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What’s a mango got to do with it? Blockchain expert panel at McLeod

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Commentary

The panel, Blockchain: Where it’s Headed, at McLeod’s UC2018 conference was constructed to be a deeper dive into blockchain. The previous day featured the more standard “Blockchain 101” content that many in the industry continue to become more familiar with. If you need a brief catch-up, I’ve distilled it into four words. Ready? Blockchain is an “append-only decentralized immutable ledger.” That isn’t so hard, is it?

Actually, it is. There’s a lot of complex, abstract, and technical concepts to understand, and many in the supply chain want to know how it applies specifically to their field.

Understandably, industry participants want practical applications. They want to know what’s happening, and whether or not it’s an actual solution for their needs.

Toward that end, the panel consisted of blockchain experts, Ken Craig, Jordan Graft, and Dale Chrystie. Ken Craig is VP of special projects at McLeod. Jordan Graft is EVP of Triump Pay. Dale Chrystie is business fellow, blockchain strategist for FedEx. Each of the “blockchain rockstars,” or “blockstars” as I referred to them as panel moderator, are on the BiTA (Blockchain in Transport Alliance) Board of Directors. McLeod is a BiTA member as well, and if you haven’t yet heard of BiTA, founded in August of 2017, let’s just say it’s been a busy year.

Ken Craig gave an overview of what BiTA is doing. BiTA has 470 members and has received nearly 3,000 applications. It also comes from a diverse array of companies. Law firms, OEMs, service providers, IoT companies, TMS companies, trade associations (such as OOIDA), universities, industry participants such as carriers, shippers, rail, and air cargo companies. There are also insurance companies, brokerages, investment banking companies, consulting and audit services, marketing and recruiting agencies, and pharmaceutical companies. There are, finally, even real live blockchain companies.

For a little over a year now, BiTA has been organizing and performing important work with its standards committees: data formats, interoperability, finance, and technical compliance. There are also five BiTA think tanks investigating areas related to risk management, operations and asset utilization, driver marketplace, supply chain, and finance and business administration. 

About BiTA, Dale Chrystie says that “blockchain is a team sport,” and that BiTA members need to be the “parents in the room” and work collaboratively on how the many points of contact need to come together for the interests of the whole.

The panel also addressed the blockchain news of the day, which is Walmart’s [NYSE: WMT] open letter to leafy green suppliers that starting January 31, 2019 they will need to get on the blockchain train and adopt IBM’s [NYSE: IBM] Food Trust blockchain. Generally speaking, it is seen as a positive development for the adoption and fundamental understanding of entering blockchain into the food supply’s mainstream. Certainly, there are big questions such as how does BiTA get the standards in place that affects the big carriers. No one knows yet who will be impacted and to what extent. All we currently have is the letter.

We do have other questions, however, such as the proprietary nature of IBM’s blockchain and the pay-to-play aspect. Much like Apple [NYSE: AAPL] co-founder, Steve Wozniak has said in various iterations: “Access to a free internet should be an American principle,” we tend to think of the idea of blockchain’s “decentralization” as an open-source concept. In a sense it is, as Jordan Graft pointed out. Part of IBM’s blockchain is built in the open source Hyperledger Fabric network. Hyperledger Fabric is gaining momentum as the infrastructure for creating trust networks in a wide variety of industries.

Dale Chrystie also used the illustration that is now referred to as the “mango pilot.” Last year, Frank Yiannas, Walmart’s VP of food safety, asked his team to trace a package of sliced mangoes back to their source. It took them six days, 18 hours, and 26 minutes. After Walmart used the software developed with IBM to track mangoes from a farm in Mexico to U.S. stores over a 30-day period, the same exercise took 2.2 seconds.

Some food safety experts have criticized the application of blockchain in the food supply suggesting that the food is only as safe as the person entering the information. They argue that blockchain is perfect for completely digital assets, but the flaw is when you have a commodity. The panelists spoke briefly to these critiques suggesting that at the very least the reverse logistics of sourcing a bad product or bad player would at least be dramatically more efficient.

The panel touched on an array of other topics from smart contracts and how they might be applied, to the idea of protecting your data when companies want to provide “solutions” for what you can do with it, to what kinds of companies actually need blockchain and who could do perfectly well with just a nice IoT solution. They also touched on how cryptocurrencies and the idea of how tokenization still gets in the way for people trying to understand and utilize enterprise applications.

