Cryptocurrencies have taken the market by storm over the past year and change. Last year, the aggregate value of virtual currencies soared close to $600 billion, increasing in value by more than 3,300% in the process. This gain may very well be the greatest single-year return we'll ever see in an asset class.
Excitement surrounding blockchain technology is building
Though numerous catalysts played a critical role in pushing digital currency prices higher, much of the credit rightly belongs to blockchain technology, which was introduced to the world in mainstream fashion when bitcoin debuted in 2009. For those of you unfamiliar with blockchain, we're talking about the digital, distributed, and decentralized ledger that underpins most cryptocurrencies and is responsible for transparently recording all transactions without the need for a financial intermediary, such as a bank.
The existence and evolution of blockchain is a result of perceived inefficiencies with the current financial system. For example, banks tend to act as third parties during transactions, entitling them to a fee, which blockchain developers view as excessive. Additionally, transactions made to countries outside of your domestic borders could take days to validate and settle, which developers believe is unacceptable.
With blockchain, transactions are being proofed 24 hours a day, seven days a week, meaning there's the potential to settle transactions almost instantly, or within a few minutes in a worst-case scenario. Likewise, the elimination of banks as the middlemen should help reduce transaction costs.
Though blockchain is expected to be a boon to the financial services industry for the points described above, blockchain actually has numerous applications beyond currency-only industries and sectors. Blockchain can be used to create decentralized IDs, immutably log medical records, and, perhaps most intriguingly, make supply chains more efficient.
Say hello to the Blockchain in Transport Alliance
The rise of blockchain has led numerous big businesses to dabble with the technology in pilot and small-scale projects. For instance, the Enterprise Ethereum Alliance (EEA), which was formed in February 2017, is now 200 organizations strong, and is the largest open-source blockchain initiative in the world. Quite a few brand-name companies are testing versions of the Ethereum blockchain for a variety of industries, including financial, industrial, logistics, energy, and medical.
Arguably, though, an even more exciting open-source blockchain initiative was formed just a few months ago: the Blockchain in Transport Alliance (BiTA). This alliance, which rather than focusing on a specific version of blockchain as the EEA does, has a specific industrial focus of utilizing blockchain to improve efficiencies in the freight industry. Understand that this doesn't just mean trucking, albeit trucking is a major component of BiTA. It involves financers, parts suppliers, cloud computing developers, railroads, and tire companies, to name a few industries.
An available presentation from BiTA on its website lists eight real-world use cases for blockchain in the freight industry. These are:
- Performance history: Since blockchain is transparent and immutable, it would allow all parties access to past performance to remove any "trust" concerns.
- Vehicle maintenance: Blockchain would allow a vehicle's repair history to stay with a vehicle for anyone to see, rather than kept on paper, which can be lost or altered.
- Quality assurance: Blockchain would allow all parties access to records and photos of loads at pick-up and drop-off locations, resolving unsubstantiated disputes.
- Compliance: Electronic logging devices already in transport vehicles can send real-time weather and traffic data to the blockchain network to aid in rerouting.
- Capacity monitoring: Blockchain can help logistics companies with changes in available capacity throughout the day.
- Payments and pricing: Since blockchain data is logged digitally, companies will be able to utilize more data than ever to generate accurate pricing.
- Fraud detection: As noted, blockchain transactions are immutable, and will therefore be visible to everyone with access to the network, reducing the potential for fraud.
- Theft prevention: Blockchain can contain regulations and photo IDs, which improves security measures and reduces the opportunity for product theft.
BiTA's biggest brand-name members
Not only is this transportation blockchain initiative picking up traction, but it's managed to attract more than 110 members, with hundreds of additional applicants lying in wait. Some of the most well-known members include logistics companies UPS (NYSE:UPS) and FedEx, tire company Bridgestone, truck and engine developer Navistar, railroad kingpin BNSF, trucking companies Werner Enterprises, C.H. Robinson, and YRC Worldwide, and cloud computing giants SAP (NYSE:SAP) and Salesforce.com.
For example, UPS joined BiTA back on Nov. 7, with the expressed interest in exploring what blockchain could do for its custom brokerage business. In particular, UPS wants to examine the possibility of removing paper from its custom brokerage business, which would improve security and transaction accuracy, helping all parties involved. UPS believes that blockchain would improve trust between it and its customers, as well as government customs agencies.
Meanwhile, German software behemoth SAP joined BiTA a mere eight days after UPS. Joining made it complete since given that SAP in 2016 vowed to invest $2.2 billion over a five-year period to develop Internet of Things (IoT) capabilities for applications in the supply chain, manufacturing, and logistics industries. In July 2017, SAP unveiled a track and trace option to its "Leonardo" IoT platform, which aids in supply chain monitoring of goods around the globe.
Given the industry focus of BiTA, as well as the consortium of brand-name companies backing it, the transportation industry may actually have a shot to beat the financial services industry into real-world, broad-scale implementation of blockchain technology. This is certainly something worth keeping a close eye on.