BlockChain technology is the last KETTL presented because of differentiated origins and potential impact. As already explained, IA, Robotics, IoT, Enhanced Reality and Autonomous Vehicles integrate and leverage each other, and have been systematically applied in manufacturing to later pour into Transport and Logistics sectors. On the other hand, BlockChain is an independent technology that emerged in 2009, with the limited function to protect cryptocurrencies and that has surprisingly evolved to be applied to any kind of transaction in any industry. BlockChain also diverges from most other KETTLs as it can be considered a disruptive technology, with the potential to severely alter all processes related to digital transactions and their contract enforcement and management.
Therefore, we suggest at looking at BlockChain as much more than facilitating bitcoins, but rather as a fast-advancing technology, capable of offering enormous improvement in security, transparency, quality, reliability in any kind of transactions. BlockChain brings this increased security and transparency at a time when more is needed, now that other KETTLs are making complex transactions and increased cooperation possible and more inevitable.
BLOCKCHAIN DESCRIPTION AND COMPONENTS
BlockChain technology attracts wide interest as a security alternative means to conduct complex, multi-sided transactions and information sharing without the need for a third-party intervention and guarantee. Conceived in 2009 as a way to protect cryptocurrencies, it allows for the conduct of any type of transaction in an immutable, reliable, accessible, secure and traceable way.
BlockChain is based on Distributed Ledger Technology (D.L.T.) with online, public and decentralised ledgers which record and share all transactions carried out. Unlike traditional databases, this record is synchronised between all and each of the parties participating. Everything is simultaneously registered in each of the ledgers and by each party, so that all participants share the same information.
Cryptography and Peer-to Peer Network Protocols
BlockChain also offers a suitable balance between security and transparency and provides a fundamental characteristic to fight against fraud: it allows for the addition of new information, but makes it impossible to undo or rewrite that which is already registered. This is achieved by cryptographic keys that serve as digital identities among transacting partners, plus a distributed peer-to-peer network, managed by a network protocol agreed to by all parties and that directly manages each of the decentralised ledgers without possibility of alteration.
The so-called Smart Contracts are software programs that collect the terms of a contract between the parties and that are stored in the BlockChain, with the peculiarity that they are self-executing when a series of conditions specified in the contract itself are met. In this way intermediaries are avoided, reducing costs and bureaucratic delays, and providing greater visibility and confidence. Additionally, this is an Open Source technology and allows for all parties in a transaction or workflow to see the same information at the same time, including regulators.
Considering its benefits and relative technological simplicity, BlockChain technology still has not jumped to a broad use. Analysis coincides to signal that it is its cryptocurrency origins that generates distrust among enterprises, plus the very important fact that BlockChain vendor’s Platforms do not offer compatible standards, and that enterprises are adamant to become strategically dependent on a single vendor.
BlockChain presents a clear case of Network Economies, when a linear increase of users triggers an exponential growth of value. Therefore, competing and incompatible standards exponentially reduce the value of using them, as incompatibility places users in separated networks or, simply deters them from using any of them. For this same reason, once standards and compatibility are established, an enormous growth in use and value is expected.
CETMO Analysis, adapted from McKinsey & Company (3)
As expected, major investments by big players have recently happened. IBM, Microsoft and Accenture already accounted for 68% of BlockChain supplier sales by 2018 (1) and in 2019 Amazon, Microsoft and IBM, the three major Cloud Service providers, had already included BlockChain services within their Could Computing Platforms. BlockChain services through the cloud is a potential market of $420.5 billion and is expected to reach USD 982.8 billion by 2025 (2), interestingly, its major growth is happening in Asian countries.
BLOCKCHAIN USES AND EFFECTS
A downright effect of BlockChain adoption is the reduction of transaction costs, as financial institutions and other third parties that establish credibility are not required, as well as the elimination of payment delays. Also for developing countries, when offered in broader Digital Platforms, it provides a contractual, transactional and financial digital infrastructure without requiring previous banking or financial institutions base, thus facilitating all kinds of economic transactions and economic growth.
