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The logistics industry is facing significant challenges due to outdated software systems that result in poor data quality. These systems lack the necessary interoperability, standardization, and immutability that logistics stakeholders desire. As a solution to these problems, many industry experts believe that web3 technology, with its promise of transactional efficiency, cryptographic security, scalability, transparency, and accessibility, is the natural successor to the legacy systems that are no longer effective.
Despite this widespread belief, open and decentralized networks, as well as token reward systems, have yet to fully integrate into the supply chain and logistics sector. Why is this the case? Many have attempted to incentivize the production of better data that could potentially save the industry billions of dollars annually, but none have succeeded. To create a successful decentralized physical infrastructure network (DePIN) solution for logistics, the primary focus should be on incentivizing transparent data production and sharing, thereby raising industry-wide data quality standards.
Resistance to change is a major obstacle in the $9.7 trillion global transportation and logistics industry, which is highly complex and consists of numerous interconnected parts. Established companies, especially shippers, freight brokers/forwarders, and carriers, are so engrossed in managing their day-to-day operations that they are reluctant to overhaul their long-standing systems.
While the adoption of new technologies is inevitable in the long run, most executives prefer to delay the implementation process due to perceived costs. The expenses associated with changing their systems and adopting a universal data quality standard outweigh the benefits of updating their systems to support a standardized model. Consequently, companies continue to add new systems to address the symptoms of the problem without addressing the root cause.
Resistance to change is not the only obstacle. The logistics industry is highly fragmented, with no universal data standards or best practices in place. Lack of transparency and trust between major market players has led to a situation where stakeholders hoard their data instead of sharing it. There are no tangible incentives to connect competitors’ isolated systems for the benefit of the industry as a whole. In other words, every company operates independently, with fierce competition between firms. No one wants to take the first step and do something different.
The rise and fall of TradeLens serves as a notable example in this context. In 2018, TradeLens, a web3-powered shipping solution, was introduced as a joint venture between Maersk, a Danish logistics giant, and IBM. Despite attracting over 300 companies and tracking four billion events, TradeLens was discontinued in 2022. It failed to achieve the commercial viability necessary to continue its operations and meet financial expectations. Simply put, it was not profitable for TradeLens or its partners, and the benefits derived from a permissioned blockchain solution did not justify the cost.
TradeLens remains the most prominent example of a web3-powered logistics solution that was active in the market for several years. It onboarded logistics firms, tracked shipments, and published documents. It demonstrated that some stakeholders were willing to think outside the box. However, it failed to convince enough of them. One of the main reasons for its limited success was that TradeLens was a centralized web3 solution controlled by Maersk, a competitor to many potential adopters. Moreover, being built on a permissioned blockchain, it lacked the unique features offered by permissionless chains, such as decentralization, tokenization, wallets, payments, and tokenomics.
Maersk and IBM embarked on the venture because they recognized the multi-billion dollar potential for improving logistics. However, they failed to realize this potential. Other companies, such as Chronicled, Slync, and CargoLedger, have recognized the same opportunity and approached it in different ways, with varying degrees of success.
The promise of DePINs and token incentivized data infrastructure networks (TIDINs) offers a new wave of web3 technology that can serve as the foundation for an effective logistics solution. DePINs combine the principles and technology of web3 with real-world infrastructure services. They include physical resource networks (PRNs) and digital resource networks (DRNs) and utilize token incentives to provide hardware or equipment solutions for real-world problems.
To leverage this technology and incentivize better data practices, HEALE has proposed a form of DePIN called TIDIN. TIDIN acts as a unified API and tokenized reward system. Unlike DePINs, TIDIN integrates with existing hardware such as electronic logging devices (ELDs), transportation management systems (TMSs), and enterprise resource planning (ERPs). It uses tokens to incentivize best practices in data management, promoting practices that generate cleaner and more reliable information. This results in streamlined transactions, shipments, and faster settlement in the logistics industry.
Both DePINs and TIDINs incentivize community-driven infrastructure management. However, the primary focus of TIDINs is to incentivize stakeholders to elevate data standards. This is crucial because inaccurate or missing data costs companies over $600 billion annually, according to the Data Warehousing Institute. The presence of “dirty data” in the industry leads to poor planning and coordination, delayed deliveries, inaccurate inventories, wasted resources, and lost or stolen shipments. There is a widespread lack of trust, even within companies, as evidenced by payment disputes between shippers, freight brokers/forwarders, and carriers. The industry must address these challenges and become more agile by adopting a universal record system.
A platform that ensures the flow of only high-quality data throughout the supply chain and shipment lifecycle would revolutionize the industry. In my opinion, web3 technologies, particularly TIDINs, hold the key to making the production and sharing of better data more profitable. Changing the game theory at the core of the logistics industry is the only way to solve this problem. The goal now is to convince key players in the industry to embrace a different game – one that is more profitable, predictable, and sustainable for everyone.
Read more:
DePINs can disrupt tech monopolies and put people back in control | Opinion
Todd Haselhorst is the CEO of HEALE Labs, a logistics technology firm that utilizes decentralization and tokenization technology to reduce errors, fraud, theft, and waste in the logistics industry.