2BLOCKCHAIN ADOPTION IN INDUSTRIAL MARKETSwww.abiresearch.com
1. A DYNAMIC MARKET POISED FOR GROWTH
Blockchain is on the cusp of the latest digital innovation wave,
with growing interest in exploring blockchain applications beyond
fintech. Its distributed ledger architecture is being successfully
leveraged in a number of use cases, including media rights
protection against piracy, real estate asset tokenization,
electronic voting security, and record keeping of higher education
degrees.
Importantly, these effective uses of blockchain have emerged to
showcase the utility and value of the technology for business,
despite recent major upheavals, not least of which is the Covid-19
pandemic. Such events have actually served to weed out speculative
offerings, leaving the more useful applications to
crystallize.
Among these, blockchain forays in industrial markets have proven
particularly successful, spanning adoption from manufacturing to
retail. Increased investments are focused on solu- tions that can
create more streamlined operations and efficient processes, and
eventually complement digital transformation strategies.
These endeavors are dynamizing the industrial blockchain market,
which is set to reach US$500 million in revenue by the end of 2020
(see Chart XX). Despite a bleaker outlook in other blockchain
applications (and notably, fintech), COVID-19 has whipped up
interest in how blockchain could effectively tackle global trade
disruptions engendered by the pandem- ic and the subsequent fallout
(lockdowns, furloughed workforce, stalled manufacture, falling
goods demand, economic downturn, etc.).
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10
CR-IBM-103: INDUSTRIAL BLOCKCHAIN WHITEPAPER
1. A DYNAMIC MARKET POISED FOR GROWTH Blockchain is on the cusp of
the latest digital innovation wave, with growing interest in
exploring blockchain applications beyond fintech. Its distributed
ledger architecture is being successfully leveraged in a number of
use cases, including media rights protection against piracy, real
estate asset tokenization, electronic voting security, and record
keeping of higher education degrees.
Importantly, these effective uses of blockchain have emerged to
showcase the utility and value of the technology for business,
despite recent major upheavals, not least of which is the Covid-19
pandemic. Such events have actually served to weed out speculative
offerings, leaving the more useful applications to
crystallize.
Among these, blockchain forays in industrial markets have proven
particularly successful, spanning adoption from manufacturing to
retail. Increased investments are focused on solutions that can
create more streamlined operations and efficient processes, and
eventually complement digital transformation strategies.
These endeavors are dynamizing the industrial blockchain market,
which is set to reach US$500 million in revenue by the end of 2020
(see Chart XX). Despite a bleaker outlook in other blockchain
applications (and notably, fintech), COVID-19 has whipped up
interest in how blockchain could effectively tackle global trade
disruptions engendered by the pandemic and the subsequent fallout
(lockdowns, furloughed workforce, stalled manufacture, falling
goods demand, economic downturn, etc.).
$0
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$1,500
$2,000
$2,500
Retail & Consumer Transport & Storage Utilities
Healthcare
3BLOCKCHAIN ADOPTION IN INDUSTRIAL MARKETSwww.abiresearch.com
In many respects, existing issues in international supply chains
have been long standing, but they are becoming more noticeable with
the adoption of Industry 4.0, where new Industrial IoT (IIoT) data,
and improved communication and analytics are much more easily
quantifying such issues. Their costs are less easily ignored and
this makes the case for addressing them as a priority. Blockchain’s
primary attributes of immutability, transparency, and autonomy
promise to do just that, propelling uptake toward a market
opportunity of US$2.2 billion by 2024 for industrial blockchain.
That is a Compound Annual Growth Rate (CAGR) of 48% over the
forecast period, with the core of that growth driven by demand in
the food and bever- age, transport and storage, retail and
consumer, and healthcare sectors.
This growth is supported by myriad active stakeholders: a strong
startup community, ven- ture capital funds, leading enterprise
software and cloud giants, industrialists, international
organizations, and government agencies. Industrial blockchain
consortiums and partner- ships, such as the IBM Food Trust,
TradeLens, the global shipping business network, the Blockchain in
Transport Alliance, or even the Construction Blockchain Consortium,
have proven particularly popular for exploring and supporting the
most promising applications.
