FedEx exec: Blockchain will become a foundational layer – for everything

Like the internet, blockchain will eventually underpin new business models – and the movement in that direction has already begun.

Chains of binary data.
MF3D / Getty Images

BOSTON – While blockchain may never be a panacea for solving all business transaction problems, it will eventually become a foundational technology across industries that will lead to new business models.

Before that can happen, however, proprietary blockchains will have to run their course and be replaced by open software and industry standards that enable distributed ledgers to communicate across competing businesses and borders, according to Dale Chrystie, a FedEx business fellow and blockchain strategist.

"Some years from now, I think it's a foundational layer under everything," Chrystie said during the Enterprise Blockchain Summit here this week. "Twenty year ago, you put the word 'internet' in front of everything and now you don't. Today, we're putting the word 'blockchain' in front of everything and I don't think we're going to in the future; it's just going to be the way it works."

Chrystie FedEx blockchain IDG

Dale Chrystie, a FedEx business fellow and blockchain strategist, called for industry collaboration around blockchain.

Essentially, blockchain can be an open, transparent electronic ledger able to remove the middleman – a central bank or a corporate supply chain database – and that will fundamentally change the way businesses transact, Chrystie said.

Combined with artificial intelligence and IoT sensors, a blockchain tracking system can accurately trace the origins of products and verify the authenticity of everything from produce to plane parts.

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While a small number of businesses will manage to implement proprietary blockchains and achieve some semblance of business-to-business transactional efficiency on their own "toll road," only an open-source ledger based on industry standards will get broad adoption, Chrystie argued.

"We believe it's going to take a global village to build this; We think the future of this is open source and we think once that's built out, all kinds of people will be able to add value on top of that," Chrystie said. "I've got a Samsung phone that's built on an Android open-source platform and you can put apps on it and do all kinds of things from that point of view."

Since 2017, $18 billion has been invested in blockchain, either in venture capital funding of start-ups, initial coin offerings and corporate implementations of the distributed ledger technology, according to Kyle Ellicott, chief labs officer for research firm ReadWrite Labs.

Just over 550 companies are involved in blockchain, from hedge funds to accelerators, incubators, consortium groups and media. More than 275 companies offer blockchain platforms, whether onsite or in the cloud, and there are 20 different blockchain working groups or consortiums. Enterprises are moving beyond pilots and collaborations and rolling out the technology to enable not only the tracking of goods but to allow customers to purchase products with blockchain-based digital currencies.

"In Q2 more than 50 companies are moving forward with blockchain technology into customer-facing applications. This is not a slow trend. This is growing very rapidly," Ellicott said, rattling off a list of companies that includes Accenture, Apple, Bank of America, JP Morgan Chase, Mastercard and Samsung.

Last month, for example, Starbucks, Nordstrom and Whole Foods - along with more than a dozen other retailers, announced pilot programs to accept bitcoin or Flexacoin, an Ethereum-based ERC-20 token, for payment. Enabled by payments start-up Flexa, a customer merely waves a QR code on their smartphone in front of a register scanner and payment is transferred to the retailer. The QR code, enabled by an app, represents digital currency in a customer's cryptocurrency wallet.

"This is not just something to brush off. Enterprises are starting to move beyond collaboration and adoption. [They're] looking to implement this technology in some way," Ellicott said. "Bank of America put more than 100 [blockchain] patents on the ground, but they're not talking about what they were doing with it. That's a continued trend."

Last year, FedEx founder and CEO Fred Smith said during a conference presentation he was quite confident blockchain will have "big implications in supply chain, transportation and logistics."

"It's the next frontier that's going to completely change worldwide supply chains," Smith said. In April, FedEx's CIO, Rob Carter, suggested that lawmakers should mandate blockchain for international shipping in order to help guard a chain of custody as parts and products move across borders.

Chrystie is also chairman of the Blockchain in Transport Alliance (BiTA), a 500+ member organization that, along with FedEx, includes Daimler, Delta Air Lines, UPS, DHL and Salesforce.

Chrystie cited several examples of how blockchain can change business models, including enabling retailers to track and trace the origins of produce, as Walmart and some others already do today. Consumers will also some day be able to use their smartphones to scan QR codes on products to learn their origins and other information – something retailers are experimenting with now. Industries such as airlines will be able to trace plane parts to ensure authenticity.

For example, while a typical automobile has 30,000 parts, an airplane has as many as two million parts, each of which must be tracked and traced.

"We are not only a mover of aircraft parts, we have a need for aircraft parts as well. And those are the types of thing where authenticity is absolutely critical," Chrystie said. "Certainly, you don't want to be doing that back upstream after some big airline accident, but if you had to and now all that data is available in what's essentially a secure database with a search engine you could instantly get to everything; all the parts, which part is having problems, where was this part three months ago."

Blockchain enables "digital twins" or tokens that represent money, goods or other assets, that allow not only tracking but a new business model for commerce.

One way tokens are being used is to ensure ethical sourcing of materials, from diamonds to smartphone parts, according to Tom Gosselin, North American director of sustainability at DNV GL, an international certification body.

For example, several of the world's major jewelry and gem businesses are using a blockchain ledger that verifies the origins of their products, all the way from the mines to the retail cases.

Thirty years ago, Gosselin said, a company was only responsible for what was manufactured within its four walls; today, companies are being held accountable for their tier-two suppliers and for outsourced manufacturing operations.

"Increasingly, that burden of responsibility is going to places they have a hard time addressing. Collaboration is key," Gosselin said. "We want to be able to design out the ability for someone to cheat. By integrating the supply chain through a blockchain, we now all share a consolidated ledger and have designed out the ability for anyone to cheat in that process. We have to embrace blockchain, AI and IoT to enhance trust because...even with the best supply chains, mapping [of goods] still comes up with big errors."

Radhika Iyengar-Emens, a partner in management consultancy DoubleNova Group, said consumers are also increasingly voting their consciences around ethical sourcing of goods and services with their wallets.

"More and more we're starting to see people, particularly the millennial generation, looking at where these products come from...and how are they produced," Iyengar-Emens said. "Are these companies or suppliers producing them with a sense of social responsibility. Are they producing them sustainably? Are they producing them with the environment in mind? Are they producing with in adherence to labor laws globally?"

Blockchain supply chain IDG

Right to left: Radhika Iyengar-Emens, managing partner for DoubleNova Group;
Tom Gosselin, North American director of sustainability at DNV GL; David Judd, VP of customer successs at Inxeption; and
Jeremy Goodwin, CEO of SyncFab.

David Judd, vice president of customer success and sales engineering at ecommerce platform Inxeption, said as a buyer of products and parts for the B2B industrial marketplace, his company is "at the end" of a long supply chain.

Blockchain can document the contribution from suppliers to a manufacturing process by tracking parts as they move. The technology doesn't necessarily prevent the introduction of improperly sourced raw materials, but it does enable the identification of who introduced those materials into the manufacturing process.

Another capability of blockchain is ensuring that intellectual property used in manufacturing is not passed along to unauthorized parties.

"There's a lot of risk in supply chain for intellectual property getting out – especially for business to business. When we're lending our technology to someone else to manufacture a product for us, how do we guarantee that technology is not being used somewhere else?" Judd said. "So, with blockchain we can securely pass back and forth patented information, secret information, secure information, knowing that company we're lending it to is using it for the purpose it was designated."

Copyright © 2019 IDG Communications, Inc.

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