This could be the end of the Enterprise Blockchain

While cryptocurrency was always a dubious proposition, in my opinion, blockchain technology is at the heart of it Bitcoin and the many thousands of other digital symbols held some legal promise. A distributed ledger with records that cannot be changed afterwards and without the need for a central authority can be thought of as useful in certain applications.

One of these applications was global trade. The process of moving cargo from one country to another, often through multiple modes of transport, is a nightmare of paperwork and manual processes. In 2018, tech giant International Business Machines (IBM -0.10%) and shipping juggernaut Maersk (AMKBY -0.62%) launched TradeLens, a blockchain-based platform, to tackle this problem.

Early success, but an ultimate failure

TradeLens scored some early victories. During a pre-launch trial of the platform, the system effectively reduced transit times in some cases by eliminating tedious steps in the process of moving cargo from source to destination. In mid-2019, five of the world’s six largest ocean liners used the platform, and it covered more than half of all ocean container cargo. It seemed to be reaching a tipping point.

While TradeLens was co-developed by Maersk, competitors jumped on board due to the nature of blockchain. Each operator could operate its own nodes on the network, as could other participants. Everyone benefited from the digitization of paper-based processes, and no single entity had more power than another.

Unfortunately, even with initial traction, TradeLens failed to win over enough of the industry. IBM and Maersk announced in November that TradeLens would be shut down by the end of the first quarter of 2023. Although the platform was viable, “the need for full global industry collaboration has not been achieved,” the joint press release said. TradeLens worked, but not as a commercially viable business.

The global shipping industry may eventually shed its old practices, but TradeLens will not be the catalyst for this change.

Little hope for blockchain

Global shipping seemed like the perfect application for blockchain technology. The industry has a large number of players worldwide who exchange information and paper documents, making it a situation ripe for digitization. While TradeLens worked on a technical level, it just didn’t work as a business.

Any blockchain project works against network effects. A blockchain-based network is largely useless until it attracts a large enough number of participants. Among the things that make it difficult are technical complexity and upfront costs. The Wall Street Journalciting experts, reported in December that blockchain adoption hit roadblocks due to the complexity of companies adopting the technology, increased computing power requirements compared to traditional solutions and higher costs compared to standard databases.

The Journal the article cited a few projects other than TradeLens that had had serious problems. Walgreens Boots Alliance toyed with the idea of ​​using blockchain technology to manage vaccine distribution, but it was much faster and easier to get something simpler up and running. In another IBM initiative, the technology giant and retailer Walmart used blockchains to track products through the supply chain. This effort has only added one additional product over the past four years, as problems arose in getting providers without digital record systems on board.

Whether blockchain is the best technology for these applications is not clear. But the best technology doesn’t always win. What wins is the technology that gets widespread use and hits critical mass. Given the experience of companies that have tried to roll out blockchain-based solutions over the past few years, these solutions appear to be too complex and expensive to really work in any real-world environment.

While the crash in cryptocurrency prices has probably helped to cool interest in blockchain technology, it is also becoming clear that the technology is not a game-changer after all.