This article first appeared in Digital Edge, The Edge Malaysia Weekly on July 10, 2023 - July 16, 2023

Blockchain technology, powered by decentralised ledgers that maintain immutable records of transactions, has long promised to revolutionise supply chain management. Tracing goods along their international journeys has been of great interest to major logistics providers since the early days of the technology.

The Harvard Business Review called for industry leaders to “develop new rules, experiment with different technologies, conduct pilots with various blockchain platforms, and build an ecosystem with other firms … [it’s] an investment [that] promises to generate handsome returns”. This investment in a Digital Silk Road — a network of supply chains and trade networks backed by blockchain technology — could pave the way for a new era of economic growth in well-poised regions, namely Southeast Asia.

However, this particular use case for blockchain technology has not seen the adoption level that this interest might suggest. IBM and shipping giant Maersk recently discontinued TradeLens, a blockchain-powered global trade platform.

“TradeLens was founded on a bold vision for global supply chain digitisation as an open and neutral industry platform. This vision centred on the ability to enable true information sharing and collaboration across a highly fragmented industry globally. Unfortunately, such a level of cooperation and support has not been possible to achieve at this point in time …” stated TradeLens.

This short statement reveals a lot about the state of the industry and the challenges blockchain-based supply chain solutions need to address in order to deliver on their potential.

Maersk and IBM blame the platform’s failure on a lack of cooperation and support in a highly fragmented industry. This is a problem with which anyone who has worked with distributed systems is familiar.

Until the invention of blockchain technology with Bitcoin in 2008, there was no way to exchange value in a trusted manner in a digital environment. Online value exchange relies on trusted intermediaries like PayPal. Blockchain-based supply chain management solutions are intended to mitigate the high counterparty risk typically associated with online transactions.

While “open and neutral” platforms work well in the abstracted world of the internet, things get complicated when you’re dealing with shipping containers full of physical goods traversing the world’s oceans. A neutral platform is essential when trying to convince other industry participants to get involved, but how can they be assured of this neutrality? The problem once again lies in translating online concepts into real-world action.

Inputs into the system — GPS location data, weather data, temperature sensor data and more — must be just as transparent and tamper-proof as the purely digital inputs into a smart contract.

This is a challenging problem to solve, but not an impossible one. Already, smart contract-based weather insurance exists and is protecting real people from real-world disasters. There is no way to maintain the benefits of blockchain technology while skirting around the core tenets of decentralisation, transparency and verifiability.

But the rewards for successfully implementing these principles into enterprise systems are enormous, and Southeast Asia — brimming with innovation and rapid development — is one of the best-placed regions to reap these rewards.

A full one-fifth of the world’s shipping containers pass through the Port of Singapore, meaning any blockchain-powered solution adopted in Singapore would have wide-reaching effects. Multilateral and bilateral trade agreements can play a key role here. For instance, the Asean Free Trade Area (Afta) and the Regional Comprehensive Economic Partnership (RCEP) are crucial in the context of setting standards and facilitating the kind of cooperation that Maersk and IBM found lacking.

Independent record keeping, a cornerstone of distributed ledger technology, empowers stakeholders with immutable and verifiable transaction records, thereby mitigating errors, fraud and central bottlenecks. By enhancing visibility and traceability, blockchain allows all stakeholders to access critical information about the journey of goods from origin to destination.

But the amount of data created on blockchains requires the development of sophisticated tools to track and contextualise what is happening on the network. It is essential to make the benefits of blockchain accessible to everyone. And security needs to be a top priority to ensure that the technology delivers on the promises it is making.

Blockchain technology holds immense potential to transform supply chain management in Southeast Asia. While challenges remain, the innovative use cases and undeniable benefits of blockchain make it a worthy contender in the pursuit of transparency, efficiency and growth.

As Southeast Asia continues to adopt and adapt to this technology, it stands to be a leading player in the global blockchain arena, paving the way for a future defined by a Digital Silk Road.

Monier Jalal is the vice-president of marketing at CertiK, a pioneer in blockchain security using cutting-edge AI technology to protect and monitor blockchain protocols and smart contracts

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