In previously describing other KETTLs, we have demonstrated that many favour the creation of production, transaction, and consumption, collaboration and integration among agents to the point of creating new business ecosystems. BlockChain, with its inherent transparency, acts as the glue of those emerging ecosystems. Its applications for economic development are straightforward. Further to this, administrations, in Australia, EU, Korea and USA are exploring applications in identity management, data portability and voting systems.
Bloomberg, Kharif, BlockChain once seen as a corporate cure-all suffers slowdown, 2018. link
Business Wire, BlockChain-as-a-Service (BaaS) Market Outlook to 2025: Growth, Trends, Companies, 2020. link
McKinsey & Company. Ashutosh, Hastings, Murnane, Neuhaus, Automation in Logistics: Big Opportunity, Bigger Uncertainty, 2019. link
Blockchain enables a more exhaustive control of all stages of transport among different agents, which gives total security and confidence between the different agents involved in the logistics chain. This allows for broad alliances among companies and an increase in the quality of services. Regarding Passenger Transport, BlockChain facilitates a more open market – decentralised, multimodal and multi-provider mobility that increases user’s benefits. It also opens the door to new ways of conducting business and facilitating transactions in situations that were previously impossible.
Enhanced Transparency and Cooperation: BlockChain technology information throughout the value chain is transmitted and shared among all actors faster and in a 100% reliable and impossible to manipulate way. Errors along the supply chain can be detected more clearly and bad practices, or lack of quality, become transparent to the customer and to the provider, and so can be addressed.
This increase in transparency among value chain actors, and its derived trust, will allow for enhanced planning and the offering of integrated services and networked services, which are also multimodal and accountable to agents in a dynamic way.
More Accurate Demand Forecasts as information between suppliers and producer’s flows in real time, and is more fluid and Connected. Thus, transport companies that in commercial, legal and administrative terms, are totally separated from each other and their customers can, in practice, analyse and plan as if their activity was connected and act as a single company department.
Faster and Audited Payments, as there are fewer intermediaries and all transactions are simplified and transparent reducing billing errors and quick diagnosis, both when and why it happens.
SmartContracts Allow for Near Automated Agreements: Smart Contracts allow the settings, triggers and execution of pre-planned supply orders and transportation services under conditions outlined in pre-set agreements between the parties involved. For example, when a product is above a quantity in stock, or an order has just been closed with a supplier or customer.
Reduction of the Tail Wave Effect: end customers have truthful and reliable information about what is happening in real time, without depending on providers or third parties. Therefore, users throughout the supply chain have real control over the course of operations and are able to foresee and address any disruption or compromise of the agreed service.
Enhanced Transparency and Cooperation: BlockChain permits smooth and efficient integration of all services and an increase in transparency between the different parties involved. The agents involved in the entire transport chain, including users, have total control over the achievement of the planned travel and visibility of the course of operations in real time, with truthful and reliable information about everything that happens, which allows for the anticipation of events or causes that may compromise the service offered and / or received.
Administrative and Operational Efficiency: as discussed, BlockChain facilitates access to all information and documentation flow in real time, making it accessible and shareable to all parties and so minimising errors throughout the processes involved. Also, in a similar way to Freight Transport errors, any bad practices can be easily detected and lack of quality becomes transparent to the customer and to the provider, and can be addressed more easily.
Disintermediation and Open Market Possibilities: BlockChain can help create an open, decentralised, multimodal and multi-vendor mobility market. The visibility and 100% reliability of information, may act as a confidence builder between the different actors, improving collaboration even among authorities and opening the door to new payment systems which are more accurate and secure, and a global payment ecosystem with fewer intermediaries.
Opportunity for Collaborative Economy Business Models: this technology and its inherent trust building effects has a clear potential to support and provide business capabilities in the rise of integrated services among different agents acting as a network (collaborative economy).
Sources: CETMO and “Impacte de les KETs en la digitalització dels diferents àmbits del transport”, CENIT-CINESI – December 2020