Blockchain technology is often associated with Bitcoin only, however, it is much more than Bitcoin or cryptocurrencies in general.
Nowadays, there are tons of problems in administrative spheres, trade, finance world etc. that can be solved through the simple application of blockchain technology. Blockchain technology can help these industries to increase their effectiveness, efficiency and at the same time stay away from extra hassles, complications, and corruption.
For instance, nowadays, in the transportation sector companies have to wait more than a month in order to receive a payment (for an average invoice). The administration costs that are paid to various third parties keep increasing and eventually become a larger share of the overall costs that are incurred by the companies. There are various challenges that come up while coordinating the supply and the demand, which results in trucks driving billions of kilometers without any load or with a very light one. The most interesting thing about blockchain technology is the fact that it is capable to solve all the listed problems that exist in the transportation industry along with a number of other sectors which have nothing to do with transportation.
As of now, one may wonder what a magical thing is the blockchain technology that it is capable of solving so many problems that exist in industries that are so different from one another.
At first glance, it may seem a bit absurd that a single technology is capable of solving various issues in such diverse industries. However, blockchain technology plays one major role for different sectors, which is making operations within multiple services more efficient and with as few costs as possible (by mainly cutting out the costs in logistics).
Nowadays, blockchain technology is enabling platforms to make the coordination of various documents shared on distributed ledger smoother and easier. In the meantime, smart contracts make the customs clearance and approvals much faster as they require way less time for processing goods at checkpoints. The blockchain is capable of ensuring users with data that is trusted in the ecosystem of the given industry. To make this possible, the whole network appears to be a contributor to the data validation process. All of these improvements are done by cutting the needs of the physical paperwork.
If we take a look at the example of the transportation sector, a single shipment may need to be passed through more than thirty companies and may require communication with hundreds of different parties. In fact, a single error in this long communication chain may result in issues such as a loss or a hold. To avoid such errors, blockchain records all the steps in a permanent and in a very safe manner.
In the transportation and especially in the shipping industry, the practice shows that the demand for quick deliveries is increasing all the time. As a result, the traditional delivery systems are not as efficient anymore and neither capable to meet this rising demand. In this sector, blockchain technology can give instant and prompt solutions that can improve the tracking and the authentication processes that the orders go through.
Taking all these issues and their potential solutions with blockchain technology, we come to the conclusion that this technology is a necessity for the currently existing supply chains.
The only problem with the blockchain technology right now is the lack of awareness. A lot of people do not know about blockchain at all, many others have heard of it but do not understand how it works and what it is about. At the end of the day, blockchain can be a bit confusing and hard to understand. For that reason, this article will cast light on questions starting from “What is blockchain?” all the way to “How can blockchain technology revolutionize sectors such as transportation?”
What is blockchain?
The fundament of the blockchain technology is cryptography, which is a branch of mathematics. It works as a shared digital ledger (series of blocks that are encrypted and linked to one another in a public chain) and is completely decentralized. Blockchain works by fully relying on the consensus of the peer network from around the globe. This way, it is impossible to modify one block without the modification of the whole chain and without getting the consensus of the peer network as a whole. Thanks to these features, the chances of the potential not legit and fake data are very low and almost none at all.
For example, Bitcoin is a cryptocurrency (digital currency) that is authenticated and exchanged through the blockchain technology. The main benefits of this cryptocurrency are the result of the application of blockchain. Those benefits include things like a high transaction speed, very low costs (in some cases none), high security, and elimination of third parties at the time of a transaction.
The transactions within blockchain technology usually take place as follows:
1. One party sends money to the other party.
2. The online transaction appears as a block.
3. The block is similar to broadcast for all the parties within the network. The role of this network is to approve the validity of the transactions.
4. After the validation, the block gets recorded in the chain in a transparent and undeniable manner.
5. The transaction is finalized and the money goes from the first party to the second one.
Please note that there are more than 1,400 cryptocurrencies in the world and Bitcoin is just one of those. All these cryptocurrencies together have a market capitalization that exceeds half-a-trillion US dollars. It is important to mention that there are many cryptocurrencies, which are aiming to improve different aspects of businesses and are working hard to increase efficiency, instead of being just a plain type of money.
