Getting up to speed on blockchain

This slide displays the basics of how a smart contract would work.

McLeod Software’s Ken Craig delivers presentation on blockchain basics to BiTA members

While attendees at the recent Blockchain in Transport Alliance (BiTA) meeting in Atlanta were there because they are members of the blockchain organization, there were varying degrees of knowledge of the emerging technology. Some are part of companies actively working on blockchain projects while others are aware of the potential disruption the technology is set to unleash on the transportation industry and want to be part of an organization that is dedicated to building blockchain industry standards and promoting educational efforts.

Regardless of where they are with their blockchain knowledge, though, all were engaged by Ken Craig, senior vice president of special projects for McLeod Software, as he delivered an energetic and entertaining primer on Blockchain 101. 

“We’re just part of a whole integrated supply chain; we can’t just go off and do our own trucking thing,” Craig told the audience.

“EDI was a standard, but it was never standardized. Everyone has their own EDI. What we need to do with this consortium (BiTA) is avoid this,” he added. “We need to avoid this. We have an opportunity…we’ll never be able to achieve all the promise and hope if we don’t [work collaboratively].”

Craig walked the BiTA members through a brief history of blockchain, tried to separate some of the hype and confusion and concluded with some of the “dirty little blockchain secrets” that no one will talk about.

By way of noting the interest in blockchain, Craig pointed out that the best attended session at the most recent McLeod User Conference was on blockchain, with over 200 attendees.

Sticking with the Blockchain 101 theme and a “gentle introduction” to the technology, Craig explained that blockchain is a “distributed secure ledger [but] obviously, it’s a lot more than that,” he said.

 The differences in how a traditional network is set up compared to a Peer-to-Peer model running on blockchain technology.
The differences in how a traditional network is set up compared to a Peer-to-Peer model running on blockchain technology.

Blockchain provides every participant in the chain a copy of the ledger and all parties can review previous entries or record new ones with the links between each block protected by cryptography so they can’t be changed. The entire blockchain is based on a peer-to-peer (P2P) network as opposed to a centralized network where all transactions are conducted with a single computer point.

Craig strongly noted that blockchain is not a database and that the data that appears on a blockchain must still be inputted into a real database for analysis and analytics. “[Blockchain] is not a process replacement,” he said. “It’s not intended to replace what you already have in place, it’s to augment EDI or whatever you have in place.”

The type of blockchain that will likely be used in transportation is a “permissioned” blockchain, Craig explained. Permissioned blockchains are private blockchains where participants need a “key” to access the chain. This will allow businesses with the proper key to see transactions within the blockchain, but it will not allow the general public to access any of the data within the chain.

Second-generation blockchain frameworks are now in development, Craig said, including Microsoft’s “Coco Framework.” Current generation frameworks include R3, Ethereum,  Hyperledger, and Ripple.

The triple ledger nature of blockchain (meaning it adds cryptography proof to the traditional double-ledger accounting standard) will help it develop into a transformative technology that allows the introduction of new technologies to the industry.

“Smart contracts, I think, are what is really going to deliver on the promise of blockchain,” Craig said. “The smart contract is going to be a great thing.”

Smart contracts are digital contracts between parties that feature triggers inserted into the blockchain using code. When a trigger is activated, the contract automatically executes the action, such as a payment.

McLeod has been working to build tools that can operate on a blockchain, Craig noted. The company recently introduced a smart contract option that will allow companies to build smart contracts.

Within the trucking ecosystem, Craig noted that areas where blockchain can be utilized may include fraud detection, theft prevention, dynamic optimization, vehicle maintenance, quality assurance, performance history, capacity monitoring and payments and pricing.

To sum up his presentation, Craig went through the “10 dirty little secrets (that most blockchain advocates won’t tell you).”

They are:

1. Trust in a permissioned blockchain is determined by the permission mechanism itself (which may include an actual contract) and not cryptography

2. If the only reason to use cryptography is for stewardship of the data you probably don’t need a blockchain

3. The real power of the supply chain blockchain lies in smart contracts

4. Bad processes or master data management will not be improved or corrected by a blockchain

5.       Blockchains do not scale linearly with increasing nodes and can’t handle huge volumes of data

6. First-generation supply chain-focused blockchain solutions will largely be proprietary

7. Most proprietary blockchains will not survive in a standards-based environment and will ultimately be discarded

8. Blockchains exhibit generally poor performance due to overhead of consensus mechanisms, signature verification and redundancy

9. Access to the private key file that unlocks a blockchain should be restricted because the ledger could be accidently corrupted.

10. In a nutshell, if you want to store some immutable data with no central control on a fault tolerant robust system, blockchain is for you, however, it will come at a cost of performance and scalability.

In the end, Craig tried to portray the important role blockchain will play going forward, something that all in attendance can agree on.

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Brian Straight

Brian Straight covers general transportation news and leads the editorial team as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler.