Business

What is Blockchain in Transportation? How is it Used?

Marlena Walburg

The technology revolutionizing the market for several years and continues, ranging from fintech to the supply chain and transport – blockchain, is gradually expanding to other sectors of the economy. It offers completely new methods of managing transactions, data and business processes, and the popularity of cryptocurrencies is fueling the blockchain hype even more. But this is not empty fame; in fact, blockchain defends itself with the benefits it offers, which are noticed by more and more businesses. The growing digitization and use of data and the need to standardize and improve security in various sectors lead to searching for solutions based on modern technologies. It is the blockchain that becomes a response to the growing problems of the contemporary world. For transport, without which many industries would not function well, or even at all, blockchain has hit the pace and is not going to stop. It has already done a lot of good, but the best is probably yet to come. See what blockchain means in transport and how it is used there.

How does Blockchain work step by step?

Blockchain can be defined as a chain of blocks containing information. It is an information storage architecture that guarantees the invariability of historical data. Blockchain is a decentralized, distributed and often public digital ledger consisting of records called blocks. Each block contains the block’s previous hash, timestamp, and transaction data. The timestamp proves that the transaction data existed when the block was posted to get to its hash. Since each block contains information about the previous block, they form a chain, and each additional block strengthens the blocks before it. 

For this reason, blockchains are resistant to modification of their data since data once written in a given block cannot be changed retrospectively without changing all subsequent blocks. The blockchain database is managed autonomously using a peer-to-peer network and a distributed timestamping server. By storing data in a peer-to-peer network, blockchain eliminates several risks associated with centralized data storage. A decentralized blockchain can use ad hoc messaging and distributed networks. Peer-to-peer blockchains have no centralized weak points that can be exploited by computer hackers and no central point of failure. For this reason, blockchains are resistant to modification of their data since data once written in a given block cannot be changed retrospectively without changing all subsequent blocks.

What is Blockchain in transportation?

Transport can draw a lot from blockchain; it’s almost a technology built specifically for the sector. However, more and more solutions are already being developed that support transport businesses, and it is expected that the share of blockchain in this industry will continue to grow.

How is blockchain used in transport? The first example is intelligent order delivery tracking. With the increasing demand for same-day and express (one/two-hour) delivery services, traditional tracking technologies may not be enough. Blockchain technology provides a scalable, immediate solution for tracking and authentication orders and thus improves the quality of services of transport and delivery companies. Thanks to blockchain-based innovative platforms, the coordination of a company’s documents and information in a shared distributed ledger minimizes paperwork and improves information flow and communication. In addition, smart contracts allow for faster approval of transactions or inspections (e.g. customs clearance), reducing the processing time of goods. Blockchain, therefore, provides a reliable data verification tool in the transport and logistics sector. The technology can also help you track truck fleets, routes, traffic incidents, and related operations. It contributes to greater transparency, security and minimization of potential fraud or threats.

How can Blockchain be used in logistics?

Blockchain helps overcome many challenges of the logistics sector. Many logistics companies are measured by low transparency and non-standardized processes, varying levels of technology adaptation or the imposition of manual operations such as data entry and paper documentation. These problems can be addressed and eliminated by using blockchain, which is already the case in many logistics companies. In addition to increasing the visibility and predictability of logistics operations, the use of this technology can accelerate the physical flow of goods. The traceability of goods can help build responsible and sustainable supply chains. In addition, blockchain-based solutions expand the possibilities and the emergence of new, more innovative logistics services.

Benefits of blockchain in transportation

Blockchain is an excellent solution for industries with numerous, quite dispersed processes, such as transport. It helps improve the coordination of all operations and provides a transparent and safe way of doing business.

  • Increased security: in addition to decentralization eliminating a central point of failure, the blockchain prevents fraud and effective attacks. It completely changed the data signature, identifying the fraud and the person who made it more effective. Each side has a copy of the original chain, thanks to which the system remains operational, even though many other nodes are damaged. In addition, even the most minor For this reason, blockchains are resistant to modification of their data since data once written in a given block cannot be changed retrospectively without changing all subsequent blocks. Blockchain is, therefore, one of the monitoring mechanisms in transport and logistics.
  • Better traceability – blockchain can track updates throughout the value chain and across all processes, thus providing information about the product at every stage of its life cycle, including production, delivery, logistics, distribution and other details. Therefore, it helps to accurately track all processes and detect where in the process a given event occurred. It has a positive effect on fraud prevention, precise origin checking, and thus ensuring the quality of the product and the entire transport service.
  • Faster and more straightforward process execution – blockchain does not require a lengthy verification and billing process as a single version of the reconciled share ledger data is available between all stack handles. As a result, it affects the faster execution of all processes and transactions. Blockchain also helps identify processed payments towards potential errors. Smart Contracts may also apply; the key feature is that they do not need a trusted third party intermediary between entities.
  • Time reduction – by enabling faster payments and settlement of transactions, blockchain significantly reduces the waiting time for the finalization of financial operations. It does not require a lengthy verification and billing process as a single version of the agreed share ledger data is available between all stack holders. 
  • Transparency – all transactions are immutable, and changes to public blockchains are visible to all. It gives greater openness to each of the interested parties.
  • Greater trust from consumers – thanks to better insight into the origin and life cycle of the purchased products, customers increase their faith in the brand. In addition, the blockchain certifies and verifies the identity of the interested parties. It results in faster transactions, no duplication of records and reduction of operating costs.

