“What is blockchain and how does it work?” You may have heard this question at the Thanksgiving dinner table this year, or maybe you’ve seen a few headlines in the news about it. But what is it exactly?

If blockchain has you scratching your head, you’re not alone. Roughly three out of four transportation professionals don’t know the answer, at least according to a current poll.

But truck drivers, shippers, and logistics professionals are among those who could benefit the most from blockchain’s potential applications. No matter your role in transportation, working to understand blockchain’s impact on logistics should be a priority for you.

What is Blockchain Technology?

Blockchain is a distributed database that allows users to track and trade virtually anything of value. Originally developed for use with Bitcoin digital currency transactions, blockchain technology allows users from any location to add records to a system, contributing to a shared information trail. While anyone can add a record to the blockchain, no one can change or delete existing information—making it permanent and more reliable.

Imagine it literally as a chain. Each link is a piece of information added to the database as a shipment moves through the supply chain. For example, a shipper adds a digital “link” when the shipment leaves the factory. The truck driver adds another when he picks up the load. A warehouse will add another link upon accepting the shipment. And so on.

How exactly will links get added?  And who will keep track of all the transactions?  The answers to these questions are unknown at this point, but looking at how Bitcoin works can give us clues:

  • Users typically buy Bitcoin through an exchange service and spend Bitcoin through merchants or individuals willing to accept the currency.  Every time the currency switches hands, that information is sent to Bitcoin miners behind the scenes.
  • It’s then the job of miners to confirm those transactions and write them into the general ledger.  Miners are volunteers that use special software to validate a transaction by solving a complex mathematical equation. Once a miner solves the equation, they send that information to all other miners in the network to check their work.  This video does a good job explaining Bitcoin mining further: http://bit.ly/2nxNxsp.
  • In return for their service, miners are issued a certain number of Bitcoins, which creates an incentive for more people to mine.  The more miners there are, the more secure the network becomes.

Who will become miners for supply chain transactions remains to be seen, but some type of system like this will need to emerge for a blockchain to work. In any case, most people who will benefit from the blockchain will not need to understand mining or complex mathematical equations. They will simply carry out their normal day-to-day tasks, and the blockchain will work behind the software platforms they use every day.

What Can be Done with Blockchain in Logistics?

We’ve written before about the benefits to leveraging the Blockchain in logistics, from greater transparency to better scalability. Several food shippers have already been testing it out (more on that later). Below are a few more ways that blockchain could potentially be used:

  • Monitoring capacity and loading efficiency. Internet of Things (IoT) devices and sensors in trucks determine how much space is available, and automatically record the information in the blockchain for all users to see. Sensors can also measure load weights, estimate delivery times, and determine a shipment’s costs (IBM).
  • Settling payment disputes.  Blockchain technology allows for automated “smart contracts,” which control and record transaction details in the system. Because transactions are managed by all participants in the permanent blockchain database, the payment process is transparent, standardized, and streamlined.  This minimizes disputes and lowers administrative costs (Trucks.com).
  • Tracking truck maintenance. Recording scheduled maintenance, repairs, and damages for every truck in a fleet can be cumbersome. However, the blockchain creates a shared, singular, and reliable record of every detail (IoTI).

Blockchain Protects the Food Chain

Blockchain is also gaining popularity for its ability to protect commodities, especially within the food supply chain where food safety is always a chief concern. The idea isn’t completely new, but more and more food companies are testing the blockchain’s potential in tracing contaminated shipments to their source, as well as monitoring food shipment temperatures. Most notably, IBM has partnered with Nestle, Walmart, Tyson, and other companies to explore blockchain technology and its implications for food safety. While still in the testing phase, results could lead to promising approaches soon (Reuters).