What is Blockchain?

Blockchain is a technology that enables the processing and storage of data by following a unique methodology. Data is generally not stored centrally, but rather sent across a computer network onto a distributed ledger. These computers record each transaction on the ledger and maintain a copy of the blockchain. Data is stored in these blocks, which are linked to one another using cryptography. Each block contains a fingerprint of the previous block. This approach is particularly relevant for the following use cases:

1. Immutability – Data on the blockchain cannot be altered retroactively

2. Transparency – Data modifications are visible to everyone

3. Robustness – No single node holds critical importance to the database as a whole

4. Disintermediation – Transactions contain their own validity and approval, eliminating the need for a central authority.

Blockchain and the Logistics Sector

Blockchain applications in the logistics sector are still in the experimental stage. However, many of these applications carry real potential. The most concrete benefits observed in the sector are as follows:

1. Tracking product location and visibility of handling conditions:

All parties involved in the logistics process can track transaction steps in the blockchain application. The data is visible to all parties in the value chain, including the end consumer. This provides the consumer with visibility regarding the origin of the shipment and the handling conditions. Smart sensors and the Internet of Things (IoT) can facilitate this flow of information.

This application allows companies to verify compliance with handling requirements and mitigate unexpected damages or the loss of shipped products. It facilitates the supply chain by offering proof of legality for pharmaceutical shipments, proof of authenticity for luxury goods, etc.

2. Facilitating interaction between multiple parties within the supply chain:

The transactions of all parties involved in a logistics process are automatically tracked and recorded digitally on the blockchain application. Without the need for a coordinator, parties can access data directly in mutual trust. Thus, a faster and more transparent process is established.

As an example, Dubai has launched numerous initiatives to become a blockchain hub. Its goal is to integrate all stakeholders in the commercial process using blockchain solutions to make import-export operations more efficient. In the supply chain, paper-based contracts will be replaced by smart contracts where all parties can access real-time information regarding the location and status of their goods.

The use cases of blockchain are still in the experimental stage. Nonetheless, the described applications show that this trend holds the potential to reshape and improve the structure of logistics processes and information flows. Blockchain solutions enable peer-to-peer communication based on mutual trust. This largely eliminates the need for intermediaries. In the future, logistics companies will add their information to a public information pool, and information sharing with their customers will occur this way via blockchain applications. Unlike today, information will become open and accessible to all parties of a communication network.

Looking at these developments, we can expect that companies providing blockchain applications in the supply chain will see an increase in their importance and profit margins within the sector in the coming years. We must not miss out on the opportunities provided by blockchain applications for sustainable growth.