More than Bitcoin

Industry gets on the blockchain

blockchain for supply chain verification
Checking out the supply chain. Source: IBM

Artificial intelligence is everywhere at this year’s Hanover Messe, among the world’s largest trade shows, with companies showing off intelligent machines that can monitor their own performance, and logistic chains that efficiently manage themselves without human intervention.

Within this vision of seamless interaction of automation hardware, software and services, blockchain is the buzzword, best known for the Bitcoin currency and its disruption of the finance industry. But Blockchain also has the potential to change the industrial world. It can help protect industrial production data, verify digital contracts and monitor the supply chain, all without any human intervention.

The International Data Corporation in the US estimates businesses will spend $1.8 billion researching blockchain solutions this year, and $8.1 billion in 2021. The World Economic Forum estimates blockchain could account for 10 percent of worldwide value in 2027.

The effects are already palpable in the finance industry: Spanish bank Santander estimates up to €20 billion ($24 billion) in savings for financial institutions by 2020 if they move international payments, bond trading and compliance to the blockchain.

André Schweizer, a researcher with the Fraunhofer Institute, likes to compare blockchain to the online encyclopedia Wikipedia: They both use a distributed system to evaluate information, replacing a central authority. But unlike Wikipedia, blockchain fully automates the processes of transparency and control.

Worldwide, businesses will spend $1.8 billion researching blockchain solutions this year, and $8.1 billion in 2021.

The integrity of the blockchain is maintained by everyone who works on it. For example, with Internet of Things applications, computers and sensors create a decentralized structure of verification of data. Mr. Schweizer says a main benefit of not relying on one central server is that it lowers your blackout risk.

The first popular application of the blockchain was Bitcoin and other cryptocurrencies that used the decentralized ledger to make financial transactions. The next generation of blockchain applications focus on the idea of smart contracts — digital transactions that can be executed without human intervention.

Shipping giant Maersk is working with IBM on a solution to streamline freight paperwork, making international trade faster and more efficient. Currently dealing with documentation accounts for one-fifth of physical transportation costs.

German logistics company JDA, which counts Heineken, Infineon and DHL among its clients, is researching blockchain solutions for managing supply chains. Hans-Georg Kaltenbrunner, vice president of industry strategy for JDA, says it could be a game changer for Germany’s grocery industry, which currently monitors its supply chain manually. “If supply chains were totally secured with blockchain, it wouldn’t be so easy for incidents like the notorious horse meat frozen lasagna to happen.”

Blockchain solutions are so appealing to industry because the data they contain is not easily manipulated. Pfizer estimates that about 10 percent of all medications sold in Europe are counterfeit. That would be much less likely if the pharmaceutical industry used a blockchain for verification.

The Hasso Plattner Institute of the University of Potsdam warns against assuming this distributed technology will solve all our problems. Researchers there do see possibilities for blockchain in logistics and the Internet of Things, but standardization is a problem. Machines have to be able to communicate with each other, across platforms and protocols, and that breakthrough is still to come.

Kevin Knitterscheidt is a journalist with Handelsblatt based in Düsseldorf. To contact the author: knitterscheidt@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!