Blockchain is the technology that allows digital currencies like bitcoin to exist, but it can do far more than that for the finance sector and other industries including healthcare and even education! The maritime industry is not exempt from this list.
We observed a healthy amount of interest (and caution) over the past year from industry stakeholders, and in a truly innovative spirit, maritime blockchain start-ups and ventures appeared across the globe. This year, these blockchain projects have celebrated real milestones, including first journeys and new collaborations to propel the technology’s development even further.
Speaking to 7 experts (Johnson Leung, Co-Founder of 300cubits, Stefan Kukman, CEO of CargoX, Todd Scott, VP of Global Trade – Blockchain at IBM, Deanna MacDonald, CEO & Founder of BLOC, Soeren Duvier, Managing Director in Asia of the Blockchain in Transport Alliance (BiTA), Alisdair Pettigrew, Director of Blue Communications, Asbjorn Christiansen, Head of Innovation & Digitalization at Danish Shipping), we find out more about the success of blockchain projects, how this technology is being developed for the maritime industry, and its potential for changing the game.
Cryptocurrency for the maritime industry
Just over a year ago, the start-up 300cubits burst into the maritime scene offering the industry’s first cryptocurrency TEU Tokens as deposits to counter no show bookings.
Despite the challenges, one year on, Johnson Leung, Co-Founder of 300cubits, looks back with the same confidence in the company’s solutions as when they first come onto the scene.
“For any B2B startups, on boarding the first group of customers is always the most challenging because corporate customers, as opposed to consumer customers, by nature have a longer and more complex decision process when trying a new service”, Leung explained. “Our solution is both financial and technological. The financial part is that we tap into the liquidity of the cryptocurrency market to find value for the shipping industry to use a booking deposit. Otherwise the shipping industry would have to come up with working capital for the booking deposits. The technological part is where we use Ethereum blockchain as an escrow account to receive, keep and re-distribute booking deposits. Both elements of our solution are not the sorts of ideas naturally understood by most shipping executives. It has been some heavy liftings to get the decision makers to understand our solution and try our solution.”
300cubits recently completed its first journey, and true to blockchain legends, the submission of tokens from the shipper and carrier increased trust between the parties. "We welcome solutions such as the one provided by 300cubits that help reduce No Show and Rolling, which, in our view, are some of the main pain points hurting both our customers and our own operation” said Naresh Potty, Chief Commercial Officer of MCC Transport. “We would like to see more shippers providing financial commitment at the booking stage. In return, we will provide equal commitment to ensure these shippers that their shipments will be loaded according to their bookings.”
Smart contracts using blockchain technology
CargoX made history this year when it raised $7m in under 8 minutes through an initial coin offering. The startup company is utilising blockchain technology to digitise and simplify bill of lading documents.
“Bills of Lading (B/L) are the most important documents in the global logistics industry”, Stefan Kukman, CEO of CargoX, stated. “The value of a Bill of Lading document equals to the value of shipped goods”, Kukman continued, and this is where it gets problematic. “Unfortunately, paper Bill of Lading documents themselves must be shipped all over the world, independently of the cargo, which is the root cause of many of the challenges plaguing the supply chain industry: they travel on average more than a week, the process to resolve a damaged, lost, or even stolen Bill of Lading document is a complete bureaucratic nightmare, and the cost of issuing and transporting one paper Bill of Lading document costs up to $180. A B/L issued through CargoX’s solution and backed by blockchain technology enables a transaction of ownership of document within minutes, and it is 10x cheaper and infinitely more secure.”
Also built on Ethereum, CargoX successfully completed its first journey:
“Our test shipment, conforming to all official demands, has recently proven that our product is working great and that it enables numerous advantages over the old, paper-based process”, Kukman declared. “A cargo shipment travelling from China to Slovenia, which was processed with our blockchain-based Smart Bill of Lading technology, has arrived safely, and has been released by the release agent to the importer who received the Smart B/L from the exporter, who received it from the generating party, one of the top 10 NVOCC companies. The process was flawless, thanks to our partners, who helped us develop the product. They provided feedback and process input details in every step of our software development journey. That is why we are confident that our solution is optimally developed, really easy to use, and simple to deploy in the shipping business processes.”
Blockchain misconceptions explained
When talking about blockchain, it is easy to use abstract and confusing language which links the technology with bitcoin strongly. But blockchain and bitcoin are not the same thing, and it is possible to harness the potential of blockchain without delving into cryptocurrencies.
