DePIN has a trillion-dollar opportunity in logistics | Opinion

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The logistics industry is plagued with outdated software systems causing bad data. Most lack the interoperability, standardization, and immutability desired by logistics stakeholders. With its promise of transactional efficiency, cryptographic security, scalability, transparency, and accessibility, web3 tech is seen by many as the natural successor to legacy systems/processes that are no longer fit for purpose.

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Despite this popular viewpoint, open, decentralized networks and token reward systems have yet to embed themselves in the supply chain and logistics. Why? While many have tried, none have successfully incentivized the production of better data that could save the industry billions per year. To build a successful DePIN solution for logistics, the key focus must be on incentivizing transparent data production and sharing—elevating industry-wide data quality standards.

Resistance to change

The $9.7 trillion global transportation and logistics industry is highly complex and characterized by many moving parts. Most established companies, particularly shippers, freight brokers/forwarders, and carriers, are so laser-focused on managing their day-to-day operations that they won’t consider overhauling long-standing systems.

Logistics market size and growth, 2022 to 2030 | Source: Precedence Research

While the eventual adoption of new technologies is inevitable, most executives would rather kick the can down the road, particularly as it is perceived as costly. The cost of changing their systems and adopting a universal data quality standard is far higher than the benefits of updating their systems to support a standard model. So, companies continue to bolt on new systems that attempt to fix the symptoms of the problem, but the root of the problem remains the same.

This stubborn resistance to change is not the only impediment. The logistics industry is highly fragmented, with no universal data standards or best practices. A lack of transparency and trust between significant market players has resulted in stakeholders hoarding their data rather than sharing it, with no tangible incentives to connect competitors’ walled gardens for the good of the whole industry. In short, every company is an island: competition between firms is fierce, and no one wants to make the first move by doing something different.

Rise and fall of TradeLens

‘No one’ isn’t strictly true. In 2018, a web3 shipping solution called TradeLens was announced as a joint venture between Danish logistics giant Maersk and IBM. Despite posting positive results—over 300 companies signed up, and the solution tracked four billion events—TradeLens was mothballed in 2022. It failed to reach the “commercial viability necessary to continue work and meet financial expectations.” Plainly said, it wasn’t profitable for TradeLens or its partners, and the benefits they received from a permissioned blockchain solution didn’t justify the cost.

TradeLens remains the most notable example of a web3-powered logistics solution that was life in the wild for several years, onboarding logistics firms, tracking shipments, and publishing documents. It demonstrated that some stakeholders were willing to think outside the box. The problem was it didn’t convince enough of them. A big reason was that TradeLens was web3 “lite,” centralized rather than decentralized, and controlled by Maersk—a competitor of many firms that might otherwise have chosen to onboard. Also, because it was built on a permissioned blockchain, it lacked the unique feature set of permissionless chains—decentralization, tokenization, wallets, payments, and tokenomics.

Ultimately, Maersk and IBM pursued the venture because they recognized a multi-billion dollar opportunity to improve logistics. They just failed to realize it. Other companies (Chronicled, Slync, CargoLedger) have recognized the same opportunity and seized it in different ways, with varying degrees of success.

The promise of DePINs and TIDINs

However, a new wave of web3 tech has shown the potential to stand as the foundation for a logistics solution that can work. Decentralized physical infrastructure networks, or DePINs, take the principles and tech of web3 and marry them to real-world infrastructure services. Encompassing physical resource networks (PRNs) and digital resource networks (DRNs), DePINs use token incentives to provide hardware or equipment to solve real-world problems.

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

With DePINs, tokens are used to grow a network as people lend their hardware. But with TIDINs, the hardware (ELDs, TMSs, ERPs, etc) is already in place—the network simply integrates with this existing hardware. It uses tokens to incentivize best practices around data, promoting practices that create cleaner information. This results in streamlined transactions, shipments, and faster settlement in the logistics world.

Both DePINs and TIDINs incentivize community-driven infrastructure management. Still, in the latter’s case, the priority is incentivizing stakeholders to elevate data standards—which is crucial given that inaccurate or missing data costs companies over $600 billion annually, according to the Data Warehousing Institute.

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

A platform that can ensure only good data flows through all pipes in the supply chain and shipment lifecycle will change the game. In my view, web3 technologies—particularly TIDINs—hold the key by making producing and sharing better data more profitable. Changing the game theory at the core of the logistics industry is the only way to solve this problem. Now, the goal is to convince the industry’s key players to play a different game—one that’s more profitable, predictable, and sustainable for everyone.

Read more: DePINs can disrupt tech monopolies and put people back in control | Opinion Todd Haselhorst

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

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