What is blockchain anyway?

So what is this blockchain and do I need to worry about it? According to the Transport Systems Catapult (TSC), the not-for-profit innovation hub in Milton Keynes, blockchain “is the distributed ledger technology (DLT) behind Bitcoin [with] the potential to revolutionise many areas of the digital world, including the intelligent mobility (IM) sphere. As a trusted, decentralised, distributed, pseudonymised database, there are many opportunities for blockchain to address challenges that, so far, have proved impossible to solve. From data privacy to logistics, the potential applications of blockchain for IM are numerous, and these should be mapped, and priority areas identified for exploration.”

Blockchain has been compared with the internet, in as much as it is an underlying technology that will enable the development of market-specific applications. As such it is not necessary to fully understand the protocols and standards used to enable blockchain any more than it is essential to know what TCIP or URL mean for the internet.

Early adopters of blockchain include the financial technology (fintech) sector, where the fast-growing cryptocurrencies like Bitcoin and Ethereum use blockchain for its security and ability to ensure the anonymity of traders.

While many of the first transport applications of blockchain are in the field of mobility as a service (MaaS) such as shared car ownership (especially with the widely anticipated arrival of autonomous electric vehicles) and public transport, a couple of container shipping lines are developing blockchain-based applications.

Shipping applications

IBM and Maersk have a joint supply chain and logistics project to digitise, manage, and track shipping transactions while Odessa-based shipping company Varamar Group is developing ShipNEXT which aims to match ships with loads in the bulk, container and general cargo markets.

The TSC has been working closely with the University of Sheffield to study the application of blockchain in transport and regularly holds seminars on the subject.

At a recent event, consultant John Palfreyman explained that blockchain is useful when assets – tangible or otherwise – flow across networks. These flows are recorded in ledgers, and the key features of blockchain is that they are distributed and could be updated by every trusted partner in the network, rather than one organisation holding a single database of the entire transaction process.

So, for example, instead of a shipping line holding a central record of where a container is, what is in it and who is currently handling it, every player in the journey could update the distributed ledger. This in theory makes the data more secure as it is held in numerous locations rather than one easily-hackable central database and more accurate and up to date, as each ledger is updated instantly with the correct information.

“All members have their own ledger to record the assets,” he said. “Transactions are trusted and agreed by all members of the network.”

The other advantage is reduced costs, as Palfreyman estimated that 20% of some businesses’ costs are in internal and external auditing of data or assets, something which could be eliminated or greatly reduced if the data could be trusted.

With blockchain, networks can be closed, where only certain organisations have permission to update the distributed ledger, or open, where anyone can have access to the network. “All businesses can share the ledger and privacy settings determine who sees what,” said Palfreyman.

Immutability

Another feature of blockchain is ‘immutability’, meaning that once an entry has been made it cannot be changed, not even by the company making it. That makes it vital that every partner in the network is trusted to make accurate entries that reflect reality – it would be a breach of trust if for example a haulier entered the fact that a container had been collected from a port and delivered to a customer if in fact it was sitting in a yard somewhere awaiting collection by a subbie.

Charles Carter, blockchain lead at the TSC, said: “If the data is not valid in the first place there is no point putting it on a decentralised ledger where it becomes immutable.”

He added: “It is rubbish to say that just because the data is decentralised it is secure. You still need data security measures and compliance with GDPR.”

Palfreyman said that the three key challenges facing freight and logistics were costs v performance, supply chain integrity and carbon costs. “Blockchain saves time, cuts cost, reduces risk and increases trust,” he said. “UK transport will not be the first mover but can learn from other industries.”

Trust

The issue of trust was raised by Victoria Adams, principal of US government programs at ConsenSys.

She said that we had “barely scratched the surface” of blockchain’s potential, and it is able to “incentivise whole different sets of behaviour”.

“It is like the internet in 1992,” Adams said. “It will revolutionise the world and we can avoid the mistakes we made then.”

ConsenSys is working on 30 different applications of blockchain, including a US port that is looking to use it to manage freight flows in and out of the port. But because blockchain requires trust the problem, Adams said, was that “truckers are not the most trustworthy people so the port wants to keep track of who is doing what and where the cargo is going”.

Heathrow Airport is also interested in blockchain because of the high value of freight moving through the airport. Simon Brown, ‎IT design lead - airfield operations at Heathrow, said that while the airport only handles 1.7m tonnes of cargo each year, this represented 30% of UK international freight traffic by value. “It all happens despite the IT systems, not because of them,” he said. “Cargo is often turned away because of poor paperwork and if we could consolidate it that would make our job a lot easier.

“We probably need a permissioned blockchain.”

Gospel truth

Ian Smith, CEO of Gospel Technology, said Gospel was probably “the first practical enterprise-level application of blockchain”. The company describes Gospel as “a platform built using distributed ledger technology that allows your organisation to securely share and track all digital information across your decentralised architecture, absolutely confident of its provenance, usage history, integrity and authenticity”.

Smith said the technology was ideal for transport which was “by its nature decentralised and needs to be connected, trusted and private”.

Accountants Ernst & Young (EY) worry about the drop-off in auditing that distributed ledgers could bring, and so it too is moving into the blockchain space with its Tesseract platform.

Designed for the brave new world of MaaS, Tesseract “facilitates fractional vehicle ownership, shared use and seamless multimodal transport and it will help lay the groundwork for how autonomous vehicle fleets can be owned in the future and provide access to a variety of on-demand mobility options”.

Philipp Schartau, director of advisory, innovation and growth at EY, cited Uber, which is a taxi platform where the driver owns and maintains the car. “When they are driverless, who will own the car?” he asked. “It will be the same for autonomous commercial vehicles. The problem is that vehicles are not used enough, which can be improved by shared ownership. Blockchain is the key enabler of fractional ownership.”

EY has created its own cryptocurrency or token – the cube – to enable fractional owners to buy a share of a vehicle. “There will be smart contracts and automated transactions based on usage data,” said Schartau, “which all happens instantly. In logistics this will mean increased asset utilisation and vehicle multi-purposing.”

Shared ownership of any vehicle requires trust of another kind – that the last user leaves the vehicle clean, tidy and undamaged ready for its next job.

Further reading

IBM’s ‘Blockchain for Dummies’

The Holmes report for the House of Lords ‘Distributed Ledger Technologies for Public Good: leadership, collaboration and innovation’