A blockchain is a decentralized database which makes sharing information more secure and transparent. Numerous sectors can benefit from this.
The future of secure digital communication begins in Rotterdam: the Port of Rotterdam port company has set itself the goal of turning Europe’s biggest deep-water port into the “best, most intelligent and most sustainable port in the world”. In order to achieve this goal, the Port of Rotterdam is taking part in an initiative which involves trialling solutions for tracking container freight more transparently, reliably and cheaply. The vision: to reduce fraud and errors by eliminating the passing of analog freight papers back and forth – a process which is both complex and expensive. The solution is based on blockchain technology.
If a ship arrives at the port half an hour early, it was virtually impossible for a truck driver who is to unload it to react to the change in schedule. This results in wasted time and financial losses. With blockchain technology, freight consignments can be tracked in real time along the entire supply chain. Although transport route monitoring is not new, there are often gaps. And not all parties involved in the logistics process have access to it. Not so with blockchain: all parties have access to the same information and can plan their resources more efficiently.
No chance for hackers
Blockchain technology came to international prominence in connection with Bitcoin – a digital currency which serves as an intermediary to allow financial transactions without a bank. However, blockchain can be used for any type of information. The innovative concept behind this technology: a decentralized database stored on a number of computers which records transactions between various parties. The transactions are processed peer-to-peer, i.e. directly between the parties, and are confirmed by all connected computers. To a certain extent, these nodes act as witnesses who certify the transaction. A central intermediary body is then obsolete. The fact that there is no central database server which can be manipulated by hackers makes the technology very secure. And any changes made to an individual node are immediately obvious.
However, decentralized storage is just one aspect which guarantees the security and transparency of blockchain. The information is bundled together in blocks that are linked together like the pearls in a necklace. An individual block contains not only the checksum for the previous block but also the checksum for the entire chain. All previous transactions are therefore documented in the blockchain – and individual items cannot be changed without this being noticed. The decentralized system and the permanently available transaction history make blockchain a highly secure technology which automatically wins trust.
More than just hype
Security and transparency are key arguments in favor of blockchain. It is hardly surprising that the Port of Rotterdam is not the only company with such plans. Companies such as Maersk are also trialing blockchain solutions for shipping logistics. Although the corporate consultancy company PwC believes that the new technology is predestined for the logistics sector, it points out that other sectors could benefit too. From the financial world to the energy sector, blockchain technology is helping to revolutionize numerous different sectors.
This is also demonstrated by the large number of start-ups that are developing blockchain-based applications. German and international universities are also stepping up research into the new technology. “Numerous blockchain infrastructure systems now exist – along with the first service models from established ITC providers,” said Bitkom blockchain expert Marco Liesenjohann. “A key question for decision-makers within companies is what added value can be generated by implementing a blockchain-based system rather than a classic solution?”
Marco Iansiti and Karim R. Lakhani, Professors of Business Management at the Harvard Business School, have developed a model which helps managers to answer this and similar questions. They recommend starting small and gradually building up the necessary knowledge for larger projects. And these projects will not be long in coming: MarketWatch predicts ten-fold growth in the global blockchain market between 2016 and 2021 – to over US$2.3 billion.
Forgotten installment payments bring cars to a standstill
The fact that blockchain technology is so versatile is without doubt one of the reasons why the outlook is so promising. Smart contracts would be one application. These are digital purchase contracts with tangible effects on the analog world. If a condition set out in the contract is not met, a corresponding measure automatically comes into force. For example, a forgotten installment payment could bring a car purchased with finance to a standstill. The idea of smart contracts is not new. Thanks to blockchain, however, such contracts can be handled much more efficiently and trustingly. Human checks are no longer required and the application of contractual conditions cannot be manipulated.
As a study carried out by the corporate consultancy company PwC on behalf of consumers' association of North Rhine-Westphalia and a survey conducted by the German Energy Agency show, blockchain technology is a major topic in the energy sector too. One possible scenario would be users who produce and sell electricity from renewable sources themselves – without having to involve an electricity company. In this case, blockchain guarantees transparent, quick billing. In New York, there is already a pilot project where users do exactly this with their surplus solar energy.
Record companies no longer needed
Spotify, the market leader for music streaming, is also looking to capitalize on the new technology and purchased a blockchain start-up in April 2017. This will give composers and copyright holders greater certainty: thanks to blockchain, they can see at any time who plays their music how often. The musicians will then receive any fees due straight from users – record companies, music agencies or banks are no longer needed.
Port of the future
While the list of possible applications continues to grow, the blockchain test phase in Rotterdam is entering its second year. What is more, the port company and the city authorities recently established a BlockLab in order to carry out even more research into blockchain solutions. “This step fits in very well with our goal of being the ‘smartest port’ offering the best, most intelligent solutions for the supply chain,” said Allard Castelein, General Director of the port company.