2. BUSINESS CASE: SOLVING REAL ISSUES
Having a strong technology development community and investment
support ecosystem is key to the market success of any new
application. Above all, however, is the need for that new
technology to address existing issues and prove itself as a viable
business solution. Industrial blockchain applications are no
exception.
The dynamics of the global trade industry are complicated and
volatile. Merchandise export, whether manufactured goods, fuel and
mining products, or agricultural produce, alongside associated
commercial services, are subject to numerous economic, political,
and social movements, including market volatility, trade policies,
political unrest, and economic con- tractions, among many
others.
The global supply chain that underlies this trade is a complex
behemoth that is opaque, slow, and inefficient, subject to high
levels of fraud, and regularly incurring significant losses.
Efforts to render the supporting infrastructure more adaptable to
these various influences is continuously underway in order to
respond quickly to and anticipate adverse conditions, thereby
minimizing costs, losses, and risks.
4BLOCKCHAIN ADOPTION IN INDUSTRIAL MARKETSwww.abiresearch.com
Blockchain promises to be especially effective in resolving
existing issues plaguing industrial markets, as well as optimizing
processes. Research and testing over the last few years shows that
blockchain can address operational inefficiencies, complex
logistics, accountability, and auditing issues, as well as
intellectual property theft.
• Operational Inefficiencies: Industrial operations can be complex
and highly specific, with specialized, often proprietary solutions
that are not always flexible. Digital adoption aims to overcome
many of the barriers of legacy industry, such as slow or poor
provisioning, time-consuming manual processing and errors,
duplication of efforts across the value chain, inadequate
maintenance, etc. Through blockchain technology, business logic and
pre-determined actions can be programmed through smart contracts,
and automatical- ly executed peer-to-peer when specific conditions
are met. This provides a new level of autonomy, intelligence, and
process optimization.
• Complex Logistics: Numerous players on a globalized supply chain,
each centrally man- aging their specific assets and data, means
little transparency beyond direct upstream/ downstream partners.
Blockchain records transactions in the ledger, a copy of which
resides with each participant. New data uploaded to one node’s
ledger is refreshed syn- chronously across each node, providing
transparency and visibility to participants in real time.
• Accountability and Auditing Issues: Traceability (e.g., history,
origin, provenance) be- comes more difficult as the supply chain
becomes more crowded. This can lead to fur- ther compliance issues
as different regulation, ethics, and standards are applied across
regions. A blockchain approach guarantees the integrity of data
related to provenance, quality assurance, certification, etc.
throughout to provide a clear and current picture of a product’s
life cycle to date.
• Intellectual Property Theft: Whether in manufacturing,
agriculture, or energy gener- ation, industries are transitioning
from monolithic operations, controlled end-to-end, toward more
fragmented markets, rife with outsourcing and third-party
contractors. Difficulties in supply chain visibility,
accountability, and auditing has seen a significant increase in
intellectual property violations, counterfeiting, and cloning.
Blockchain can pro- vide trust through immutability with the
cementing of data and transactions, once verified and accepted,
into blocks. Recorded information cannot be copied or forged later
without the knowledge or consent of the participants, or in case of
modification, without having to change each and every copy of the
ledger and all of the transactions taking place after that point of
change.
5BLOCKCHAIN ADOPTION IN INDUSTRIAL MARKETSwww.abiresearch.com
Undoubtedly, the use of blockchain can provide enhanced
transparency and greater scal- ability, reduce risks, and improve
security, as well as drive innovation. Blockchain is an economic
technology—it is not just about a shared state where assets can be
exchanged. It can effectively hold these assets, whether these be
data, liabilities, value, goods, or services, allowing participants
to build, fund, and own the infrastructure that holds them through
distribution and decentralization.
Blockchain can be especially valuable when used alongside digital
transformation strategies that aim to create agile and lean supply
chain management systems. Innovative applications have successfully
leveraged blockchain with new connectivity and automation
technologies, Internet of Things (IoT) devices and platforms, cloud
and edge computing, Machine Learning (ML) and Artificial
Intelligence (AI) technologies, etc. Importantly, blockchain can
also serve to enhance existing legacy operations by providing an
additional layer of security and visibility into aging systems that
may still be operational.
