Emerging Technologies in Transportation Casebook/Blockchain

Blockchain in Transportation

This case reviews the use of Blockchain in the Transportation Field. It is the collaborative work of Alexander Merker, Farida Ibrahim, and Jephthah Nti, graduate students enrolled in George Mason University's Transportation Policy, Operations, and Logistics Program at the time of writing. The following casebook examines the uses and policy challenges associated with blockchain technology in the transportation field. It was produced as an assignment for George Mason University's Emerging Tech, Transportation & Public Policy graduate course, taught by Dr. Jonathan Gifford.

Case Summary

Carrying large volumes of goods and people, the transportation and logistics industry require strong processes of accountability and security to ensure long-term success. Blockchain, an emergent computer technology, offers potential solutions for these age-old problems. Rising to prominence as the framework for BitCoin, one of the first digital currencies, Blockchain’s fundamental features of strong accountability and security have led to a plethora of hypothetical uses, with many already brought into reality. For transportation, likely one of humanity's oldest industries, the introduction of this new technology has been slow but steady. Overall, the technology appears poised to become a bedrock of operations for nearly all businesses in this field.

Blockchain

A simplified rendering of a "block" in a Blockchain

Blockchain, also known as distributed ledger, is a computer system that utilizes a peer-to-peer network of computers to facilitate a log of transactions within the network. Each transaction, known as a block, has its own signature known as a hash. Each new transaction is tied to the last and creates a lineage which is known as a blockchain. The creation and history of each blockchain is shared in a digital ledger among many different computers in a network known as nodes. Each node must be in agreement on the authenticity of each hash. Because the hash has been distributed amongst nodes that are physically separated and ideally controlled by differing parties in a network, forging a hash or otherwise altering it requires alteration on all nodes. This system makes it difficult, though not impossible, to alter. This system allows for an extensive log of information, which can be used for transactions or data storage applications and is easy to audit for validity. Bitcoin is an example of a blockchain technology, as it utilizes the technology to record all transactions amongst its digital currency.

Annotated List of Actors

Road Transportation

• General Motors: Developing blockchain network for autonomous vehicle data sharing across the passenger vehicle industry

Aviation

• Honeywell Aerospace: One of the first aerospace manufacturers to incorporate blockchain into its product line and sales

Maritime

• TradeLens: The first significant shipping consortium established specifically with the utilization of Blockchain in mind. Includes the establishing partners:
  • IBM
  • Maersk
• Global Shipping Business Network (GSBN): A competing consortium to TradeLens. Includes the establishing partners:
  • CargoSmart
  • Oracle

Blockchain in Transport Alliance (BiTA) This is an organization which comprises members from almost all of the transportation industry. It is a member-driven organization where members share a common mission of ensuring that the various industry stakeholders adopt and develop the technology to help meet its demands as time evolves.

Timeline of Events

1991: Stuart Haber and Scott Stornetta introduce the concept of time stamping digital documents to verify authenticity.

2000: The theory of cryptographic secured chains and ideas on how to implement it is published by Stefan Konst

2002: David Mazières and Dennis Shasha took the concept further, studying how blocks can store data

2005: Nick Szabo, a computer scientist, proposed a new block chain based currency called ‘bit gold.

2008: Satoshi Nakamoto (A Pseudonym) published Bitcoin: A Peer-to-Peer Electronic Cash System, an outline for what would become BitCoin

2009: BitCoin, one of the first Blockchain-based digital currencies, is launched

2009: Nakamoto mines first successful block transaction

2014: Blockchain’s potential in supporting other kinds of operations not only that of cryptocurrency is realized. This leads to the birth of Blockchain 2.0 and attracts a lot of investment by investors.^,

2017: Blockchain in Transport Alliance (BiTA) is founded which is currently the largest commercial blockchain alliance in the world that generates an annual revenue of over $1 trillion

2018: Competing Blockchain-enabled shipping networks TradeLens and the Global Shipping Business Network are launched

2018: Honeywell Aerospace launches its GoDirect portal, which utilizes Blockchain in sales of its aviation products to customers

Identification of Policy Issues

Positive Attributes

A simple illustration of a Blockchain

The primary benefits and uses of blockchain technology can be broken down into three categories:

• Security: Blockchain’s interwoven structure provides strong anti-tampering defenses, so long as the distributed network it is built upon ensures no single actor or group of actors own more than half of all nodes.
• Auditing: The use of lineage-based chains and distributed reporting of interactions allows for quick and accurate audits of all transactions occurring in the network from any node. This also provides any actor within a network the ability to audit other members of the network.
• Easy Access To Data: The process of logging all transactions allows for each node to contain all data on the network, providing for immediate access to a log of all transactions. The distribution of this information across many nodes also provides redundancy in the case of data loss at a node.

