FREE BRIEF: Blockchain in logistics: TradeLens reignites public vs private debate

Tech network shown as lights blockchain aiThe recent announcement of additional shipping lines joining the IBM/Maersk TradeLens project, is obviously very positive news for the initiative. Their PR team must be very happy at the steady flow of participants announcing they plan to participate. It also contradicts the scepticism observers (such as this writer) have expressed, regarding the possible reluctance of major industry players to join a service owned and operated by a potential competitor.

IBM have pointed out that they understand the concerns and have tried to address them by focussing on sensitive issues such as governance, security, standards alignment and publishing the API’s (interface definitions). No doubt all of this is true, but when examining some of the announcements a couple of interesting points stand out. It seems that the carriers who recently agreed to join, will be establishing their own ‘nodes’ in the Blockchain network, enabling them to keep their data separate.

It may be helpful at this point to reconfirm the definition of a Blockchain. “A blockchain is a peer-to-peer distributed ledger forged by consensus. They have trust, transparency and accountability at the core, while streamlining business process and legal constraints.” (Source:IBM Hyperledger). Each piece of data recorded in the ledger has a single owner, but the ledger should be stored across multiple independent locations (nodes), in fact as many as possible, as this makes it harder to subvert.

As a node generates a block, all the other nodes validate the transactions contained within it and once done, it gets added to the blockchain. This makes it very difficult to reengineer the validation necessary for a different conclusion, if the goal is to modify any of the transactions. In effect to alter the past. As a corollary of any unauthorised modifications, any subsequent blocks validated and added to the chain after the original validation, will also have to be modified as the encryption is based on the totals of the prior validated blocks.

Yes, I know this can be a bit tricky to understand – but it gets a bit easier from here. 

This is immensely challenging, but theoretically possible if there are a small number of nodes under the possible control of a single entity. However, this does become virtually impossible to do if the blockchain has a huge number of independent nodes. As an example, public blockchains such as Ethereum have thousands of nodes around the world verifying transactions. It would seem that the TradeLens implementation is somewhat different to this and to be clear, this does not mean that subversion is likely.

Both IBM and Maersk have always defended the fact that TradeLens is a permissioned network and members have to be validated before they can join, which makes sense from a PR point of view. But the encryption mechanisms in public blockchains have been designed to enforce security and prevent any one party being is a position to control a majority of the nodes. (e.g. Ethereum where the existing blockchain network can be used by anyone – permissionless, but is under the control of no single organisation or entity).

They also maintain that it is a neutral and open platform (provided they agree you can enter the ‘open’ platform), so why are carriers going to the expense and effort of setting up their own blockchain ‘nodes’ to participate? More to the point, if the carriers are keeping their own data to themselves, it would probably be cheaper to agree data exchange standards between the players and open the API’s to their existing databases. So, I think this is what TradeLens is really all about…establishing standards.

It is a mechanism for sharing some aspects of sensitive data across the global supply chain landscape. This is a laudable aim and the community has been attempting this for decades. The effort to define EDI standards for trade goes back to the early 1980s and even earlier or some aspects. Modern supply chain operations require rapid, accurate data transfers and greater transparency, which helps to identity issues and possible resolutions very quickly. It is  obvious that all of this must come to pass given the capabilities of modern technology. But the main barrier has always been the lack or trust and transparency between partners.

So a technology such as blockchain, designed to deliver trust and transparency, is obviously a compelling solution to this dilemma, especially as it can operate as a neutral ‘actor’, when implemented with no single party in control. Unfortunately, this approach makes it very  difficult to monetise, which I am guessing may have been challenging to ‘sell’ in the IBM and Maersk investment meetings.

I think the goal of the project is to do whatever is necessary to encourage participation in the project by as many ‘validated’ participants as possible, in the hope that it becomes a de-facto operating platform. They will then seek to introduce a business model that helps to recover their investment costs. It’s a numbers game – ‘grow it as big as we can, as fast as we can, before the technology landscape changes and hope we don’t run out of money’.

This is not a bad thing, as it’s the same model many companies adopted in the early years of the World Wide Web. The venture capital investors told their start-ups to get as many users as possible and when they are hooked, work out how to make money from them. A platform such as this will no doubt also provide many of the participants the opportunity to introduce their own money-making services. E-bay is a great example of this model, with many sellers on the e-bay platform making huge amounts of money, even after they have paid their ebay fees.

Many other logistics network platforms have tried this in the past, swallowing hundreds of millions of dollars in the process e.g. e2open, GT Nexus, etc. But they were unable to co-opt the hype surrounding a technology such as Blockchain to help them. Also, it’s fair to say that the other competing efforts around the globe, (Oracle/Cargosmart, Global Shipping Business Network (GSBN), the port projects from PSA and Abu Dhabi Ports, etc.) have not had anything like the acceptance of TradeLens so far. Although the 300cubits experiment, using Ethereum and the Maritime Blockchain Labs (MBL) project, are looking at more interesting developments and their outcome is unclear at this stage.

Just as we saw in the early days of electronic data interchange and the value-added networks targeted at the shipping sector, multiple initiatives were started, promising the same benefits the various logistics and maritime blockchain projects are claiming now, but pretty much every one of them faded into obscurity. This was due to incompatible technology standards, competing priorities and the advent of the open source and freely available Internet infrastructure arriving on the scene. This may well be what happens to many of these projects unless there is a coalescing around a common approach.

So as long as the members of TradeLens really do start to share information between themselves and eventually open up the network API’s to any new ad-hoc trading partners – which is how liquid markets work – this will succeed. Just don’t think its an open, neutral blockchain network, because at the moment to an external observer, it doesn’t look like one.

Further reading: See this article – Safety Without Silos – which gives some wider background on the nature of public and private blockchains and the debate around their use. 

Source: Transport Intelligence, July 23, 2019

Author: Ken Lyon


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