Dale Chrystie sees blockchain at about a 3-5 on a scale of 100 in terms of maturity. However, once the leaps start happening “you’ll see it at a 30 then a 70.” In other words, it’s hard to predict how the scalability of blockchain enterprise solutions will mature. Technology tends to grow exponentially. While some in the media seem to think that people are only joining alliances like BiTA due to FOMO (fear of missing out), it’s driven by a much more powerful reality, as difficult as it may be for some to grasp. Now, with Walmart’s most recent dictum, things are getting real (if they weren’t already). 

Dale Chrystie also offered another tangible illustration for how to assess the blockchain reality. He said, “I don’t know what’s going on inside my car when I’m getting from point A to B. I do know that I’m getting somewhere.” He went on to suggest that explaining how the internal combustion engine works would be hard to explain, but especially when it was in its infancy, no one was exactly sure how it might be used.

So, whether or not blockchain becomes “a whole new internet” remains to be seen, but there seems little doubt the dam of applications is breaking. Those who were too cool for school really will miss out—they’re already missing out.

In the Q&A afterwards it seemed to all come back to the mango, however. People wanted to know why it took so long to trace that mango back in the first place.

Four strategies for putting blockchain to work in transportation

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Blockchain offers remarkable opportunities to transform your business--that’s beyond dispute. What’s also indisputable is that organizations are hesitant to adopt blockchain because of a lack of trust—in the technology, with potential collaborators, and in the evolving regulatory environment.

What’s ironic is that blockchain, by its very definition, should engender trust because encryption and a single source of transaction truth, among other things, make blockchain essentially unhackable.

In the latest BiTA webinar, we reviewed the state of blockchain with industry experts. Mitch Hixon, Executive Vice President of Membership Engagement, BiTA spoke with Rachel Parker Sealy, Partner, PwC Advisory and Kris Kersey, Director, PwC Advisory, providing insights from PwC's 2018 Global Blockchain Survey of 600 executives from 15 territories.

PwC analyzed 250+ technologies to find out which advancements are having the biggest business impact right now. The result? What PwC refers to as the essential 8: artificial intelligence, augmented reality, blockchain, drones, Internet of Things, robotics, virtual reality, and 3D printing.

“What’s become really exciting as we start to explore blockchain and have its use case across industry sectors, it’s really the convergence of these technologies, and that’s exciting when you think of having blockchain in the toolkit.” As things stand, “nobody wants to be left behind,” PwC stated.

In speaking to the “tremendous potential” of blockchain, Kersey noted that in 2030, blockchain could generate $3 trillion in business value. The results of the 2018 Global Blockchain Survey revealed that 84% of executives have at least some involvement--with 15% having a live project, pilot, or proof of concept. And that’s just the beginning.

“Companies must confront blockchain’s trust paradox--a technology designed to foster trust is being held back by trust issues,” PwC found. “What is going to be the regulatory response to blockchain ecosystems being stood up” Kersey asked.

While the trust in the technology itself is still building, the challenge of bringing counter parties to work together also arose in the results of the survey. “How do I engender the trust of the people sitting at the table even before we do anything?”

“In the freight business, you serve almost every industry, so that presents somewhat of a challenge,” Sealy admitted.

In analyzing the results of the survey, PwC developed four strategies for blockchain implementation in the transportation industry:

  1. Make the business case by committing to new ways of working, starting small, and scaling out.

  2. Build an ecosystem by focusing on a cooperative few, broadening your network, and working across the value chain.

  3. Design deliberately and determine the rules of engagement in confronting risks early, considering privacy applications, and investing in data and processes.

  4. Navigate regulatory uncertainty by watching and not waiting to shape the trusted tech decision, monitor evolving regulation, and using existing regulation as a guide.

“It’s wise to be plugged into consortiums like the Blockchain in Transport Alliance (BiTA) to understand what direction the ecosystem and the industry is moving towards as decisions are being made,” encouraging listeners to work regulators into the ecosystem and give them a place at the table.

BiTA was formed by experienced tech and transportation executives to create a forum for the development of blockchain standards and education for the freight industry. Founded in August 2017, BiTA has quickly grown into the largest commercial blockchain alliance in the world, with more than 450 members that collectively generate over $1 trillion in revenue annually.

