Blockchain for business starts in the supply chain
Crypto hogs the headlines, but supply chains are more likely to be blockchain’s first practical use case, MIT experts say. Here’s how to proceed.
Will blockchain disrupt your industry? Maybe, but it’s not likely to happen anytime soon. At least that’s the opinion of many MIT experts who watch the blockchain space.
“In 2019, the actual live use cases of blockchain are predominantly for speculative investing,” said MIT Sloan professor Gary Gensler, a senior advisor to the MIT Digital Currency Initiative and former chairman of the U.S. Commodity Futures Trading Commission.
Michael Casey, senior advisor to the Digital Currency Initiative, agreed. “Across the board, actual productive use of blockchain for day-to-day business operations is still extremely thin. There’s no doubt about that,” said Casey, co-author of “The Truth Machine: The Blockchain and the Future of Everything.”
Neha Narula, director of the initiative, may have summed it up best as she moderated a panel at MIT’s 2019 Business of Blockchain conference. Referring to MIT’s first blockchain conference three years earlier, Narula said, “Maybe in 2016 we underestimated the amount of learning that needed to happen at all layers.”
Blockchain is a distributed ledger technology that creates an unchangeable record of transactions, facilitating interaction between participants without the need for intermediaries such as banks.
The technology is complex and not conclusively defined — some so-called blockchain applications are simply traditional distributed ledgers, lacking blockchain’s hallmark features of anonymity and immutability, experts have pointed out. What’s more, figuring out how and when to apply blockchain is challenging, and companies are struggling with the business model.
“We are on a giant, giant learning curve right now,” said Simon Whitehouse, senior managing director for financial services, growth, and strategy at Accenture, who also spoke at the conference. Most companies don’t yet understand “how blockchain can work, how it can add value, and why they have to cooperate and compete with partners at the same time.”
Different consortia have formed in different industries to try to collaborate on blockchain, but progress has been limited. “The reason it’s taking such a long time is not necessarily a technical problem,” said Casey. “It is a cultural and structural challenge getting different non-trusting parties to work together. Blockchain is a ‘we’ technology, not a ‘me’ technology.” Its biggest benefits are for the group, not a single company.
Although the initial enthusiasm was about finance, supply chains are more likely to be the first real, practical use case for the technology, said Irving Wladawsky-Berger, a visiting lecturer at the MIT Sloan School of Management.
“Financial systems are among the most ungodly complicated systems you can imagine,” he said, making the application of a complex technology like blockchain extra difficult. Supply chain applications can be simpler, and the potential value more straightforward.
Wladawsky-Berger said he can explain a supply chain application in the time it takes to deliver an elevator pitch, albeit a longish one (30 floors, he said). “If you are going to develop something complicated, being able to describe it simply is very important,” he said. “I think that’s a major part of why supply chain is the killer app of blockchain.”
As a shared digital ledger that creates an immutable record of transactions, blockchain is ideal for tracking the provenance of goods.
