Industrial Blockchains—Thinking Outside the Coin

There is a lot of buzz around blockchain. It is rapidly transforming finance and has the potential to radically change many other sectors as well. Heavy industry, however, is generally conservative with respect to new technology. Consequently, it is important to understand what the properties of blockchain are and to understand why one could, or rather should, consider using it.

If blockchain could only be described in one word, that word would be “trust.” It is an ideal mechanism to establish trust among multiple parties, demonstrated by its seminal use case as an abstraction for currency. The currency paradigm is instructive because it demonstrates the core concepts that could be leveraged in other use cases including:

  • Affirmative identification—all parties can be required to identify themselves.
  • Transactional transparency—all transactions are known to all participants.
  • Objective neutrality—the rules of the game are known in advance.
  • Historic immutability—the history of the rules and the data cannot be changed.
  • Automation—rules can be applied with or without human intervention.
  • Constructive incentives—good actors are rewarded and bad actors are deterred.

The most glaring flaw in existing blockchain implementations is that the high cost of transactions, in both time and energy, limits use cases to those which can sustain them. Several methods have been, or are being, developed to address this, such as rewards for mining and alternate demonstration(s) of trustworthiness. Of these, the most common method is “proof of work” but competing methods such as “proof of burn” or “proof of stake” are being developed.

For many applications, having a high participation cost is desirable because the cost of hacking the network will exceed the potential gain or damage bad actors could realize. Thus, the most relevant use cases are those which require high levels of trust, involve multiple actors and/or transactions, and can sustain high costs, delays, or both. This generally excludes real-time operations, high granularity, and, most strictly, two-party or in-house transactions. In each of these cases, it is likely that conventional centralized databases will offer better performance and lower costs.

Industrial Purposes for Blockchain

For industrial purposes, there remain many use cases that are very well-suited for blockchain, including these:

Permit Management

Blockchain is an ideal internal tool for managing safety or other permits to work. If we think of a permit as a contract, it is a natural extension of the concept. It is also well-suited for statutory permits such as those issued by jurisdictions (states, agencies, etc.) as they are public filings and must be awarded and retained according to well-defined rules. Potential savings in filings and compliance could be significant.

Safety Critical Equipment

Traceability of fungible safety equipment, such as check valves, blowout-preventers, or other equipment that is regularly rigged-up/down or replaced, would benefit from blockchain. Device history from raw materials through manufacture, acceptance, purchase, assembly, testing, and use is critical to understanding the risk associated with this equipment. Given the habits of the remote industrial operations to use a diverse vendor base and for equipment to have long service lives and many owners, it is impractical to manage this data without a blockchain-style solution.

Minerals, Land, Patent, or Licensure

Blockchain is an excellent vehicle to define, award, buy, sell, or otherwise transfer any of these grants. It can also vastly simplify the sale, subaward, or royalty management, as well as other record-keeping associated with them.

Multi-Party Automation

A key limiter to non-vertical automation, particularly in industrial field applications such as oil and gas, construction, mining, or defense, is the ability for multiple systems and organizations to communicate in a trusted way. Because blockchain is an abstraction of trust and is an immutable data structure, it is ideal to use for this purpose—particularly in the “token” framework.

Commodities Trading

Because commodities are frequently traded in absentia, the proper allocation of bulk commodities can be difficult to manage. Blockchain has the potential to simplify these trades and tie them to tangible goods that can be traced to their origin, or close thereto.

Regulatory Reporting

Most regulatory reporting for quantized assets that have long life spans (such as wells, wind turbines, etc.) can benefit from blockchain. Because of the immutability of the data and the public ledger, the cost of sharing with the regulator is significantly reduced as the data is at rest and the regulator has access, by definition. Moreover, long-lasting assets that may change hands through mergers or acquisitions can benefit from transparent descriptions of assets and their histories.

Data Quality Management

People are generally more likely to trust data from a sensor than a person. However, those with experience in sensor data analytics recognize the potential for sensors to produce errors resulting from bias, drift, hysteresis, nonlinearities, damage, and other various factors. Many use cases can benefit from accurate modeling of these errors, while others demand it. Blockchain is an ideal method to capture the current and past error models of sensors and document their historical calibration, validation, adjustment, maintenance, and repair.

Blockchain's Likely Impact in Industrial Space

There are many more applications based on the intrinsic properties of blockchain. However, these stand out as low-hanging fruit. That said, there are several places where blockchain is unlikely to have a significant impact in the industrial space. These include the following:

Real-Time Sensor Data

Sensor data, in bulk and post-process, may one day be stored in a blockchain repository. This could be useful for systems that must store or distribute sensor data in a regulatory context. However, it is unlikely that the transaction speed and cost could be made acceptable for high-frequency data from sensors, controllers, or other real-time industrial sources. An excellent use case supporting sensor data is the metadata describing the sensor, its environment, its orientation, or other properties which enrich the sensor data. These properties are often constant for long periods of time, such as between calibrations, and would likely have value for compliance purposes.

Vertically Integrated Operations

When an organization is fully integrated, there is little advantage in employing a blockchain solution. The benefits of immutability and security could be achieved more economically through good governance and provenance practices, as the organization is the sole consumer of the data. Once a transaction occurs in which another party requires trust in the data, however, blockchain may be considered. For example, a company that breeds, raises, processes, and sells whole animals, such as poultry, would not need a blockchain to inform the customer about an animal’s history. Since there are no handoffs, the data can more efficiently be managed using conventional databases. However, processors who buy animals from multiple farms and combine multiple classes of ingredients for a finished product could use blockchain for traceability and food safety and communicate that information to interested consumers in a secure and trusted manner.

Many remain wary due to the slow deployment or soft landing of much-hyped big data projects, and it is reasonable to approach blockchain with similar caution and hesitation. A careful inspection of the technology and use cases for blockchain, however, reveals that there is much more chemistry than alchemy and that the use cases for it are a logical and repeatable extension of how we work today. The risk of exploring blockchain solutions is low, but the risk of ignoring them could be significant.


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