BiTA members are primarily from the freight, transportation and logistics industries. Alliance members share a common mission to develop a standards framework, educate the market on blockchain applications and encourage the use of those applications.

“Blockchain is rewiring commerce,” Sealy concluded. “Whether you lead or follow, start now.”  

For more information about BiTA, click here. To listen to a recording of the webinar, click here.

CargoX CEO: smart contracts reduced BoL transfer time to 4 minutes

( PHOTO: CARGOX )

(PHOTO: CARGOX)

Last month, CargoX made history by deploying a new kind of bill-of-lading for a container shipment from China to Slovenia: the Bill of Lading was actually a smart contract, a piece of software executed on the Ethereum blockchain. The maritime freight industry still uses paper bills of lading that take up to ten days to transfer ownership of cargo and settle payments—the equivalent of 400,000 trees worth of paper every year.

Using blockchain to accelerate the transfer of asset ownership makes perfect sense, because the very first blockchain, bitcoin, was designed to do just that: keep track of assets, solve the double-spend problem, and enable censorship-resistant transactions. CargoX’s shipment had four parties on its smart contract BoL: the Chinese exporter, the maritime carrier/logistics provider, the consignee in Slovenia, and the release agent. The CargoX ERC20 utility token (ticker: CXO) was used to power the computations on the Ethereum network. Although CXO is traded on secondary exchanges and has basically tracked the fluctuations of the larger crypto market—making it potentially undesirable as a medium of exchange for maritime shipping—the CargoX platform allows the use of fiat currencies as payments while relying on CXO to power computation.

Ethereum’s scaling problems have been much-discussed in blockchain media. Two major solutions have emerged: Casper, a scheme to move the network from the expensive, computing-intensive Proof-of-Work consensus algorithms to Proof-of-Stake, and Plasma, Ethereum’s shardingsolution that divides the blockchain into sidechains in order to reduce the number of nodes required for consensus. Notably, Casper has been recently delayed by 12 months.

What’s fascinating about CargoX’s smart contract BoL is that the team does not have to wait for Ethereum to dramatically increase its network throughput in order to reach scale. Bills-of-lading are actually some of the lowest hanging fruit for blockchain use cases in transportation and logistics. Unlike Visa transactions, which are extremely fast and extremely high volume, paper-based bills-of-lading take up to ten days to transfer back and forth between the NVOCC, exporter, and consignee, and transaction volumes are in the hundreds per hour rather than millions per hour. 

FreightWaves spoke to Stefan Kukman, the CEO of CargoX, by phone.

“What we wanted to do with the shipment is gather user feedback,” Kukman said, “because we’re developing a platform for other people—their voice and opinions are really important. In China I was sitting with the exporter, and the first thing he said was ‘why don’t you have this in Chinese?’ I had assumed they spoke English, and they did, but they made the point that if they wanted to transfer the bill of lading to a local 3PL, they could find a cheaper solution if it was in Chinese.”

The biggest surprise for CargoX, Kukman said, were the implications for the importer’s liquidity. The importer realized that it could have held onto its final payment for the shipment for another ten days without incurring any demurrage fees, because the transaction, once started, executed so quickly. 

“On January 24, we raised 7,000 Ethereum in our ICO in seven minutes and forty seconds, and ever since then, we’ve been ahead of schedule,” Kukman said. CargoX plans to take its platform live toward the end of this month, said Kukman, and so far, unlike many transport blockchain startups, the team is delivering ahead of the timeline outlined in its white paper.

“I would be happy 100-300 bills of lading per day by the end of this year,” said Kukman. “And considering the partners we’re signing with, that shouldn’t be hard.”

We also talked about the network capacity required by CargoX’s smart contract BoLs.

“We don’t need something really fast like Ripple,” explained Kukman. “In our business, the standard is 2-10 days, so if we do it four minutes, or even an hour, we’re doing great.”

The next step for CargoX, after opening its platform to the public, is putting Letters of Credit on a smart contract. Letters of Credit are commitments issued by banks to exporters at the request of the importer that payment be made.

FedEx Joins Hyperledger in further push for Logistics efficiency

FedEx the giant US courier company, proactive adopter of blockchain technology and BiTA member, has joined Linux hosted open-source project Hyperledger to further advance the use of distributed ledger in logistics, and transportation.

