Opinion Logistics presents DePIN with a trilliondollar chance

Disclaimer: The author’s views and opinions expressed in this article are personal and do not reflect the views and opinions of crypto.news’ editorial team.

The logistics industry is facing significant challenges due to outdated software systems that result in poor data quality. These systems lack interoperability, standardization, and immutability, which are essential for logistics stakeholders. Many people see web3 technology as the natural successor to these legacy systems, thanks to its promise of transactional efficiency, cryptographic security, scalability, transparency, and accessibility.

However, despite this widespread belief, open and decentralized networks, as well as token reward systems, have not yet been fully integrated into the supply chain and logistics industry. This begs the question: why? Despite numerous attempts, no one has been successful in incentivizing the production of high-quality data that could potentially save billions of dollars annually for the industry. To create a successful decentralized physical infrastructure network (DePIN) solution for logistics, the primary focus should be on incentivizing transparent data production and sharing, thereby raising industry-wide data quality standards.

Resistance to change is one significant obstacle in the logistics industry. With its complexity and numerous moving parts, most established companies, particularly shippers, freight brokers/forwarders, and carriers, are reluctant to overhaul their long-standing systems. They are so focused on day-to-day operations that they prefer to postpone adopting new technologies, considering them costly. The cost of changing systems and adopting universal data quality standards outweighs the benefits of updating systems to support a standard model. As a result, companies continue adding new systems to fix the symptoms of the problem, without addressing the root cause.

However, resistance to change is not the only issue. The logistics industry is highly fragmented, lacking universal data standards and best practices. The lack of transparency and trust among major market players has led to hoarding of data instead of sharing it. There are no tangible incentives for connecting competitors’ isolated data systems for the benefit of the entire industry. Each company operates independently, resulting in fierce competition, and no one wants to be the first to take a different approach.

One notable example of a web3-powered logistics solution is TradeLens, a joint venture between Maersk and IBM. Despite its positive results, with over 300 companies signing up and tracking four billion events, TradeLens was discontinued in 2022. It failed to achieve commercial viability and meet financial expectations. The main reasons behind its failure were its centralized nature and control by Maersk, which deterred potential onboarders. Additionally, being built on a permissioned blockchain limited its features compared to permissionless chains.

Nevertheless, other companies like Chronicled, Slync, and CargoLedger have recognized the same opportunity and have achieved varying degrees of success in seizing it.

The promise of DePINs and token incentivized data infrastructure networks (TIDINs) offers a new wave of web3 technology that can serve as the foundation for a viable logistics solution. DePINs combine web3 principles and technology with real-world infrastructure services, utilizing token incentives to address real-world problems. TIDINs, on the other hand, act as a unified API and tokenized reward system, utilizing existing hardware like electronic logging devices (ELDs) and transportation management systems (TMSs) to incentivize best data practices. This results in streamlined transactions, shipments, and faster settlement in the logistics industry.

Both DePINs and TIDINs incentivize community-driven infrastructure management. However, TIDINs prioritize incentivizing stakeholders to elevate data standards, as inaccurate or missing data costs companies billions of dollars annually. Poor data quality leads to planning and coordination issues, delayed deliveries, inaccurate inventories, wasted resources, and lost or stolen shipments. To overcome these challenges and become more agile, the industry must adopt a universal record system.

A platform that ensures the flow of accurate data throughout the supply chain and shipment lifecycle will revolutionize the industry. Web3 technologies, particularly TIDINs, hold the key to making the production and sharing of high-quality data more profitable. Changing the game theory at the core of the logistics industry is the only way to solve this problem. The goal now is to convince key industry players to embrace a different game that is more profitable, predictable, and sustainable for everyone.

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