Blockchain can also be incorporated into the companys trading activities, which includes refined products. Shell has established a blockchain team that is exploring opportunities across our business. We continue to monitor the blockchain space for further applications, a spokesman said.

Shells move has some wondering whether blockchain might also help base oil refiners and lubricant blenders improve quality control and margins. But unpacking the hype behind the technology – essentially a distributed electronic ledger – and identifying relevant areas for industry applications is complicated by its opaque origins and links to the cryptocurrency Bitcoin.

Bitcoin was built on a blockchain by an anonymous inventor to create a secure environment to manage the cryptocurrency. Since then, Bitcoin has become synonymous with rampant speculation and even criminality, which has rubbed off on blockchains reputation but this has little to do with its underlying technology. Blockchain uses a decentralized network of computers to convert transaction data into blocks. These are then recorded in sequence in a ledger shared among participants in the chain.

The technology has already made inroads into banking by offering an inexpensive, secure and fast platform for cross-border payments. Not only is it inexpensive but blockchain also improves margins, and that could be a key use for base oil refiners and lubricant blenders. Both are frequently confronted with fragmented distribution networks and in the case of finished lubricants, potentially dozens of products. Blockchains network of thousands, sometimes millions, of computers checking and verifying digital transactions makes it almost impossible to manipulate or tamper with data.

A blockchain makes data management easier and enables tighter supply chain monitoring. Integrating smart contracts (defined as self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code) into the process also ensures data is only shared with certain entities when necessary and denies access to another stakeholders proprietary information.

For global base oil refiners, that could provide confidence in reconciling data across the supply chain, allowing refiners to automate with greater security, saving on the bottom line and improving margins.

But it is stemming revenue lost to counterfeiting where blockchain may be most effective. According to Ondiflo, a Houston-based blockchain provider, lubricant marketers are particularly exposed to counterfeiting due to the numerous parties involved in packaging and distribution. Each retailer or distributor often has its own unconnected information technology system to track product movements, meaning a lack of consistent data collection, digitization and sharing. A shared blockchain-based ledger could dramatically reduce risk, despite the constantly evolving threat from counterfeiting.

Blockchain could also help reduce product recalls triggered by quality control problems. Companies tend to over-recall, usually pulling huge quantities of products to capture the offending batch. Ondiflo says barcodes with blockchain-recorded production information ensures only the affected batches are removed, saving companies money and increasing consumer confidence.

Even so, for every blockchain evangelist there is a skeptic who says it is unproven, which is why refiners and lubricant blenders will require evidence that blockchain is more than just digital lipstick on the proverbial pig.