Some of the industries that have been actively adopting the blockchain technology are the trucking and commercial transportation. Bellow, you may find the list of the improvements that this technology is able to bring with it.
Top 10 changes that blockchain technology brings up
1. New and effective way to check a performance history.
For instance, in case a business or a company is wanting to buy a vehicle that is second hand, with the help of the blockchain technology the buyer has a chance to see the information related to the previous performances of the given vehicle along with the maintenance history it has.
There are some businesses, which provide this service, however, the fact is that similar businesses are intermediaries. The presence of intermediaries may create problems such as time-consuming processes, extra costs, privacy, and safety issues and so on. The blockchain is capable of solving all of these issues and can allow having a high quality of experience without the involvement of any outside parties.
2. Trustworthy method for the validation of new records.
Like in the previous example, when a business or company can check the history of a second-hand vehicle, blockchain also makes it possible to record and validate the information about the new carrier. In other words, in case you decide to sell the vehicle to another person, the new buyer has a chance to see the history that has been incurred after your purchase. This is important in terms of gaining trust and for the successful trade in general.
3. Impossible to falsify the records.
The blockchain technology creates a decentralized network and holds all the records across the industry it is applied in. This information cannot be falsified and can be verified within a few seconds. In case of modifying a certain part of the data, the whole thing has to be modified too. In contrast to this, the current data recorders that exist can be falsified and changed. This often allows people to fake, manipulate or take other corrupt actions.
4. Improvements in tracking
As it has already been mentioned above, the demand for the instant and same day deliveries keeps increasing around the world, however, many companies are incapable of meeting the demand with the current resources and technologies. Blockchain technology can be a true innovation for such companies as it will authenticate the data safely and will improve the operations continuously. This is also a good alternative for avoiding heavy investments in tracking technology.
5. Data security
The security of data recorded on the blockchain technology is maximized. This is very crucial as only trustworthy authenticated data can allow improvements in operations. The lack of the data security can also create problems such as manipulation and a number of misunderstandings. In case of using blockchain technology for the data authentication, the network as a whole will be able to validate as well as contribute to the data. This way the data will not be a subject to manipulations. In fact, the reliability of information is very important for a high-quality business in any industry.
For instance, in case of temperature controlled transportation, this is very important because of the dependency it has on the timely delivery. Many companies, which already use this approach to confirm that it helps in terms of transparency, efficiency, and authenticity of supply chain around the world.
6. Better communication with IoT aka Internet of Things
IoT and blockchain combination is seen as a good solution for communication issues as well. For instance, some companies use these technologies for the vehicle to vehicle communications (also known as V2V). This allows several vehicles to stay in touch and check on each other by communicating about matters such as the safety, the fuel situation and so on. The communication that takes place in the V2V format is stored and also validates the newly created data on the blockchain. Many people believe that this can be helpful for the companies from around the globe to streamline own operations.
7. Increase in efficiency through AI aka Artificial Intelligence and IoT aka Internet of Things
The combination of blockchain technology and IoT innovations also appear to be very useful for monitoring purposes.For example, a shipping company can put IoT sensors in the trucks or other vehicles that it owns in order to get informed about how much space is available at the time of a certain shipment. This can be helpful for finding out the costs (or other details) and for transmitting this information to the second component of the combo – the blockchain technology. Some companies today use blockchain technology to enable the IoT sensors and as a result, they are able to monitor the location of each vehicle they own along with the temperature and the level of humidity for each one. This way such companies have an ability to control the deviation rate of the temperature. As a matter of fact, some of these companies also use blockchain for recording all kinds of documentation (related to financial departments, customer service, etc.).
Blockchain technology also allows companies to transport valuable products in a safe and immutable manner by recording all the documentation of the entire process of the product shipping. The shippers can get a big advantage from this opportunity taking into account the fact that the global shipments go through several checkpoints that are done by different companies.