Example of blockchain in transportation

An exciting example of the use of blockchain in transport is the cooperation of IBM with ZF Friedrichshafen AG and UBS. The companies have joined forces to develop the first blockchain-based automotive trading platform for mobility services. The choice of technology was not accidental – blockchain will enable safe and transparent payments in the vehicle. Thanks to this, drivers will pay for tolls, parking, car sharing or receive payments for car-sharing conveniently and securely. One of the main essential elements of this project is developing a reliable, autonomous agent that will enable cars to react to their surroundings, navigate routes, and perform diagnostic checks without human intervention. First, the presentation initiated the ZF and UBS Car eWallet, allowing users to make on-the-go cashless payments for tolls, parking and electric charging. Then IBM joined businesses to work on the platform discussed above.

We can also find Toyota among the blockchain adapters. In April 2019, the Toyota Blockchain Lab was established, developing new ways of using blockchain technology in Toyota structures. TBL is to analyze new ideas for the use of blockchain in the activities of companies involved in the project and conduct appropriate tests. And yes, TBL has conducted testing as part of new endeavors focused on customers and how blockchain can improve their experiences. Another issue addressed is improving existing and creating new services by collecting and using available information on the vehicle’s life cycle. The focus was also on improving the efficiency of supply chains and the traceability of business processes. In addition, TBL is working on digitizing value and leveraging the digitization of assets like vehicles. Toyota Blockchain Lab plans to expand cooperation with other partner companies and continue to use the possibilities of blockchain technology and accelerate its implementation in business.

How does FedEx use Blockchain?

FedEx is committed to leveraging the potential of blockchain and revolutionizing shipping parcels. FedEx’s interest in blockchain began with a dispute resolution process that resulted in freight claims of several million dollars a year. The identified problem is related to a three-way dispute resolution scenario involving the recipient, the sender and the carrier. Inspired by the example of other companies that solved this challenge with blockchain, FedEx also chose to rely on it. In February 2018, FedEx joined the Blockchain in Transport Alliance (BITA) – the most prominent commercial blockchain alliance in the world. BiTA is an organization associating members mainly from the freight, transport, logistics and related industries. Allies have a joint mission to stimulate the implementation of new technologies. They achieve this by developing industry standards, educating members and others about blockchain and distributed ledger technology implementations, and encouraging the adaption of new solutions.  

How does DHL use Blockchain?

DHL, one of the global logistics and delivery giants, has seen the potential of blockchain and its benefits for its industry for years. Working with Accenture, the companies created a blockchain-based serialization prototype with nodes in six geographic locations to track drugs throughout the supply chain. This project aims to trace the end-to-end path of pharmaceutical products from origin to consumer, preventing manipulation and error. In addition, a bookkeeping track of these medications can be shared with interested parties, including manufacturers, warehouses, distributors, pharmacies and hospitals. As a result, safety standards can significantly improve, and the system can ultimately save millions of lives that counterfeit drugs could have killed.

Future of blockchain in transportation

We are likely to see more blockchain-based solutions combined with other technologies. Such mixes give really great results and increase the performance even more. Comprehensive Internet of Things and blockchain systems can be effectively used to collect accurate data about each stage of the shipping process. This helps to control incidents on the road and react in case of package damage. Besides, it is also a great comfort for consumers. This combination makes it possible to trace products for safety and quality, check their origin carefully, and avoid fraud and counterfeiting. Thanks to blockchain, automation of many processes are already entering, but it will definitely achieve an even larger scale in the future. Each activity can be tracked in a blockchain, so it is easy to identify potential or already occurring threats. Given which industry leaders have already started implementing or developing blockchain-based solutions, more and more companies may go in this direction. Although it may take time to adapt this technology in transport, setting the appropriate software and implementing it is gaining popularity and is very profitable.

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