“There is a lot of hype surrounding this technology and a lot of people capitalising off of the initial coin offering (ICO) model of creating wealth out of thin air from magic internet money through the release of white paper and launch of a token that promises to change the world”, Deanna MacDonald, CEO & Founder of BLOC, warned. “We try to separate fact from fiction and those that are creating actual technology from those that are using the technology to raise money.”
Blockchain: The silver bullet?
It is actually very hard to separate fact from fiction, when reading about blockchain. Adjectives like ‘transparent’, ‘secure’, and ‘immutable’ are often used to describe blockchain, even by experts, but Leung warned that it is not so black and white:
“There are many superlatives people used to describe blockchain”, Leung explained. “Unfortunately, many people's understanding stop at these superlatives. One of these mistakes is that ‘blockchain is a robust data base where all data are correct because blockchain is immutable’. Blockchain's strength is its immutability. But immutability does not imply the data entered into the blockchain is naturally correct. For example, the first data block could contain wrong data. Moreover, blockchain has been effective as a public ledger which is a simple database containing information of when, who and how much digital assets are being transacted. Being effective as a ledger does not mean blockchain is a more robust database than other database technologies. The other mistake people often make is that ‘blockchain is a decentralized public ledger so its solutions would only work if the entire industry subscribe to these solutions’. It really depends on the type of solution one wanted to use blockchain for.”
Blockchain: “It is still early days”
Although numerous blockchain projects have been revealed this year and the industry is not short on innovative startups, maritime will inevitably find it difficult to adopt this technology. According to Soeren Duvier, Managing Director in Asia of the Blockchain in Transport Alliance (BiTA): “The nature of international trade across borders and different regulations make [the adaptation of blockchain] more challenging [for shipping] than local trucking solutions as an example. Banking and airlines are more consolidated and have been working towards standards for decades.”
“As it stands, the maritime industry as a whole is highly fragmented and fractionated”, MacDonald explains. “In fact, most of the players in the shipping sector are small and do not generally have the resources to access innovations and traditionally expensive technological upgrading that the larger players can afford. In this dynamic, it is difficult to create industry wide change, standards, regulations or even technological upgrading and innovation. Rather than looking at the maritime industry as a slow mover or reluctant to change, it is better to approach the industry knowing that there is a lot of work required in on boarding, upgrading and providing access to all of the players that comprise the industry. I think this is one of the major factors that have affected whether or not the industry has adopted new technologies and blockchain in particular. That, and blockchain is an emerging technology that has not, in all honestly, been applied in industry and in the real-world too often nor has it been scaled. It is still early days.”
An industry-wide blockchain system
One of the biggest criticisms of the blockchain start-ups and ventures is that there are no industry-wide standards that everyone can aspire to and systems that everybody in the industry can use.
“There’s a great deal of scepticism, and impatience for blockchain to work on a larger scale”, Alisdair Pettigrew, Director of Blue Communications, said. “For this to happen, it’s important that the industry builds solutions together, rather than separate competing systems. Blockchain is an inherently collaborative technology, the value of which lies in creating shared access to trusted information. As such, it doesn’t make sense for blockchain to be used in closed systems – we need to be creating systems that the whole industry can use, not just a privileged few. Maersk and IBM’s flagship project, TradeLens is perhaps the most obvious case in point. While it has 90+ partners on board, only one other carrier is involved – which casts doubt over its potential for adoption as a universal system.”
MacDonald believes that an inclusive system is essential in making blockchain a success in maritime: “Blockchain will only benefit the industry and will only work on a technical level, if all participants are in the same or interlinked system. It is a collaborative technology by nature and as such we need to build a global digital infrastructure that is both accessible and open. The merits of whether you build permission or non-permissioned applications on top of this foundation, or in other words transparent or access based, can be assessed on a case by case basis depending on the problem and needs that are being solved for.
At BLOC, we believe that systems can be greater than the sum of their parts. We create technology with industry front and centre in our minds, building consortia rather than imposing systems in a top-down way. We are inclusive, collaborative, and non-hierarchical. We trust our people and partners to act autonomously and think for themselves. We only create systems that are open and transparent, rather than building walled gardens. The industry seems to be responding well to this type of organisational structure. Often, especially in the maritime sector, many incumbents are not able to participate in the market like their corporate counterparts with scale and market access are. Therefore, this technology in particular, as well as how we build and apply, can have a significant impact for the global shipping sector and the fragmented and smaller players that comprise the large majority of it.”
IBM’s VP of Global Trade – Blockchain – Todd Scott weighed in, suggesting that the development of the technology can make blockchain more inclusive: “IBM believes that the network effects is one of the strongest characteristics of blockchain technology. As blockchain networks, such as TradeLens, grow, groups will be able to work with others and be governed based on a set of industry standards. As blockchain networks become more interoperable with one another, entire industries will be able to work together based on mutually agreed-upon governance structures.”