Critically, blockchain is not about ripping out and replacing
existing systems, whether new or legacy; on the contrary, it is
about complementing and improving existing operations. Regardless
of whether a company is improving simply with Radio Frequency
Identification (RFID) sticker tags or deploying a brand-new fleet
of 5G IoT modules, blockchain can serve to augment tracking and
tracing capabilities, securely storing and sharing the data in a
pre-de- fined manner.
Key to unlocking the value of blockchain is identifying realistic
deployment strategies for industrial applications, and
understanding the costs and the potential Return on Investment
(ROI) that will result in a successful implementation. The best way
to understand these chal- lenges is to look at those successful use
cases in the market today.
6BLOCKCHAIN ADOPTION IN INDUSTRIAL MARKETSwww.abiresearch.com
3. JUMPSTARTING BLOCKCHAIN
Despite being an emerging technology, blockchain is ripe for
productization. Though prom- ising, it can be complex to understand
and implement. Increasingly, however, a range of platforms and
deployment options exists to suit even the most novice adopters
served by a maturing and highly competitive ecosystem. Solution
providers are offering cloud-based in- frastructure plays based on
Capital Expenditure (CAPEX) models, a broad range of developer
tools (including templates, libraries, code) that are ready for
use, and supporting services to help implementers build, test, and
deploy as quickly and efficiently as possible.
Many of these solutions are catering to industrial applications,
including construction, phar- maceutical and life sciences,
manufacturing, utilities, automotive, distribution, energy, and
agriculture. When considering a blockchain partner, a number of
factors should be weighed to find the most suitable collaborator
for a particular use case:
• Experience: Industrial Proofs of Concept (PoCs), pilots,
commercial launches, and net- works in production.
• Integration with Industrial Internet: Application of blockchain
alongside Industry 4.0 concepts, integration with digital
industrial platforms, cyber-physical systems, IIoT, indus- trial
cloud computing, etc.
• Integration with Industrial Legacy Systems: Integration of
blockchain platform to exist- ing industrial control systems,
operational technologies, industrial software systems, etc.
• Industrial Ecosystem Support: Industrial blockchain application
advancement through partnerships, consortia, alliances
participating in industrial standards development, refer- ence
architectures, guidelines, and best practices.
• Platform Choice: Blockchain architecture availability
(Hyperledger Fabric, R3 Corda, Dig- ital Asset, Ethereum, Quorum,
etc.) and interoperability with other blockchain platforms and
technologies.
• Developer Resources: Test networks, setup of peers/nodes, smart
contract develop- ment, integrated development environments,
software development kits, application programming interfaces,
templates, documentation, tutorials—notably for industrial inte-
gration.
• Management Tools: Administration and management (including
troubleshooting) of network, peers, nodes, ledgers, channels,
transactions, smart contracts, decentralized applications,
security, access, authentication, etc.
7BLOCKCHAIN ADOPTION IN INDUSTRIAL MARKETSwww.abiresearch.com
Other metrics that should be assessed include pricing (the payment
structure may change radically from testnet to production, and
scaling costs should be closely scrutinized) and geographic reach
(especially where cross-border use cases are being implemented that
may be affected by regional/national constraints; e.g., regulation,
data center presence, etc.).
Many partners offer appealing and competitive blockchain solutions
today. IBM is a leader in this space and can be an ideal partner
for implementers starting their blockchain journey. ABI Research
ranked IBM first in its 2020 competitive assessment of industrial
blockchain providers.
The IBM Blockchain is an integrated business-ready solution for the
development, gover- nance, and operation of a multi-organization
blockchain networks. IBM has been working on blockchain technology
since 2015, and this experience has allowed it to explore and test
numerous applications and use cases.
Today, the IBM Blockchain is open to a broad range of industrial
verticals, offering business applications for supply chain
management, trade finance, and provenance, among others.
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Microsoft
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Integration with industrial internet.
