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Blockchain -- bitcoin's underlying technology -- could next disrupt the transportation sector

MARKETWATCH 8:22 AM ET 12/01/17
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Revenue opportunity for blockchain within freight transportation space could be $500 billion, says Morgan Stanley

Blockchain, the underlying technology behind digital currencies like bitcoin, has been hailed as having world-changing potential for industries ranging from health care and banks to manufacturing. Now, another sector could be poised for blockchain-related disruption: transportation.

According to Morgan Stanley, blockchain "has the potential to join autonomous trucks, drones, and the 'uberization' of freight as a key disruptive technology that can bring operating and cost efficiency to supply chains--while also being a threat to existing asset-light business models."

The investment bank, in a research report, noted that blockchain usage was still in its "early days" with respect to freight transportation, but added there were numerous potential uses, particularly in areas related to security, automation, and supply-chain visibility.

Blockchain essentially functions as a decentralized ledger technology, used to record and verify transactions. While bitcoin and Ether, which run on their own distinct blockchains, are the most visible usage at the moment, the technology has a myriad of applications beyond cryptocurrencies.

Don't miss:Automation could impact 375 million jobs by 2030, new study suggests (http://www.marketwatch.com/story/ automation-could-impact-375-million-jobs-by-2030-new-study-suggests-2017-11-29)

"At a basic level, the secure, transparent and automated nature of blockchain technology can allow for smooth, speedy and secure execution of contracts across the supply chain thereby not just eliminating physical documentation but also eliminating manual involvement completely by automating contract execution and delivery from initiation through payment (through smart contracts)," the report read.

"If blockchain can be successful in quick, smooth, transparent and secure execution of supply chains, it should eliminate the need for middle-men in the process between the original shipper and the end customer."

While bitcoin remains a highly controversial part of the market--with a number of prominent analysts calling it a bubble or a fraud (http://www.marketwatch.com/story/bitcoin-lays-waste-to-a-years-worth-of-bubble-calls-on-its-way-to- new-highs-2017-11-27), and its proponents saying its massive rally is nowhere near over (http://www.marketwatch.com/ story/bitcoin-1-million-cybersecurity-legend-jon-mcafee-ramps-up-his-nsfw-wager-2017-11-29)--there is generally a lot of optimism about blockchain and its growth potential.

"Just as internet has transformed our lives with email, e-commerce, or smartphone apps, we believe blockchain as an infrastructure technology can power future disruptive technologies through distributive ledgers, smart contracts, tokens or identity management," UBS wrote in October.

The investment bank added that blockchain was "akin to investing in the internet in the mid-nineties," estimating it could add as much as $300 to $400 billion of annual economic value globally by 2027.

Read:Here's why UBS is bullish on blockchain, but not bitcoin (http://www.marketwatch.com/story/heres-why-ubs-is- bullish-on-blockchain-but-not-bitcoin-2017-10-24)

Related: ETF sponsors file for funds related to blockchain, bitcoin's foundational technology (http:// www.marketwatch.com/story/a-potential-etf-looks-to-provide-exposure-to-blockchain-bitcoins-foundational-technology-2017- 11-02)

Morgan Stanley went further, saying that the revenue opportunity for blockchain within the freight transportation space could end up being as much as $500 billion, "as it encompasses global truck brokerage ($160 billion), freight forwarding ($150 billion), truck fuel spend ($175 billion in the U.S.), and supply chain management software ($10 billion)." Some of the more sophisticated applications could be available by 2020, it suggested, while noting that Wal- Mart Stores Inc.(WMT) has already incorporated blockchain into its supply chain.

The implications of blockchain are so dramatic, the investment bank speculated, that the companies that fail to invest in the technology could swiftly be left behind as it takes hold in the industry.

"Increased use of technology could further divide the industry into the haves and have-nots--the haves being large well-funded technologically sophisticated companies and the have-nots being the smaller mom-and-pop carriers and shippers," the report read.

Morgan Stanley stressed that blockchain was an extremely new technology, and that as such, there were significant-- albeit surmountable, in its opinion--obstacles to full adoption. Among the obstacles are ones related to cost and resource usage, scalability, and compatibility with existing systems.

"We caution that at this point, there are more questions than answers. We are likely at the top of the first inning with this technology, if the game has started at all," the analysts said.

-Ryan Vlastelica; 415-439-6400; [e-mail]


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