These benefits provide a strong use case in transportation, which requires both security and accountability in the high volume, high value transactions on which business and organizations in the field are built.

Negative Attributes

Like many new technologies, the early stages of development and adoption are susceptible to policy concerns that may hold back the mainstream adoption. Blockchain technologies are no different and pose an even greater policy debate due to its ability to create new ways to facilitate the transfer of assets and verify transactions which can render traditional ways of verifying transactions obsolete. Subsequently, a few key issues related to blockchain are listed below:

Privacy/security concerns

One of the fundamental issues of blockchain is how to use the technology without violating privacy. Although there is potential for blockchain to facilitate increased trust and security, there is also a potential for its features to make secured data open to cyber-attacks. Block chain operates on an add only data process where data recorded is permanently stored and cannot be removed or deleted. Thus, its immutability remains one of its greatest advantages and simultaneously the most vulnerable feature. Although a difficult task, if hackers manage to obtain a majority of computing power greater than 50% (51 % percent attack) in the node they can gain access to data stored on the distributed ledger system. The data on the blockchain does not contain personal identifiable information; it is still a risk that operating data such as transaction details can be illegally obtained.

Legislative Action

With the emergence of block chain technology the issue of its regulation has become increasingly relevant. Governments and policy makers require a deep understanding of blockchain technology in order to develop policy and regulatory frameworks. However, as a novel technology some experts and policy makers are uncertain about the capabilities of this technology. As a result, it is often debated and contested on which legal and regulatory frameworks should be implemented and/or amended to support the technology. Furthermore, there is a certain obscurity associated with components of the technology that makes reaching a consensus difficult. For example, do we treat smart contracts as traditional agreements that are legally binding?. Smart contracts are a digitized form of traditional agreements that are coded, and effectively computer programs, which have gradually gained leverage in society as they first became legal in the UK.

The implementation of block chain technology is a gradual process that involves legal considerations that will define what is plausible and/ or practical. For example, Arizona introduced House Bill 2417 in 2017, this bill validated smart contracts and made it legally a permissible and binding contract. As of 2015, 5 states such as Tennessee, Nevada, Delaware, Ohio and Wyoming have followed suit enacting block chain legislation.

Additionally, as this technology transcends borders it is necessary to develop standards on the technological level to ensure interoperability and cross-border exchange (allen et al). This would require a combined effort from public to private partnerships and national and international authorities to make the new and updated standards work.

Narrative of the Case

Blockchain’s Use in Transportation

Transportation and logistics networks, whether they be land, air, or sea-based, can all benefit in one way or another from the enhanced security and accountability provided by blockchain technology. The data collection aspect of Blockchain is particularly valuable in these industries, as people and goods are transported in large volumes and blockchain provides transportation organizations with a streamlined and secure method of tracking and accounting their shipments.

Road Transportation

Blockchain technologies can offer significant advantages in the movement of goods and people by road. The commercial movement of goods is information intensive and requires extensive communication between multiple participants. Blockchain technology can be beneficial through this process by ensuring that these parties are interconnected and that the flow of the information across shippers, carriers, customs agents and banks are managed more efficiently as all distributed information will be synced across all actors within the network. The decentralized location of all supply chain data will improve transparency and eliminate redundancy. For one, it can be useful in verifying the authenticity of documents that often change hands multiple times at different points of entry and throughout the supply chain process. For example, all goods are usually accompanied by a bill of lading which documents the number and condition of goods. As these documents change hands, there is a risk that documents may be tampered with. However, adding documents as they are received to a blockchain may reduce the possibility of double spending and allow for the multiple parties listed above to engage in secure, trusted transactions with one another without an intermediary. The improvement of the flow and management of information will increase the efficiency of transportation by facilitating increased transparency and trust across the road transportation network. Additionally, by removing the third-party verification there will also be cost savings in administrative costs as transaction fees are bypassed.

Blockchain technology can be useful in aiding the communication between autonomous vehicles. Self-driving vehicles required an immense amount of data as inputs into their machine learning architecture, something which a lone automaker may have immense trouble acquiring. To resolve this issue, General Motors and automakers are turning to blockchain networks to crowdsource data while maintaining privacy.

Within the context of their use as rideshare fleets, blockchain networks could theoretically allow for secure transactions with charging stations owned by separate organizations without human intervention. Additionally, access to the data produced in a blockchain network could be used for third parties outside of a transportation network, such as insurance providers.