8. Cutting costs with smart contracts by eliminating the middlemen
Smart Contracts are tasks coded through blockchain technology that execute themselves when a specific condition is met. For example, in case a company is interested in releasing a payment for the shipper as soon as the ordered item gets to its destination, through smart contacts, it can automate the process. In other words, the payment can be realized as soon as the item makes its way to the intended destination. Nowadays, the supply chains are based on a system that is full of papers and is very inefficient. It takes a while until it goes through some channels and gets the required approvals. This process is time-consuming process increases the chances of frauds and losses.
The blockchain and the smart contracts can fully eliminate the extra and the unnecessary hustles that are nowadays created due to the long supply chains. This will also have a positive impact on the costs and there will be zero chances of mistakes in the overall process.
It is important to mention, that by saying cutting the administrative costs, we talk about a big portion of the entire costs that are incurred and paid by the company. In the meantime, this money can be used in a more beneficial way for the business or for the people who are involved in the given business.
9. A genuine depiction of demand
Very often some companies face confusions due to the wrong data or due to duplication’s and disordered data. Blockchain technology allows businesses to record and verify their actions within the decentralized network. With the help of the blockchain technology, the data is clear, reliable and useful without the involvement of any brokers or other third parties of such kind.
If we go back to the example of the trucking companies, nowadays, without the blockchain technology one shipper has to be in touch with multiple brokers and those brokers often reach out to the same load board due to lack of communication. When they reach out to the same load board or when they miss out one, it leads to problems with understanding the actual demand which results in extra costs again. This process is full of chances of mistakes and at the same time, it gives the brokers a space for manipulations by making it possible to fake the demand and by allowing to duplicate it.
In case of the application of the blockchain technology the shipper who has access to the network is capable of reaching out to the load boards on his or her own without extra confusions and yet in a very fast manner. With the blockchain technology, the information connected to the load is stored and stamped with the time on the network. This lets different load boards have access to it and eliminates the unnecessary and problematic involvement of the third parties as a fully decentralized system.
10. More liquidity within the supply chain
The blockchain based technologies are capable of not only finding and facing but also solving the inefficiencies that exist in the supply chains around the world. Such technologies aim to reach their objectives, which include making supply chains more flexible, increasing the liquidity within the supply chain as well as improving the operations that take place inside the supply chain. These improvements can be relevant to all sorts of industries including the trucking transportation sector. This way the companies have an opportunity to increase their productivity through the settlement amongst parties that appear to be the individual elements of the entire supply chain.
In the transportation industry, this technology allows saving millions of dollars in payment disputes every day and decrease the long time that is necessary for receiving payments. The cut down of these days will not only save the patience of the company but will also increase the liquidity and the extra administrative work that is completely not necessary. As a result, the companies get a chance to decrease the costs of borrowing they have and in the meantime, the separate parties of the supply chain get to increase their profits.
The potential risks
The benefits of the blockchain technology in sectors such as the transportation industry are enormous, however, there may be a few drawbacks too, which are worth discussing.
Some people believe that the backfire of the blockchain technology, similar to the other data entry methods has some space for the mistakes that can be made by human beings. Other people claim that blockchain technology is an extra and a far from perfect technology which can create more problems related to the logistics. The distrust of these people, in fact, tends to come from the failures of other new technologies that they have witnessed. Finally, the different type of the technology within the supply chain may create some inconsistencies as well as confusions when it comes to the communications and the collaborations between different companies.
What is coming next?
Nowadays, many companies work hard with blockchain technology, which will possibly be a good and a true way of proving what can and what cannot be done with this new innovation. The fact is, that the administrative sectors as well as the transportation industry along with others, need this technology very much right now.
Morgan Stanly once mentioned that the blockchain technology can increase the revenues for the transportation companies with around 500 billion USD. He thinks that this opportunity of the large revenues will be able to pay out for necessary elements that the industry needs right now, for instance, software for supply chain management, the brokerage for global tracking, saving fuel and so on.
All in all, blockchain technology is not only interesting and promising but also a necessity, which will be even more needed in the near future with the constantly changing world.