Blockchain Goes Beyond Crypto-Currency

Businesses are exploiting a technology created for bitcoin.

Starting next September, some logistics companies in Finland, Sweden, Estonia, and Latvia will begin outfitting shipping containers with a soda-can-size device that will beam out the cargo’s location, how much it’s vibrating as it travels, and its ambient temperature. The data will flow into a repository in the cloud so the entire supply chain can be informed if a shipment’s been delayed. That will prevent redundant e-mails and phone calls. “There are massive problems communicating between companies,” says Mika Lammi, who’s overseeing the project from his perch at Kouvola Innovation, a business development agency in southern Finland. “Instead of having separate databases, why not have a single blockchain where everyone can pool information?”

Blockchain is the technology created to support bitcoin, but it may soon surpass the crypto-currency in importance. In the first quarter of 2016, venture capital investment in startups commercializing blockchain eclipsed that in pure-play bitcoin companies for the first time, according to industry researcher CoinDesk, which has tallied $1.1 billion in deals to date.

he simplest way to understand blockchain is to see it as the evolution of the ledger, a record-keeping tool that’s been central to commerce since ancient times. Ledgers track the movement of assets, whether they’re parcels of land or shares in a company, but they have a big limitation: Access to the trove of data is restricted, ostensibly for security reasons, but often because that’s how its custodians make money.

In the age of the cloud, it’s possible for a network of banks or companies in a supply chain to maintain what’s called a distributed ledger that all authorized participants can tap into without needing to go through an intermediary. Another benefit of a blockchain-based system is that it’s more secure. Criminals cannot commandeer individual machines to gain access to a network, as they did with recent attacks on Asian banks, by way of fake messages on Swift, a platform banks use to communicate with one another. In February, that method was used to siphon about $80 million out of an account of the central bank of Bangladesh. “Hacking a blockchain is generally considered a low risk,” says Richard Johnson, a market structure analyst at Greenwich Associates. “Bitcoin has never been hacked.”

The technology is drawing interest from finance, shipping, manufacturing, and entertainment. Gilles Gravier, an adviser at Wipro, the Indian outsourcing giant, says blockchain today is where the Internet was in 1995. Companies will need “courage,” he says, to use the technology to “allow them to do what they haven’t done before.”