Blockchain Events
Enterprise Blockchain, the Next Big Thing or NOT?!
A promising distributed ledger technology application is being discontinued.
While cryptocurrency has always been a risky investment, I believe the blockchain technology that underpins Bitcoin and the hundreds of other digital tokens holds some genuine potential.
A distributed ledger with no need for a central authority and entries that cannot be changed after the fact might potentially be beneficial in certain applications.
Global trade was one of these uses. Moving freight from one nation to another, typically via numerous means of transportation, is a nightmare of paperwork and administrative processes.
To address this issue, International Business Machines (IBM -0.10%) and shipping behemoth Maersk (AMKBY -0.62%) established TradeLens, a blockchain-based platform, in 2018.
Early Triumph, but the Eventual Failure
TradeLens had some early success. During pre-launch testing of the platform, the system effectively cut transit times in some situations by removing time-consuming processes in the process of transferring freight from source to destination.
By mid-2019, the platform had been used by five of the world’s six major ocean carriers, and it had covered more than half of all ocean container freight. It looked to be approaching a critical juncture.
Despite the fact that Maersk co-developed TradeLens, rivals got on board owing to the nature of blockchain. Each carrier, as well as other partners, might run their own nodes on the network.
The digitalization of paper-based procedures benefited everyone, and no single entity had greater influence than the others.
Even with that initial traction, TradeLens was unable to win over enough of the industry.
In November, IBM and Maersk stated that TradeLens would be decommissioned by the end of the first quarter of 2023. The platform proved practical, but “the necessity for complete global industry collaboration has not been met,” according to the joint news statement. TradeLens functioned, but not as a profitable business.
The global shipping sector may ultimately abandon its antiquated norms, but TradeLens will not be the trigger for that transformation.
There is Little Hope for Enterprise Blockchain?
Global shipping appeared to be an ideal use for blockchain technology. The sector is characterized by a huge number of actors from all over the world exchanging information and paper documents, creating an environment suitable for digitalization.
While TradeLens functioned technically, it did not operate as a company.
Any blockchain initiative must contend with network effects. A blockchain-based network is mostly ineffective unless it draws a sufficient number of participants.
Technical intricacy and upfront fees are two factors that make this challenging. According to the Wall Street Journal, which cited experts, blockchain adoption was hitting stumbling blocks in December due to the complexity of companies adopting the technology, increased computing power requirements compared to traditional solutions, and higher costs compared to standard databases.
Other initiatives beyond TradeLens were mentioned in the Journal article as having major concerns.
Walgreens Boots Alliance considered adopting blockchain technology to oversee vaccination delivery, but it was much faster and easier to set up something simpler.
Another IBM venture employed blockchains to trace products through the supply chain at the tech giant and retailer Walmart.
Over the last four years, that initiative has brought only one new product due to difficulties in bringing vendors without digital record-keeping systems on board.
It’s unclear if blockchain is the right technology for these applications.
However, the finest technology does not always triumph. The technology that achieves critical mass and widespread acceptance wins.
Based on the experiences of firms that have attempted to implement blockchain-based solutions in the previous several years, those solutions appear to be too complex and expensive to function in any real-world context.
While the drop in bitcoin prices has likely led to a decrease in interest in blockchain technology, it is also becoming evident that the technology isn’t a game changer after all.
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