The imminent shutdown of one of the largest digital shipment tracking books is likely a sign that expensive, custom, consortium-run enterprise blockchain projects are doomed, and have been for a long time.
“They are only successful when all parties are on the same win-win page, and there is a clear, demonstrable return on investment when the application is deployed,” said Avivah Litan, vice president, analyst, Gartner Research. . “[This] seems to be the latest chapter in the age of expensive blockchain ventures.
This week, Danish shipping giant Maersk and IBM announced that after four years, their TradeLens blockchain-based digital ledger for tracking global shipments will shut down in the first quarter of 2023. The reason: a lack of participation from all players. of the industry.
In 2018, the TradeLens pilot looked promising as it initially brought together 94 initial participants and 20 port operators who wanted to test how a blockchain-enabled electronic ledger could make tracking global shipments less expensive and more transparent and efficient. . Today, Maersk claims that TradeLens covers 60% of global container trade.
But on Wednesday, Maersk's head of trading platforms, Rotem Hershko, said in a statement that "the need for full global industry collaboration has not been met. As a result, TradeLens has not reached the level of commercial viability necessary to continue to operate and meet financial expectations as an independent business."
"As of today, the TradeLens team is taking steps to withdraw the offers and discontinue the platform," Maersk said. "During this process, all parties involved will ensure that customers are served without disrupting their business."
Maersk said it will continue to try to digitize the supply chain and increase industry innovation through other solutions to reduce trade frictions and further promote global trade. It is unknown what those efforts will be. Maersk did not respond to a request for comment and an IBM spokesman said the company had nothing further to add beyond Maersk's statement.
Unlike permissionless blockchain registries such as Bitcoin or Ethereum, which allow anyone to participate, permissioned or private blockchains use centrally controlled distributed ledger technology (DLT) that allows only approved members. Permissioned blockchains sacrifice some anonymity and decentralization to allow participants to view business transactions in real time while reaping the benefits of digitization, including speed and efficiency.
"I think the return on investment just wasn't there," Litan said. “They were spending more than they were taking in in terms of financial value. Furthermore, IBM is no longer willing to take losses on its blockchain business ventures and has phased out its blockchain business.
IBM has several blockchain-based projects underway, including Blockchain World Wire, a blockchain-based global payments network, and Food Trust, a blockchain-based distributed electronic ledger that can track and trace the supply of food from the farm to store shelf.
Although there are scaling issues associated with the Hyperledger Fabric platform that TradeLens is built on, in the end, the number of project participants “just wasn't enough,” says Martha Bennett, principal analyst and vice president at Forrester Research.
It is probably only a small fraction of the total number of participants in the global shipping industry that actually bought the project, Bennett said. None of the Asian/Chinese container shipping companies have joined TradeLens, and one of the major European carriers is part of the Global Shipping Business Network (GSBN), a competing licensed blockchain supply chain registry.
"There are also more fundamental reasons, related to the challenge of digitizing documents, and especially documents that span multiple jurisdictions," Bennett said.
For example, electronic bills of lading are not new: they have been in use for a few decades, and more should have been done to examine the main reasons why scanning of shipping documents failed "before running the blockchain on them". Bennett said.
To date, finding a viable business model for an electronic shipping ledger remains a challenge for all blockchain networks, Bennett said.
For TradeLens, the technical problems were compounded by the fact that the driving force behind the ledger was shipping giant Maersk, "which made many reluctant to join."
“A network with a more neutral setup would probably have had better luck; adding IBM to the mix was not enough, especially since IBM itself withdrew from the blockchain,” Bennett said. "And let's also not forget that the original plan to create this as a joint venture between Maersk and IBM didn't work out for legal and regulatory reasons."
TradeLens was co-developed by Maersk and IBM and recorded the details of cargo shipments as they left their origin, arrived at ports, shipped abroad, and arrived at their final destinations.
During the transportation process, all parties involved in the supply chain can view tracking information such as shipment arrival times and documents such as customs clearances, commercial invoices, and bills of lading in near real time through the general ledger. Blockchain Authorized.
According to the TradeLens website, to date, the ledger has tracked just under 70 million shipping containers and published nearly 36 million electronic shipping documents.
The good news, according to Litan, is that the costs of enterprise blockchain projects are falling with the offerings of new Enhanced Blockchain as a Service (EBaaS) providers such as ConsenSys, Dragonchain, Kaleido, ShelterZoom, Settlemint, and Vendia. .
EBaaS service providers offer to run applications and other business solutions on their own infrastructure, which means they absorb the infrastructure (ie server nodes) and maintenance costs.
“These vendors sell simpler applications based on widely reusable code sets and technologies that support easier integration of legacy systems,” Litan said. “We are seeing success with this type of state-of-the-art projects. ROI can be achieved through faster implementations than we have seen in the first generation of expensive custom enterprise blockchain applications, such as TradeLens.
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