Blockchain – The Way Ahead

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Image Courtesy: Datafloq

“The times, they are a-changing,” Bob Dylan sang in 1964.

This statement is truer for the shipping industry today than ever before. There are drastic changes taking place globally, not just with regards to the environment but also, technology and digitalisation are changing the way the industry functions.

In the wake of all this, comes the industry’s newest and most viable solution – Blockchain Technology.

So, what is this one-stop solution?

Tuscor Lloyds explains, “Blockchain’s store information across a network of personal computers making them not just decentralised but distributed. This means no central company or person owns the system but everyone can use it and help run it. This makes it very difficult for it to be hacked. The people who run the system use their computer to hold bundles of ‘blocks’ (records) that can be submitted to others in a chronological chain. The blockchain uses a form of math called cryptography to ensure records can’t be counterfeited. Old transactions are preserved forever and new transactions are irreversible once added.”

Through blockchain, no one party can modify, delete or even append any record without the consensus from others on the network. This level of transparency helps to reduce fraud and errors; reduce the time products spend in the transit and shipping process; improve inventory management; and, ultimately, reduce waste and cost.

Opensea.pro states, “one of the biggest revolutions that the blockchain could bring in the shipping industry is the “smart contracts”. These are contracts in the form of a computer program which is run and self-executed in blockchain and which shall automatically implement the terms and conditions of any agreement between the parties.”

Apart from this, there are many other advantages that this technology presents, some of which are listed below:

  • Better accuracy – errors are minimal since the execution all of the contracts and processes are automated.
  • Faster processing and real-time updates – exchange of information is instantaneous and procedures that could take weeks are completed in a matter of minutes. The software code of blockchain will also automate tasks that are typically accomplished manually.
  • Transparency – information is accessible to everyone that has the required access key. This allows for full transparency.
  • Lower costs – financing costs with respect to documentation, delays in procedures, errors and discrepancies are removed. Intermediaries are replaced by the use of blockchain.
  • Higher security – since information is encrypted. Also, users cannot change information stored in the system, protecting markets from fraudulent activities and manipulations in documentation.
  • More market access – since everyone can access blockchain technology, there are minimum entry barriers and more competition.
Blockchain technology is poised to recover billions of dollars lost to coordination costs in both capital markets and the shipping industry, according to Arvind Krishna, the director of research at IBM. He states, “A single piece of paper, if it’s missing when it arrives in Rotterdam, means that a container full of avocados just sits there. A few days extra of sitting there and you’ve got to throw out the whole container because you’ve crossed the limit of how long those goods can sit there without being considered spoiled.”
To explain further, Blockchain will allow customs officials to upload a copy of a signed document (approving the transaction/shipment) where everyone can see it. This could save up to £230 per container in terms of the labour that process documents. So, an Ultra Large Container ship that can carry 18,000 containers, could mean the savings for one ship’s full cargo would amount to £4.4 million.
Arvind adds, “We believe that just doing this kind of digitization can result in tens of billions of dollars saved across that network.”
Though it might take a while for the whole industry to adopt this technology, the initial steps have been taken and it is interesting to see how this technology will amount to a paradigm shift in the way shipping is carried out.

 

References: Opensea.pro, Coindesk, Tusscor Lloyds, siliconrepublic.com