Blockchain in Manufacturing: Opportunities and Threats

The manufacturing sector, which has made a truly remarkable comeback throughout the globe, has an exciting future. Blockchain technology not only promises to bring lucrative opportunities to manufacturers—but also certain threats that companies should be aware of before diving deep into the novel technology.

Opportunities

There are so many opportunities for blockchain technology to lean out manufacturers’ supply chain processes while reducing costs, boosting time-to-market, and increasing transparency.

1. Integrate supply chain data into a single source

One reason blockchain is attractive to manufacturers is that supply chains are difficult to manage because they are fragmented with each participant having their own database systems. With the immutability and permanency of blockchain technology, manufacturers and all other supply chain participants could put data on the blockchain ledger, which would serve as a single and decentralized source of data.

1. Simpler and smarter manufacturing processes

Businesses need to simplify their manufacturing processes for the same reason they want more transparent supply chain management. From reducing recall risk to preventing IP theft to automating payments and everything in between, companies can use blockchain technology to simplify the entire process of moving a product from the factory to the end-consumer. A leaner and simpler process would also save money.

1. Boost data protection, accuracy, and transparency

Data security is becoming a big concern with companies all around the world. Because nobody can tamper with or alter any data on the blockchain after it had been confirmed by all parties, the blockchain is a secure way to store data and keep records. Because it is tamper-proof and fully visible to all involved parties, manufacturers finally have the supply chain visibility they’ve needed for so long.

Threats

While there are lots of opportunities for manufacturers looking at blockchain, they must also look at its potential threats and vulnerabilities before adopting this technology on a large-scale.

1. Cybersecurity threats

With recent hacks of cryptocurrency exchanges along with theft from individual crypto wallets, companies are right to be concerned about whether blockchain technology is really secure. Although blockchain technology itself is very secure, the applications using blockchain may not be. Therefore, manufacturers should staff their IT teams with cybersecurity experts with proper training to create a secure application layer on top of blockchain that deals with both internal and external threats.

1. Environmental costs and regulation

Running large-scale blockchain networks sometimes require tons of electricity. As data storage is cheap, blockchain stores data across multiple nodes to ensure decentralization. The problem is that the cost of electricity to store that data is immense, and undoubtedly this has an impact on the environment. However, this issue has already been addressed as blockchain technologies have evolved to third-generation consensus schemes such as Delegated Proof-of-Stake. Using newer technologies that are much more energy efficient than older Proof-of-Work technologies will mitigate the threat of electricity cost overruns and prevent noncompliance with environmental regulations.

1. Trade-off between scalability and 51% attack protection

On one hand, a large-scale blockchain network can be very secure. However, it is difficult for companies to scale due to electricity costs and data storage space constraints. On the other hand, a smaller and limited-use blockchain, while easier to scale, can theoretically be vulnerable to the 51% attack and other forms of data manipulation. Under such scenarios, the immutability and security of all data stored on that blockchain would be called into question.

Looking to the Future

There is a strong push towards smart manufacturing using IoT devices, AI, and blockchain technology. The benefits include increased data security and transparency along with simpler supply chain management. However, manufacturers and supply chain professionals would do well to recognize the potential security threats and environmental costs that may come with blockchain.