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Blockchain in rail: Where do we go from here?

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Blockchain enables secure, trusted peer-to-peer transactions. In the rail industry, it could be used for smart ticketing and transparent, efficient supply chains. In this article, the last one in this series, we consider other potential uses, the current status of blockchain as a technology, and some hurdles it needs to overcome.

The trajectory of blockchain

Like many new technologies and applications, blockchain is going through a familiar technology “hype cycle”.  There was initial excitement about the possibilities of Blockchain when the technology first emerged, which was followed by some disillusionment when these possibilities were not quickly realised. Now a more nuanced picture appears to be emerging, and there is growing awareness of the long-term benefits blockchain could bring. 

Blockchain: the potential for rail

An earlier article showed how blockchain could be used for smart ticketing. It could provide flexibility for passengers as their ticket status is available anywhere and anytime on the network, and on any device. It could also be used to automate compensation schemes for delays and cancellations; or implementing loyalty schemes with incentive-based rewards, such as rewarding someone for walking to a less congested station on a busy day. Blockchain could be used to manage delay repayments between Network Rail, the Train Operating Companies and the Freight Operating Companies.

Possibly the most ambitious proposal for the use of blockchain in rail comes from blockchain specialists at Deutsche Bahn. They propose that digitising  the entire network via blockchain could implement a more dynamic form of rail system control. It would decentralise train operations “by enabling the trains to find routes and make decisions which are safeguarded and protocolled in an auditable manner”. They also suggest that Blockchain could be used to realise predictive maintenance, recording not just the states of all components in real time, but also the “proof of the execution of repairs and maintenance as well as the documentation and traceability of the single steps”.

Current blockchain applications in rail

To date, there appears to have been relatively little blockchain-related activity in the rail industry. In 2019, a worldwide technology investment survey by Global Railway Review reported that no respondents were aware of their organisations having plans to invest in blockchain over the next 12-24 months.

Nonetheless, there have been initiatives in several countries. The Swiss rail company SBB has trialled the use of blockchain for a credentials management system for workers employed at its construction sites. The state-owned Russian railways company, RZD, is reportedly trialling blockchain as a means for implementing smart contracts, “to facilitate the cooperation between the railway, a transportation company, and a seaport terminal”. In China’s Sichuan province, a cross-border blockchain platform has been put into operation to facilitate trade along the New Silk Road. Additionally, China’s influential National Development and Reform Commission has said that blockchain will be one of several emerging technologies that China will use to manage its flow of information in coming years. 

The Gartner group, which advises companies on trends and technologies, anticipates that blockchain-based smart contracts will be commonplace in the economy within 2-5 years, and that applications within transportation and supply chain will be commonplace within 5-10 years.

Blockchain is not the answer to all problems, however. Organisations that are considering the use of a blockchain should consider carefully how it might add value to their business. A concept paper by Transport Catapult Systems (2018) states:

For a blockchain use case to be a valid one it must involve a multi-stakeholder network, and especially one with stakeholders that have trust issues or different incentives. If there isn’t such a network involved, then another technology will likely suffice.”

Sustainability, security and scalability: some issues to consider

Organisations need to consider issues relating to the type of blockchain they decide to use. Our article on security describes how blocks can be added to the blockchain. One significant issue with the method described there is that it is energy-intensive as the computers within a given network compete to be the first to add blocks to the chain. This raises questions about its sustainability. A group of researchers at the University of Cambridge have been tracking the energy consumption of Bitcoin, which reported in 2019 that the blockchain underlying the cryptocurrency used as much energy as Switzerland.

Blockchain is regarded as highly secure, but it is not perfectly secure. The consensus mechanism, which requires 51% of nodes to agree to validate a new block, illustrates this. If an individual or group controls over 50% of a network’s computing power, then they command the majority of consenting powers and could prevent transactions from being confirmed, thus stopping transactions occurring between some or all users. They could also reverse transactions and cause double-spending. This is known as a 51% attack.

Fortunately, developers are working on solutions to address these issues, though these may bring other drawbacks. The Cointelegraph website lists five such solutions, although many more exist. These include requiring participants to put their capital at risk to validate the blockchain (Proof of Stake), and leveraging hard disk capacity, rather than computing power, to solve computational problems (Proof of Capacity). 

Blockchain applications, especially non-cryptocurrency ones, are still at a relatively early stage, and are limited in scale. As blockchain platforms become more widely adopted, the stress on the network increases with a greater number of transactions that require validating. Potential solutions for scalability issues include ‘sharding’ and ‘swarming’. Sharding partitions data into shards and distributes them across the nodes on the network. A swarm is a collection of shard-nodes that store and manage the data. Together, these technologies prevent the platform from overloading by keeping data fragmented, whilst still allowing efficient access by maintaining the connection. 

Looking ahead

Blockchain seems to have been progressing through the typical hype cycle. The 2019 Gartner review of blockchain takes the view that blockchain is now heading into the final stage, and railway blockchain projects are now happening in Switzerland, China and Russia. 

The UK rail industry may be at a turning point, due to both the long-awaited Williams review and the Covid-19 crisis. We still don’t know what the Williams review has in store, but the virus has led to a desire for ticketing systems that minimise or eliminate the need for people to queue near each other, or press touchscreens that others have touched. Furthermore, the current crisis is threatening rail revenues, with the industry facing the possibility of reduced passenger numbers for the foreseeable future. This is especially the case for the complicated supply chain, particularly if rolling stock companies begin sourcing specialised materials with antibacterial or antiviral properties. The industry would benefits from both the smart ticketing systems and disintermediation that blockchain can provide. 

This may well be the right time for the UK rail industry to begin considering what blockchain can offer.

Haven’t found what you’re looking for?
Get in touch with our Senior Research Analyst for further information.
David Hardman
Tel: 020 3142 5488
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