DePIN has a trillion-dollar opportunity in logistics

Disclosure: The views and opinions expressed here are solely those of the author and do not necessarily represent the views and opinions of crypto.news editorial.

The logistics industry is plagued by legacy software systems that result in bad data. Many lack the interoperability, standardization and immutability that logistics stakeholders desire. With its promise of transaction efficiency, cryptographic security, scalability, transparency and accessibility, web3 technology is seen by many as the natural successor to legacy systems/processes that are no longer fit for purpose.

Despite this popular perspective, open, decentralized networks and token reward systems have not yet become established in the supply chain and logistics. From where? While many have tried, none have successfully spurred the production of better data that could save the industry billions of dollars a year. To build a successful DePIN solution in logistics, the key focus should be on promoting transparent data generation and sharing, i.e. raising industry-wide data quality standards.

resistance to change

The $9.7 trillion global transportation and logistics industry is complex and consists of many moving parts. Many established companies, especially shippers, freight forwarders, and forwarders, are so focused on managing their day-to-day operations that they do not consider overhauling long-standing systems.

Logistics market size and growth, 2022 – 2030 | Source: Priority Research

While the eventual adoption of new technologies is inevitable, many managers choose to leave it at bay, especially because it is perceived as costly. The cost of changing their systems and adopting a universal data quality standard is much higher than the benefits of updating their systems to support a standard model. That’s why companies continue to move towards new systems that try to solve the symptoms of the problem, but the root of the problem remains the same.

This stubborn resistance to change is not the only obstacle. The logistics industry is a highly fragmented industry that lacks universal data standards or best practices. A lack of transparency and trust among key market players has resulted in stakeholders hoarding their data rather than sharing it, and a lack of concrete incentives to connect competitors’ walled gardens for the good of the entire industry. In short, every company is an island: Competition between companies is intense and no one wants to take the first step by doing something different.

The rise and fall of TradeLens

‘Nobody’ isn’t quite right. In 2018, a web3 shipping solution called TradeLens was announced as a joint venture between Danish logistics giant Maersk and IBM. Despite showing positive results (more than 300 companies signed up and the solution tracked four billion events), TradeLens was shelved in 2022. It failed to achieve “the business sustainability necessary to continue operating and meet financial expectations”. Frankly, it was not profitable for TradeLens or its partners, and the benefits they received from a permissioned blockchain solution did not justify the cost.

TradeLens remains the most notable example of a web3-powered logistics solution that has been in the wild for several years, enabling logistics companies to onboard, track shipments, and publish documents. This showed that some stakeholders were willing to think outside the box. The problem was that he couldn’t convince them enough. This was largely because TradeLens was web3 “lite,” decentralized, and controlled by Maersk, a rival of many firms that might otherwise choose to participate. Additionally, since it was built on a permissioned blockchain, it did not have the unique features of permissionless chains (decentralization, tokenization, wallets, payments, and tokenomics).

Ultimately, Maersk and IBM pursued the initiative because they recognized a multibillion-dollar opportunity to improve logistics. They just didn’t realize it. Other companies (Chronicled, Slync, CargoLedger) recognized the same opportunity and seized it in different ways, with varying degrees of success.

The promise of DePINs and TIDINs

But a new wave of web3 technology has shown its potential to be the basis of a workable logistics solution. Decentralized physical infrastructure networks, or DePINs, take the principles and technology of web3 and combine them with real-world infrastructure services. DePINs, which include physical resource networks (PRNs) and digital resource networks (DRNs), use token incentives to provide hardware or equipment to solve real-world problems.

To leverage the power of this technology to promote better data practices, we at HEALE have proposed a form of DePIN that acts as a unified API and tokenized reward system: the token-incentivized data infrastructure network, or TIDIN.

With DePINs, tokens are used to grow a network as people lend their hardware. However, TIDINs already have the hardware (ELDs, TMSs, ERPs, etc.); the network easily integrates with existing hardware. It uses tokens to promote best practices around data and encourage practices that create cleaner information. This facilitates transactions, shipments and faster payments in the world of logistics.

Both DePINs and TIDINs promote community-driven infrastructure management. Yet in the latter case, the priority is to encourage stakeholders to raise data standards; This is crucial considering that inaccurate or incomplete data costs companies more than $600 billion annually, according to the Data Warehouse Institute.

This ‘dirty data’ problem is responsible for poor planning and coordination, late deliveries, inaccurate inventories, wasted resources and lost and stolen shipments. Distrust is widespread even within companies, as evidenced by payment disputes between shippers, freight forwarders/shippers, and carriers. The industry needs to address these challenges and become more agile by adopting a universal registration system.

A platform that can ensure only good data flows across all channels in the supply chain and shipping lifecycle will be a game changer. In my view, web3 technologies (especially TIDINs) are the key to making producing and sharing better data more profitable. Changing the game theory underlying the logistics industry is the only way to solve this problem. The aim now is to persuade the industry’s key players to play a different game; A more profitable, predictable and sustainable game for everyone.

Todd Haselhorst

Todd Haselhorst is the CEO of HEALE Labs, a logistics technology company that uses decentralization and tokenization technology to reduce errors, fraud, theft, and waste in the logistics industry.