Hyperledger, which was started in December 2015 by the Linux Foundation and now has 270 members, was set up to enable member organizations to build blockchain-based industry-grade applications, platforms and hardware systems in the context of their individual business transactions.

FedEx has been a proactive adopter blockchain technology. Fred Smith, FedEx CEO said earlier in the year he believes that blockchain is the “next frontier” for global supply chains. In February this year, FedEx joined the Blockchain in Transport Alliance (BiTA), and Dale Chrystie told FreightWaves: 'We want to work on developing common standards around blockchain technology in the transportation industry, and we continually try to enhance the customer’s experience, and blockchain is tied to that.'

Kevin Humphries, Senior Vice President of IT at FedEx Services told Cointelegraph.com that blockchain technology has 'big implications' for supply chains, logistics, and transportation.

Walmart says ‘Get on the blockchain’ or ‘Get off the bus, Gus’

PHOTO: SHUTTERSTOCK.COM

PHOTO: SHUTTERSTOCK.COM

Good day,

Walmart Inc. [NASDAQ: WMT], in a letter to be issued Monday to suppliers, will require its direct suppliers of lettuce, spinach and other greens to join its food-tracking blockchain by Jan. 31. The retailer also will mandate that farmers, logistics firms and business partners of these suppliers join the blockchain by Sept. 30, 2019.

Walmart brought blockchain technology to the forefront now three times. First, by conducting the pork trial in China in 2016, and second with sliced mangoes in 2017 with IBM [NASDAQ: IBM], Dole, and Driscoll. It has now formed the Blockchain Food Safety Alliance with IBM, JD.com [NASDAQ: JD] and the Tsinghu University National Engineering Laboratory for E-Commerce to develop standards and partnerships to enable a food safety ecosystem, and to create a standards-based method of collecting data about the origin, safety and authenticity of food. Farm origination details, batch numbers, factory and processing data, expiration dates, and shipping details are digitally connected—within at least two seconds—to food items and entered into the blockchain at each step.

Cargill will soon offer consumers Honeysuckle White turkeys produced by family farmers. In select markets, consumers will be able to text or enter an on-package code to access the farm’s location (by state and county), view the family farm story, see photos from the farm, and read a message from the farmer, according to Meat + Poultry.

Did you know?

The heavy rain from Hurricane Florence has been gone for days, but rivers are still rising and thousands of people were told to plan to leave their homes on Monday before rivers reach their crest.

Quotable:

“Apple Developers are said to have designed parts of their computers on napkins in my dad’s restaurant.” 

—Preet Sivia, co-founder and chief business officer, Parade

In other news:

U.S. reliance on obscure imports from China points to strategic vulnerability

Corporations gained tariff waivers for raw materials and parts by arguing that China had become an indispensable supplier. (WSJ)

How Trump split Mexico and Canada in NAFTA talks

Mexico weakened Canada’s negotiating leverage when it conceded on some issues important to Ottawa. (Reuters)

Scant liquidity, continued spending and inflated deposits highlight Tesla's 10-Q disclosures

Tesla only had $230 million remaining under its credit agreement at June 30th, its main source of cash funding. (Forbes)

This driverless startup has one mission: save the future of Ford

Argo AI’s Bryan Salesky, with a billion-dollar investment from a Detroit icon, might be looking for another automaker to buy in. (Bloomberg)

OmniTRAX: Savannah Gateway Hub's road construction begins

Construction is underway to improve access to the Savannah Gateway Industrial Hub near the Port of Savannah, Georgia. (Progressive Railroading)

Final thoughts:

McKinsey sees a business model disruption in transportation. Increasing commoditization of vehicles will lead to OEMs staying focused on operational efficiency at the heart of its business, as they look towards alternative powertrain solutions to complement their diesel offerings. McKinsey expects disruptive competitors emerging from corners that have traditionally ignored the OEM industry, like the Silicon Valley, Tel Aviv, or Shanghai. Heid contended that differentiation through a product alone would no longer be feasible, and that mobility would change across major dimensions.

“On the people dimension, we have the aim for zero fatalities and accidents, as well as a shift from pure commuting time to value-added time. And on our planet, we further strive towards 100% clean technology and emission-free technology,” he said. “And on the business dimension, it is important to stay competitive, decrease transport costs and further gain in attractiveness.”

Hammer down, everyone!