Leung took inspiration from history and predicted that there are ways that today’s projects can co-exist in the future: “There are many blockchain projects in the market today just like in the 90s when there were many internet projects. No one back then (and nor do we now) have questioned why we do not use one email system instead of having Gmail, Hotmail, Yahoo, Outlook etc. At least we have not heard of it being a widely held question. So I presume the question itself does not suggest all blockchain related projects have to come under one umbrella. We think that in shipping the users always long for some solutions that can aggregate multiple platforms' data into one platform or make them accessible at one user front end. It would be just like hotel chains where each hotel has their own booking portals but there is a Booking.com that can aggregate all hotel portals’ offerings into one to make it easier for the users. We are sure there are blockchain projects out there trying to provide the aggregation solution.”
The future of blockchain in maritime
Duvier notes, “We see it revolutionising the industry over time across, documentation, participants, payments, contracts and other areas.”
When delivered well, blockchain can become a powerful tool to transform businesses.
“I see the blockchain evolving, speeding up, and enabling completely new services in the sector”, Kukman shared his vision. “Data will flow faster, with less superfluous work being needed to complete tasks, and all the information will be trustworthy, delivered fast and secure. Coupled with the IoT (Internet of Things), the technology will deliver a new class of services where real-time tracking will actually be possible, with implications for the whole supply chain management sector as well. But, we believe that companies in the maritime sector need to start with the bills of lading and continue their digitalization from there. They need to put away the analogue paper business mentality and get up to speed with digital!”
Although there are challenges in blockchain’s adoption, Pettigrew is positive that “there are certainly instances where it can make a huge impact. Shipping is full of fragmented, highly complex supply chains, where the shared trust that blockchain enables can create a level playing field of access to reliable information. The marine fuels sector is a prime example of this – and recent comments from the likes of Intertanko predicting a ‘global epidemic’ of bad bunker fuels show why this is so important.”
Asbjorn Christiansen, Head of Innovation & Digitalization at Danish Shipping, said: “Blockchain is an interesting technology that is surrounded by a lot of hype at the moment, some even state it, as the ‘new internet’. I believe without doubt that it is an important technology, which is also proved by numerous applications in i.e. the financial sector as well as projects in shipping. Blockchain is like a cryptographic box containing value and unlocks only if conditions are met. The technology is extremely valuable when there is a need for multiple parties to engage with immutable documents in an environment lacking trust. This makes it very relevant for the maritime and logistics sector, as it eliminates the need for a trusted third party, which is hard to agree to. With increasing awareness and easier implementation of the technology, I believe we will see a large proportion of transactions in logistics, trade and maritime handled by a blockchain system within the next five years.”
MacDonald expanded on the conditions in which blockchain could help the maritime industry thrive: “We see blockchain as one part of many that could change the way in which global trade is operating to create a more fair, accessible and level playing field. If we are able to build a system where each actor is valued the same as the next because we can trust their transactions, or trust the information they are sending forward, then we would be able to eliminate the need for intermediaries and brokers, two entities that the shipping sector relies heavily upon to broker trust.
When you are a large conglomerate, for example, you are able to book directly with shipping lines because they trust you and you have scale, reputation and assurance to back you. However, if you are a smaller organisation operating say, 3 ships, you are unable to book directly and must rely upon the intermediary of EDIFACT to book for you. That third-party obfuscation creates time delays, costs and does not allow for decision making power in providers. The same can be said for bunker brokering, chartering, customs, insurance claims, regulations, compliance and the list goes on.
If we had a system that was trusted, where the data, the transactions or the communications were trusted and verified, it would allow everyone to participate in the market on their own terms, regardless of size. That is where we think this industry needs to head and that is what will allow for better facilitation of trade and goods throughout the world and streamline the processes that are creating redundancies and costs for all involved.”
It seems that blockchain, when optimised and standardised to the industry’s standards, is fit for purpose. Scott said: “Blockchain is ideally suited for industries in which multiple parties – either within the same company or different ones – need to transact with one another. Complex supply chains or transactions – such as those that define global shipping industry – can be streamlined and made more transparent and secure with blockchain technology. The maritime sector has a long and proud tradition of innovation. Over the years the global trade sector has expanded with amazing scope and scale and the maritime sector has played a major role in that success. However, the sector has struggled to securely and efficiently share information across a complex network; to enable the levelling of the playing field for market participants of all sizes; and reducing the inefficiencies that have long plagued the field. Blockchain is a technology well positioned to help overcome these long-standing challenges.”