Is Blockchain A Viable Technology For Industry 4.0?

Blockchain can enable OEMs and contractors to more effectively optimize and streamline processes and add new value to operations.

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Michela MentingMichela Menting

Blockchain is essentially a ledger technology that uses cryptography to provide an authoritative record of secure transactions. By doing away with a trusted centralized middle man responsible for the ledger, blockchain allows for a “trustless trust.” The three primary transformative features are immutability, transparency, and autonomy.

The transactions, once verified and accepted, are cemented into blocks and then appended to the chain. The synchronized replication across all distributed nodes and the use of cryptographic hashing is what provides the transparency — the immutable record — of transactions, with the data viewable to all the participants.

Blockchain has truly evolved from its Bitcoin origin a decade ago and has moved beyond cryptocurrency just for digital payments. Now, business logic can be programmed through smart contracts and contractual agreements that can be automatically executed between peer-to-peer or machine to machine (M2M).

This provides a new level of autonomy. Smart contracts can be programmed to do many things: release funds, communicate information, and record and embed data, all in a preprogrammed, self-executing, and autonomous manner. Furthermore, digital identities can be created for physical properties and intangible assets with the ownership of those controlled through smart contracts.

Moving beyond smart contracts is the idea of decentralized autonomous organizations (DAOs). At the core, they are AI-based autonomous agents. DAOs are best defined as a set of long-lasting smart contracts. They can be a party to a smart contract, but they can also be used to implement more complex governance structures — owning, exchanging and trading resources, interacting with other parties (human and machine), and executing pre-defined tasks.

Industrial Drivers

The key drivers for blockchain and Industry 4.0 are automation, connectivity, and digitization. Couple that with greater intelligence through analytics and data rationalization, and the implementation of smarter operations can begin. Industrial IoT (Internet of Things) and cyberphysical systems represent the most popular realization of those key drivers. Industry 4.0 is making use of new technology developments, such as IoT and cyber systems, to improve operations and management in industrial settings. Supporting these are global investments to expand the implementation of technology and consortium efforts to increase inter-operability and integration within the evolution.

The transition to Industry 4.0 won’t be easy. The industrial vendor landscape is still relatively conservative, stemming from a siloed structure where OEMs like to keep tight control over processes. At the same time, the plant network is rather fragmented with a mix of propriety and open source technology. Logistically, machine lifespan and safety can be critical issues, and any changes that will affect those will take time. Overall, the industry in general is a bit slower to change. They need to carefully weigh the benefits of undergoing significant structural changes. But the ecosystem is changing toward increased technology adoption.

Industry 4.0 Issues

Technology adoption to an Industry 4.0 context is not without a range of issues. Contract manufacturing, for example, is increasingly on the rise, and new players from the technology sector are targeting the industry, making logistics more complex and creating a crowded supply chain, meaning less visibility end to end. This can also lead to issues with accountability and auditing. Thus, participants can only see so far either upstream or downstream. There are also the continuing issues of IP theft, counterfeiting and the cloning of products that are increasingly common in contract manufacturing and along the supply chain. Overall, there are a lot of teething issues around 4.0 operational processes and adopting new technologies. Operators need to integrate them with existing legacy systems, which can be a complex affair, making for uncertain uptime, slower provisioning, and trickier maintenance.

Blockchain Enablement for Industry 4.0

Blockchain enablement is where blockchain can step in to resolve some issues — not by replacing the existing technology — but by bridging some of those gaps and offering some solutions to these ingrained issues.

For example, public ledger can provide transparency and visibility end-to-end from the product source all the way through to final form and delivery post market. Smart contracts and DAOs can make deployments more autonomous and more intelligent, enabling machines to carry out tasks faster by taking them over from the human element and essentially automating them.

Blockchain can enable OEMs and contractors to more effectively optimize and streamline processes and add new value to operations.

Initially, the vendor ecosystem will consist of primarily proof-of-concepts and pilots, followed by an emerging dynamic startup market. Commercialization is expected in the next 3-5 years but will hinge on effectively addressing barriers around cost, scale, and security.

Michela Menting is a Research Director at ABI Research.

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