Maersk’s TradeLens demise likely a death knell for blockchain consortiums

The impending shutdown of one of the largest digital shipping tracking ledgers is likely a sign that costly customized enterprise blockchain projects managed by consortiums are doomed — and have been for a long time.

“They only succeed when all parties are on the same win-win page, and there is clear demonstrable ROI when the application is implemented,” said Avivah Litan, a vice president analyst at Gartner Research. “[This] seems like the last chapter in the era of costly enterprise blockchain projects.”

This week, Danish shipping giant Maersk and IBM announced that after four years their blockchain-based TradeLens digital ledger for tracking global shipments will shut down in the first quarter of 2023. The reason: a lack of participation by all industry players.

In 2018, the TradeLens pilot project looked promising as it initially garnered 94 early participants and 20 port operators who wanted to test how well a permissioned, electronic, blockchain ledger could make tracking global shipments less costly and more transparent and efficient. Today, Maersk claims TradeLens covers 60% of global containerized trade.

But on Wednesday, Maersk’s head of business platforms, Rotem Hershko, said in a statement, “the need for full global industry collaboration has not been achieved. As a result, TradeLens has not reached the level of commercial viability necessary to continue work and meet the financial expectations as an independent business.”

“Starting today, the TradeLens team is taking action to withdraw the offerings and discontinue the platform,” Maersk said. “During this process, all parties involved will ensure that customers are attended to without disruptions to their businesses.”

IBM, Maersk

Maersk said it will continue to attempt to digitize the supply chain and increase industry innovation through other solutions to reduce trade friction and promote more global trade. What those efforts will be remains  unknown. Maersk did not respond to a request for comment and an IBM spokesman said the company had nothing further to add beyond Maersk’s statement.

Unlike permissionless blockchain ledgers, such as Bitcoin or Ethereum, which allow anyone to participate, permissioned or private blockchains use centrally controlled distributed ledger technology (DLT) that only allows in vetted members. Permissioned blockchains sacrifice some anonymity and decentralization to enable participants to see business transactions in real time while also gaining the benefits of digitization, which includes speed and efficiency.

“I think the ROI just wasn’t there,” Litan said. “They were spending more than they were getting back in terms of financial value. Also, IBM is no longer willing to take losses on their enterprise blockchain projects and have been gradually exiting their blockchain business.”

IBM has several blockchain-based projects under way, including Blockchain World Wire, a global blockchain-based payments network, and Food Trust, a blockchain-based electronic distributed ledger that can track and trace food supply chain data from farm to store shelf.

While there are scaling issues associated with the Hyperledger Fabric platform on which TradeLens is based, in the end the number of participants in the project “simply wasn’t enough,” said Martha Bennett, a principal analyst and vice president with Forrester Research.

It’s likely only a small portion of the total participants in the global shipping industry actually signed on to the project, Bennett said. None of the Asian/Chinese container shipping firms joined TradeLens, and one of the major European shippers is part of Global Shipping Business Network (GSBN), a competing permissioned blockchain supply chain ledger.

“There are more fundamental reasons as well, related to the challenge in digitizing documents, and in particular documents that span multiple jurisdictions,” Bennett said.

For example, electronic bills of lading aren’t new — they’ve been used for a couple of decades, and more should have been done to examine the key reasons for the failure to digitize the shipping documents “before throwing blockchain at it,” Bennett said.

To this day, finding a workable, commercial model for an electronic shipping ledger remains an issue for all blockchain networks, Bennett said.

For TradeLens, technical issues were further exacerbated by the fact the driving force behind the ledger was shipping giant Maersk, “which makes many wary of joining.”

“A network with a more neutral set-up would likely have had more of a chance; adding IBM into the mix wasn’t enough, in particular as IBM itself pulled back from blockchain,” Bennett said. “And let’s also not forget that the original plan to set this up as a Maersk/IBM joint venture didn’t work out for legal and regulatory reasons.”

TradeLens was jointly developed by Maersk and IBM and it recorded details of cargo shipments as they left their origin, arrived in ports, were shipped overseas and arrived at their final destinations.

During the transportation process, all involved parties in the supply chain can view tracking information such as shipment arrival times and documents such as customs releases, commercial invoices, and bills of lading in near real time via the permissioned blockchain ledger.

According to the TradeLens website, to date the ledger had tracked just under 70 million shipping containers and published nearly 36 million electronic shipping documents.

The good news, according to Litan, is the costs of enterprise blockchain projects are coming down with offerings from new “Enhanced Blockchain as a Service” (EBaaS) providers, such as ConsenSys, Dragonchain, Kaleido, ShelterZoom, Settlemint, and Vendia.

EBaaS service providers offer to run applications and other business solutions on their own infrastructure, meaning they absorb the infrastructure (i.e., server nodes) and maintenance costs.

“These providers are selling simpler applications based on largely reusable code sets and technologies that support easier legacy system integration,” Litan said. “We are seeing success with these types of newer generation projects. ROI can be achieved through faster implementations than we saw in the first generation of expensive customized enterprise blockchain applications, such as TradeLens.”