• Food safety • Healthcare • Manufacturing • Pharma and Life
Sciences • Provenance • Supply Chain • Trade Finance •
Utilities
8BLOCKCHAIN ADOPTION IN INDUSTRIAL MARKETSwww.abiresearch.com
IBM has run numerous pilots and PoCs in the last 5 years, resulting
in a number of success- ful commercial launches. It is also
spearheading some of the largest collaborative blockchain networks
in the supply chain, including Food Trust, TradeLens, Trust Your
Supplier, and Responsible Sourcing.
• Food Trust: Includes 30+ projects and more than 100 industry
leaders to ensure food safety, to reduce waste, and to add
transparency to the agricultural supply chain from farm to
store.
• TradeLens: Partnership with Maersk, CMA CGM, MSC Mediterranean
Shipping Company, and others to enable an efficient cross-border
supply chain network, tracking the prove- nance of shipping crates
that move across global ports, securely sharing shipment events and
documents with permissioned parties across six continents.
• Trust Your Supplier: A joint effort between IBM and Chainyard,
Trust Your Supplier is a blockchain-based supplier life cycle
management solution for IBM’s Procurement organization (with
thousands of suppliers) and for external companies. Business out-
comes include 90% real-time updates to supplier information, a 70%
to 90% reduction in cycle time to onboard a new supplier, and a 50%
reduction in cost. TYS network members include Cisco, UPS, JetBlue,
SAP Ariba, BHP, GSK, ABInBev, Nokia, Flex, Lenovo, Dun &
Bradstreet, and more. Rapid Supplier Connect, an IBM platform that
enables buyers and suppliers to quickly find each other, and
accelerate verification and onboarding processes is now also part
of TYS.
• Responsible Sourcing Blockchain Network (RSBN): Working with
Ford, Volvo, FCA, LG Chem, Volkswagen, IBM, Glencore, Huayou
Cobalt, RCS Global, and more to address human rights and
environmental and labor violations from the mining to the Original
Equipment Manufacturer (OEM) supply chain. For this network, IBM
started initially with cobalt and will work alongside consortium
partners and a supply chain auditor to track cobalt (moving to 3TG
afterward) from the mine to the smelter to the OEM.
IBM’s commitment to the industrial ecosystem, support for
industrial collaborative efforts, and integration with industrial
internet and legacy applications has enabled it to build successful
use cases in numerous industrial sectors:
Agriculture • Farmer Connect: A platform designed to help increase
traceability, efficiency and fairness
in the coffee supply chain.
Aquaculture/Fishing • Atea: Sharing supply chain data throughout
Norway’s seafood industry to provide safer,
better seafood to consumers worldwide.
9BLOCKCHAIN ADOPTION IN INDUSTRIAL MARKETSwww.abiresearch.com
Automotive • Vinturas: A consortium of leading European automotive
logistics service providers aiming
to reduce supply chain costs for manufacturers, while improving the
car-buying experi- ence for customers and enabling end-to-end
visibility in the finished vehicle supply chain.
Healthcare • Digital Health Pass: Launched in tandem with IBM
Watson Health, this tool is aimed at
helping individuals to return to work or school by sharing their
verified health pass, estab- lished on criteria, such as COVID-19
test results.
Pharmaceuticals • Federal Drug Administration (FDA): Partnership
with KPMG, Merck, and Walmart in the
U.S. FDA blockchain pilot program in support of the U.S. Drug
Supply Chain Security Act to address requirements to identify,
track, and trace prescription medicines and vaccines.
Energy • Equigy: A platform joining European electricity grid
operators providing an accounting
system for consumers charging their electric vehicles and for the
ability of home batteries to interact with transmissioning
systems.
Oil and Gas • Vertrax: Total liquid asset visibility for the oil
& gas supply chain.
Labor • Learning Credential Network: Enables skilled workers to
store and manage their earned
credentials and share them with employers, licensing boards, and
regulatory agencies, among others.
IBM has achieved this level of success by offering a comprehensive
enterprise solution through the IBM Blockchain, rich with features
and development and management tools, capable of bringing that
enterprise blockchain vision from planning to reality.
For more information on how to start your blockchain journey, visit
www.ibm.com/blockchain
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