Blockchain Has Potential, but Still “Too Young” to Support Global Supply Chain

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Despite the immense potential, blockchain technology is still not mature enough in order to fully support the global supply chain, CEO and co-founder of Tradeshift, a digital invoicing startup told CNBC on September 19.

Blockchain End-To-End Digitized Supply Still Not Attainable

According to Christian Lanng, co-founder and CEO of Tradeshift, a web-based business network, and a free invoicing platform, blockchain is a technology that could the potential to shake up the global supply chain.

However, a blockchain solution to all of the problems supply chains face is still a long way ahead.

During the World Economic Forum in Tianjin, China on September 19, Lanng told CNBC that using blockchain is a great idea when there are multiple stakeholders involved since the ledger records every transaction that takes place.

Lanng explained that supply chains often have many different stakeholders that are in direct contact with the goods and moving them around, which makes it hard to authenticate data. He also added that having information on where the goods are sourced and how they’re handled could be solved with blockchain.

“The problem is just it’s not a high-performance technology,” he said, adding that it is also expensive.

Later in the interview, Lanng said that existing supply chains were not built for change. What could solve those problems are technologies that can digitize their supply chains so that they can respond to change quickly, he said.

However, despite the hype surrounding blockchain, Lanng was skeptical of the technology’s immediate application.

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“Whenever people say blockchain, I think what they’re really saying is they would like to connect things digitally,” he said. “I don’t think blockchain is a mature enough technology yet to carry that … I also want to be a little bit cautious for some of the hype.”

Immense Potential That Is yet to Be Tapped

CNBC pointed out that while blockchain is still very much a new technology, its tangible benefits are more theoretical than practical.

While the first major application of blockchain was Bitcoin, with the technology focusing mainly on payments, it could have a much more drastic impact on supply chain management. Blockchain has already seen a major application in the financial services industry, as many major banks are already carrying out experiments with the technology.

What makes blockchain so attractive when it comes to managing supply chains, is the fact that it has the potential to eliminate the need for third-party intermediaries that are often present in the supply chain, in turn cutting costs and increasing business efficiency.

However, having entire supply chains run on blockchain is still a long way ahead, CNBC pointed out.

Lanng said that the main reason that widespread adoption of the technology is still about five to ten years away is its speed. According to him, the Ethereum network can do around seven transactions a second, and managing a global supply chain with thousands of transactions per second is virtually unattainable.

“For the main transactional scenarios, it’s not ready yet. It’s too expensive and it’s very complicated to build and scale,” he added.