Aviation

Aviation Maintenance

There are several uses for blockchain in the field of aircraft maintenance. In this sector, costs are high, and safety is paramount. For these reasons, counterfeit replacement parts are a constant concern for aircraft operators. Parts not produced under the strict standards established for approved parts manufacturers may be prone to failure, with the potential for loss of property and life. In 2016, the NTSB concluded that such incidents of counterfeit part failure resulted in more than 20 crashes and seven fatalities between 2010 and 2016. To curb or eliminate the use of counterfeit parts, manufacturers may turn to blockchain technology. Because it provides a system for the verification of a parts authenticity, the risk of accidental use of counterfeit parts in aircraft is reduced the overall incentive for selling such articles as a result. Honeywell, an aerospace manufacturer, has already begun utilizing Blockchain in its services, launching an online web portal in tandem with its blockchain enabled digital documentation process.

Blockchain also provides a method of accurately recording and auditing the maintenance cycles of aircraft. Using Blockchain, aircraft maintainers and operators have the capability to consistently and effectively log the life cycle of each aircraft and its components, theoretically down to the individual bolt. Such a capability provides a wealth of benefits, which include increasing the efficiency of maintenance, certifying appropriate maintenance actions, and anticipating future maintenance needs. These enhanced processes may lead to reduced costs for operators, thereby lowering the cost of operations land passing it on to the consumers of their passenger or cargo services.

Airline Services

Blockchain’s data collection properties provide many accounting benefits for businesses. In the airline industry, these can range from tracking loyalty program flyers and their benefits, to improving the efficiency of aircraft operations. These benefits can create both costs savings and enhance revenue generation. In addition to business benefits, blockchain technology can also provide enhanced security and reduce risk for airline and aircraft operators by building enhanced digital security measures to ensure data privacy and integrity.

Rail

Blockchain has been adopted by various industries including the railway industry. The reason for this is because of its characteristics of transparency, data security and decentralization. These characteristics when summed up support the railway industry in offering efficient and effective services of transporting both goods and passengers from one place to the other.

Blockchain that is centered on digitization enables more efficiency and effectiveness by reducing cost of processes and operations in the industry. For example the digitized issuance of tickets to passengers possesses the capability of eliminating paper tickets and surplus voucher cards. The technology used also affords passengers various ways to pay for and access their tickets. Still on its effectiveness and efficiency is how this technology has the potential of tracking freight shipments and its paperwork that are handled by freight service providers.^, Many businesses, states and countries are adopting this technology in order to sustain, develop and expand their networks as well as increase their mode of conducting business. In the United States for instance, some major railroad companies have joined the blockchain technology alliance. BNSF Railway Company a first Class I railway company in Northern America freight transportation companies which operates about 32,500 miles of track in 28 states was the first railway company to join the Alliance. Other companies like CSX have also joined Maersk’s blockchain-backed freight tracking platforms called TradeLens in order to track end-to-end shipments effectively.

Even Russia, despite its lack of trust in cryptocurrencies like Bitcoin, has accepted the technology to some extent as it will help in tracking and gathering data on passengers.

Maritime

Much like the benefits seen in other transportation sectors, blockchain can provide significant cost savings through increased efficiency and security in the maritime sector. At the time of writing, the maritime industry requires an extensive amount of paperwork and bureaucracy to operate in its multinational and highly regulated environment. Blockchain technology can replace these extensive paperwork approval processes with a much more efficient and secure system. Additionally, it can provide proof of custody for goods and easily resolve disputes with clear and secure documentation. These improvements could provide significant cost savings to shipping organizations, which would have significant implications for the overall cost of the multinational trade.

IBM and Maersk have already partnered to build a Blockchain platform known as TradeLens. Established and launched in 2018, the TradeLens consortium is composed of five of the largest shipping companies. Competing against TradeLens is the joint CargoSmart-Oracle system known as the Global Shipping Business Network (GSBN) that was launched the same year. Membership in these networks is not exclusive however, and at least two European shipping companies have membership with both.

Outlook

Blockchain technology promises solutions to the business and technology challenges faced by the transportation industry. While the progress of adoption remains slow, the emergence of blockchain networks in international shipping appears to be a significant milestone for blockchain in transportation. With adoption by the world’s largest shipping organizations, the use case for this technology can be proven and a precedent set. In parallel, the potential for blockchain in autonomous vehicle development may dramatically reduce the length of time required for its development, as competitors utilize blockchain’s peer-to-peer sharing aspect to crowdsource data used in machine learning for their systems. Overall, this emergent technology appears poised to revolutionize business practices in one of the world’s oldest and largest industries.

Discussion Questions

1. What other uses might blockchain’s principle design features have in transportation?
2. How much of blockchain’s use cases could be done without blockchain technology?
   1. What are the benefits and drawbacks?
3. What unique problems exist in transportation that might inhibit the adoption of blockchain technology?

Additional Readings

International Air Transport Association: Blockchain In Aviation Exploring The Fundamentals, Use Cases, And Industry Initiatives

Texas A&M: Exploring Blockchain – Technology behind Bitcoin and Implications for Transforming Transportation

Satoshi Nakamoto: Bitcoin: A Peer-to-Peer Electronic Cash System