Blockchains

Trend Overview

Impact:

Limited

Adoption:

5 - 10 Years

Focus Areas:

Physical & Digital Security Visibility & Resilience

Trend Clusters:

Digital Backbone

Sectors:

A blockchain in simple terms is a distributed database that maintains a continuously growing list of records, called blocks. These blocks are connected using a method where each block has a cryptographic hash (an equation used to verify the validity of data) of the previous block, a timestamp, and an item of transaction data. These details cannot be altered retroactively without the alteration of all subsequent blocks as well as the consensus of the entire network. This ensures integrity of the data and enables this information to be considered a single source of truth for its users.

In recent years, logistics leaders in several industries have sought applicable use cases for this technology in their supply chains. Some logistics service providers, including DHL and Maersk in partnership with IBM and others, launched their own blockchains. However, in Q1 2023 Maersk and IBM decided to discontinue their blockchain-enabled shipping solution as it “has not reached the level of commercial viability necessary to continue work and meet the financial expectations as an independent business.”

There are different perspectives on market growth within this trend. The global blockchain funding market, worth US$ 9.2 billion in Q1 2022, dropped to $6.5 billion by Q2 2022 – a quarter-on-quarter decrease of 29%. But market intelligence company Fortune Business Insights projects blockchain industry growth from $17.57 billion in 2023 to $469.49 billion in 2030, a compound annual growth rate (CAGR) of 59.9%.

Blockchain technology exists today and is applicable to many segments along a supply chain, although not necessarily to the same degree. To maximize the benefit and utility of blockchain, however, companies need the right data and thus various methods of data collection. This requires coordination and collaboration among many players in the typically highly diverse supply chain ecosystem. Therefore, the small number of 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.

Although there are many players in the market offering blockchain-based solutions, the technology has not yet been widely accepted across supply chains and it will take more than 5 years for this to happen at scale. Also, different levels of acceptance and thus adoption of the technology by country differs, determined by several factors including government legislation and funding.

550+ million people own cryptocurrencies worldwide

Source: TripleA (2024): The State of Global Cryptocurrency Ownership in 2024

Relevance to the Future of Logistics

Digital Product Passports

Blockchain can track products across their lifetime, all the way from production to end of life and including lifecycle circularity. Building a product passport on blockchain technology is likely to increase the item’s credibility, acceptance, and sustainability across borders, wherever this technology benefit has been accepted.

All parties involved at any point with the product’s lifecycle, including logistics service providers, would be identifiable in the digital product passport so this, in turn, would boost product visibility, traceability, and accountability. For example, EU rules could soon require UK toys sold on the continent to come with a digital product passport.

A digital product passport would show whether virgin materials have been used in a product and whether the entire product or some part of it was used for a previous purpose. It would also show where the product and its constituent parts have been – their physical location, monitored and recorded using Internet of Things (IoT) technology. Together, this increases the credibility of any claims to circularity.

This lets the end user take informed decisions before making a purchase. Everyone can see from the blockchain record when a product is new, recycled, remanufactured, upcycled, or partly sourced from recycling. This increased visibility and traceability achieved using blockchain is likely to significantly boost materials circulation.

Next use case

Crypto Stamps

There is growing interest among collectors in crypto stamps. Companies like DHL are responding to this demand by creating these items. Each physical stamp includes a digital image which, in the blockchain, is clearly assigned a non-fungible token (NFT). As this data is stored in the blockchain, the collector is assured exclusive ownership of the NFT; they can include it in their personal digital wallet and it proves their possession of a uniquely numbered crypto stamp or a digital piece of art.

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Traceability & Transparency

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.

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Smart Contracts

During its supply chain journey, each product can be subjected 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 traveled 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.

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Blockchain & ESG

Blockchain technology can increase transparency and accountability around environmental, social, and governance (ESG) reporting for corporates. ESG metrics are normally self-reported so, by using blockchain to securely record carbon emissions, social impacts, and governance practices, all parties can track this data, and with greater granularity than before. While achieving more visibility, this helps build trust in the organization’s compliance and reporting standards.

There are numerous application examples. For a more sustainable neighborhood in smart cities, blockchain facilitates smart grid mapping and management to improve utility usage and control. And for companies using carbon trading to deliver on net-zero targets, blockchain ensures accountability and verifiability.

Innovation and alignment are required not only with blockchain but also with other initiatives to effectively tackle ESG challenges. The most significant contributions of blockchain technology are to introduce much-needed trust in the ecosystem and evidence the strategic actions taken. Organizations using blockchain can be held accountable for their practices and can showcase their progress with transparent and verified ESG metrics.

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Challenges

Technical limitations such as scalability and high power consumption must be overcome to enable sustainable, large-scale deployment.

Industry-wide adoption along and across supply chains is difficult given industry fragmentation and competition.

Governance, standards bodies, and industry consortia are required to ensure conformity to regulations and interoperability between carriers, operators, customers, and customs authorities.

Cryptocurrencies are mostly unregulated, increasing the risk of scams and lowering levels of trust; this is a barrier to the acceptance of crypto as payment and assets.

Technical limitations such as scalability and high power consumption must be overcome to enable sustainable, large-scale deployment.

Industry-wide adoption along and across supply chains is difficult given industry fragmentation and competition.

Governance, standards bodies, and industry consortia are required to ensure conformity to regulations and interoperability between carriers, operators, customers, and customs authorities.

Cryptocurrencies are mostly unregulated, increasing the risk of scams and lowering levels of trust; this is a barrier to the acceptance of crypto as payment and assets.

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Outlook

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.

This trend should be monitored TO SOME EXTENT,with developments still needed and use cases still being explored.