD in 2030 as more businesses accept blockchains in their operations. This increase in participant numbers will have an amplified network effect, boosting the supply chain value and benefits of this Blockchains trend.
Blockchain technology exists today and is applicable to many segments along a supply chain, although not necessarily at the same degree. To maximize the benefit and utility of blockchain, however, companies need various methods of detection, including many sensors, at almost every segment. This requires coordination and collaboration among many players in the typically disjointed logistics ecosystem. Therefore, the small blockchain implementations of today are likely to need several more years before they mature to meaningful, comprehensive integration within the end-to-end supply chain.
320+ million people own cryptocurrencies worldwide.
Relevance to the Future of Logistics
Today, companies have limited visibility of products as they move through production processes and supply chains. Manufacturers, retailers, and end customers are all demanding better and more reliable track-and-trace capabilities for products, raw materials, and waste. Blockchains, paired with logged records from sensors, can provide this visibility as a trusted, immutable ledger.
Supply chain professionals and customers can access a blockchain ledger with an interface from which they can see each product’s shipment status and accurately confirm product attributes, such as whether it was locally produced, organically grown, or received certifications. Additionally, using blockchain technology, companies can quickly identify points of unauthorized removal or the insertion of products, helping to investigate theft, fraud, and counterfeiting. Finally, with hundreds of international trade laws and regulations, a blockchain-supported level of transparency enables supply chain organizations to ensure supplier and distributor compliance.
By acting as a single source of truth, blockchains can bring a sense of fidelity to all partners along the supply chain.
During its supply chain journey, each product can be subject to multiple back-office processes, from manufacturing invoices and customs forms to retail agreements and delivery payments. These processes can take weeks or even months of human activity, involving many different parties. Instead, blockchain-based smart contracts effectively eliminate delays and shorten the critical-path timeline.
The smart contract is essentially an elaborate digital ‘if-then’ statement which self-executes procedures once pre-determined and agreed criteria are met. For example, if a product and all its components have been properly recorded, tracked, and traced in a customs agency’s smart contract, the product meeting all requirements may automatically clear customs without any forms. Smart contracts can also perform more advanced functions like splitting payments among parties based on the distance each has travelled or subtracting varying degrees of penalties from payments depending on how late or damaged a package is when it arrives at its destination.
By implementing blockchain-based smart contracts, logistics organizations can streamline processes, reduce clerical errors, and bring transparency to an automated system.
It has been estimated that in 2022, about 320 million people around the world own some form of cryptocurrency or ‘crypto'. In Vietnam, almost 1 in 5 people are crypto users while, in Nigeria, this number reaches almost 1 in 3.
Like the normalization of credit cards and PayPal as payment methods before it, bolstering the rise of e-commerce, crypto can help companies extend their reach into markets as an alternative form of payment. While the value of cryptocurrencies like Bitcoin and Ethereum has proved volatile, there are other cryptos – known as ‘stablecoins' – which have a more reliable, predictable value as they are pegged to a fiat currency like the USD or Euro. Some countries have begun to recognize and provide more legal space for crypto, including protections and regulations. To date, 2 countries, El Salvador and the Central African Republic, have gone so far as to recognize Bitcoin as legal tender.
As the personal use of cryptocurrency appears to be increasing and with regulations to follow, supply chain companies should consider accepting this alternative form of payment to better accommodate their customers.
Many pertinent and impactful use cases have been identified in the supply chain for existing blockchain technology. It is only a matter of time before multiple players along and across supply chains coordinate and collaborate to create comprehensive blockchain ecosystems, accelerating the full capabilities of this technology.
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- Fact.MR (2022): Blockchain technology market outlook (2022-2032).
- Grand View Research (2022): Blockchain technology market report
- TripleA (2022): Cryptocurrency across the world
- Yahoo Finance (2021): Which countries are using cryptocurrency the most?
- TripleA (2022): Cryptocurrency across the world