The impending shutdown of one of the largest digital shipping registries is likely a sign that expensive custom blockchain projects for businesses managed by consortia are doomed – and have been for a long time.
“They only succeed when all parties are on the same win-win page and there is clearly demonstrable ROI when the application is implemented,” said Avivah Litan, a vice president analyst at Gartner Research. “[This] seems like the final chapter in an era of costly corporate blockchain projects.”
This week, Danish shipping giant Maersk and IBM announced that after four years, their blockchain-based TradeLens digital ledger for tracking global shipments will close in the first quarter of 2023. The reason: lack of participation from all industry players.
In 2018, the TradeLens pilot project looked promising as it initially gained 94 early participants and 20 port operators who wanted to test how well a permissioned electronic blockchain ledger could make tracking global shipments less expensive and more transparent and efficient. Today, Maersk claims TradeLens covers 60% of global container trade.
But on Wednesday, Maersk’s head of business platforms, Rotem Hershko, said in a statement, “the need for full global industry collaboration has not been achieved. As a result, TradeLens has not reached the level of commercial viability necessary to continue its work and meet the financial expectations as an independent enterprise.”
“As of today, the TradeLens team is taking action to withdraw the offers and decommission the platform,” Maersk said. “During this process, all parties involved will ensure that customers are taken care of without disruption to their business.”
IBM, MaerskMaersk said it will continue to seek to digitize its supply chain and increase industrial innovation through other solutions to reduce trade friction and promote more global trade. What this effort will be remains unknown. Maersk did not respond to a request for comment, and an IBM spokesman said the company had nothing more to add beyond Maersk’s statement.
Unlike permissionless blockchain ledgers, such as Bitcoin or Ethereum, which allow anyone to participate, permissioned or private blockchains use centralized distributed ledger technology (DLT) that allows only approved members. Permissioned blockchains sacrifice some anonymity and decentralization to enable participants to see business transactions in real time, while gaining the benefits of digitization, which include speed and efficiency.
“I think the return just wasn’t there,” Litan said. “They spent more than they got back in terms of economic value. Also, IBM is no longer willing to take losses on their blockchain projects and has gradually exited their blockchain business.”
IBM has several blockchain-based projects underway, including Blockchain World Wire, a global blockchain-based payment network, and Food Trust, a blockchain-based electronic distributed ledger that can track and trace food supply chain data from farm to store shelf.
Although there are scaling issues associated with the Hyperledger Fabric platform on which TradeLens is based, the number of participants in the project was “simply not enough,” said Martha Bennett, a principal analyst and vice president at Forrester Research.
It is likely that only a small portion of the total participants in the global shipping industry have actually signed on to the project, Bennett said. None of the Asian/Chinese container shipping companies joined TradeLens, and one of the major European shippers is part of the Global Shipping Business Network (GSBN), a competing permissioned blockchain supply chain ledger.
“There are also more fundamental reasons, related to the challenge of digitizing documents, and particularly documents that span multiple jurisdictions,” Bennett said.
For example, electronic bills of lading aren’t new — they’ve been used for a couple of decades, and more should have been done to investigate the root causes of the failure to digitize shipping documents “before you throw blockchain at it,” Bennett said.
To this day, finding a workable, commercial model for an electronic shipping ledger remains a problem for all blockchain networks, Bennett said.
For TradeLens, technical issues were further compounded by the fact that the driving force behind the ledger was shipping giant Maersk, “which makes many wary of joining.”
“A network with a more neutral setup would probably have had a better chance; Adding IBM to the mix wasn’t enough, especially as IBM itself pulled back from the blockchain, Bennett said. “And let’s also not forget that the original plan to set this up as a Maersk/IBM joint venture didn’t work out for legal and regulatory reasons.”
Developed jointly by Maersk and IBM, TradeLens recorded details of cargo shipments as they left their origin, arrived at ports, were shipped overseas 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 via the permissioned blockchain ledger.
According to the TradeLens website, to date the ledger had tracked just under 70 million shipping containers and published nearly 36 million electronic shipping documents.
The good news, according to Litan, is that the cost of enterprise blockchain projects is coming down with offerings from 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, meaning they absorb the infrastructure (i.e. server nodes) and maintenance costs.
“These vendors sell simpler applications based on largely reusable code sets and technologies that support easier legacy system integration,” Litan said. “We are seeing success with these types of next-generation projects. Returns can be achieved through faster implementations than we saw in the first generation of expensive custom enterprise blockchain applications, such as TradeLens.”
