Three things why you shouldn't consider using blockchain for industrial applications


With internet not only our lives have changed but also industry and manufacturing have changed. And the Internet of Things came, and industry again was challenged to move forward and to move beyond traditional industrial and automation systems. And then blockchain came, right? Wrong. No one was really aware of the blockchain technology until the rise of the Bitcoin. And after its debut and fast growth, only than blockchain gain more attention. Only after some time, people start to learn about the blockchain and potential applications of this technology beyond cryptocurrency, tokens and other financial applications.

First things first: Blockchain is not Bitcoin!

The blockchain is a digitized, distributed and secure ledger that guarantees immutable transactions and solves the trust problem when two parties exchange value. Cryptocurrencies like Bitcoin rely on blockchain to conduct transactions.

 

What doesn't work?

So if the blockchain is so attractive and promising, how come, it's so hard and unusual to see it used in the traditional industrial applications? Even more, there's a lack of applications out of the hyped financial business.

  • First, Blockchain consumes a lot, I mean a lot of energy. Well, to be honest, it is cryptocurrencies, which make blockchain guilty for a high power consumption. According to the Diginomist's BitCoin Energy Consumption, the Bitcoin energy consumption reached recently as much as 92% of Czech Republic energy consumption, which is a country with a 10+ million population.

  • Second, Blockchain is slow. This is again only partially true and it again relates to the blockchain most spread application(s), namely cryptocurrencies. It is estimated that Bitcoin only can do 7 transactions per second and for example, VISA system is capable of 24,000 transactions per second. It doesn't sound very promising for industrial applications. Yet, it is important to know, that cryptocurrencies are not the blockchain and as such IBM platform is capable of handling 1,000 TPS (transactions per second) and it seems we may soon see a lot of speed improvements in the blockchain TPS. Not only tens or hundred thousands but millions of TPS.

  • Third, it is not cheap as expected. Though there are many problems that could be addressed with blockchain technology, it is impossible to say whether economic efficiencies can be achieved, if we don't understand the costs.

 

With all these three drawbacks it seems it is really challenging to create a sustainable business model that delivers value to the industry and industrial applications. In general, there are some industries that jumped on the blockchain train earlier than others:

  • Banking and financing industries are early adopters of the blockchain technology in order to bring trust, simplicity & enhanced customer experience to financial services;
  • Insurance, by its nature, is very close to financing industry, mostly to revolutionize the trust that powers insurance with an immutable foundation of transparency and shared purpose;

  • Supply chain and logistics, especially retail and consumer goods to reinvent the product authenticity, operational excellence, and consumer experience;

  • Healthcare, related to EHR (Electronic Health Record) toexchange clinical data across organizations and enable patients to control their medical data to increase the quality of care;

  • A government, to ensure data stewardship to protect citizen information, maintain trust and ensure the accuracy of public records, which may sound like a good foundation for Smart cities and open communities as well.

 

How about more traditional production and manufacturing industry?

The best way to understand why and how to use the blockchain technology in the manufacturing and production industry is to focus on the use cases. This is important as the manufacturing and production industry is typically more traditional and it takes some more time to innovate and move from the well proven and established patterns and processes.

 

The use cases interesting for manufacturing and production companies

  • Digital products, which means that there is an instant and reliable access to any product produced, sold and maintained during its lifetime.

  • Supply chain management, where the information about goods, like quality, expire date, status etc. and type of logistics means used during the goods transported are always on a tip of your fingers or only click away, no matter if you are a manufacturer, a logistics company, a retail store or an end user.

  • Asset management is in the companies critical in many aspects and with the blockchain lots of them can be properly addressed, like preventing theft, reducing the cost of the maintenance and keeping all under control, despite they can also be mobile assets.

  • Lean production processes sound familiar to many manufacturing and production companies. Blockchain can help in establishing more transparent and trustworthy processes in between departments in the company and thus help optimizing a complex processes. This on the long run lower the costs of production and manufacturing.

  • Energy management is usually a very hot topic in the traditional industries, manufacturing, and production, as machines, factories and production facilities keep using lots of energy. With blockchain usually together with IoT there are many opportunities to more efficiently manage the energy consumption and even to innovate in terms of energy trading. Companies don't use energy (electricity) evenly all the time, and they could start actively participate in energy demand and supply market as part of the microgrids.


What's next?

If you don't know your pain, it makes no sense to jump blindly on the digital/blockchain wagon and expect a gain. Especially not tomorrow and for free. As you can learn today not only about the blockchain but also about the cases of innovative companies and early adopters, it makes sense to start here.

To learn more about the blockchain as technology and how it is and could be used in industry, especially in production and manufacturing, join us on June 18-19, 2018 at the Living bits and things 2018 in Bled, Slovenia or simply stay in touch with us joining the community.

 

Sources:


Author:

Tomaž Vidonja is CMO and head of customer development in Eurocon, d.o.o.
He's been running the IoT competence and innovation center and founder of the Living bits and things community.

© 2018 Living bits and things
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