Could Blockchain be the Shipping Industry’s Life Jacket?

Women in Shipping

Last week we proposed that blockchain was a potential game changing technology in the maritime and shipping industries; but as hot as the topic is, we still find ourselves scratching our heads about how exactly the shipping industry can take advantage of blockchain. So we sat down with the founder of BLOC, a Copenhagen-based organization that describes itself as: “The leading community and platform for maritime blockchain solutions” to try and get some clarification around blockchain and what it offers for the shipping industry. We were not disappointed in the answers, and found BLOC’s comments both insightful and thought provoking. We hope you do too!

Frictionless and instantaneous peer-to-peer trade on a global scale

KNect365: “What is blockchain and why does the shipping industry need it?”

BLOC: “Blockchain is one of the biggest buzzwords in the technology world these days and yet with all of the hype that surrounds it there have been few concrete definitions of what blockchain is. I have taken a deeper dive into the technical components that make up the entirety of what the blockchain is and what it means for society in a blog post but will give a high level summary here. Stripped down to its core, blockchain is essentially a global database, or public ledger, that securely stores transactions of any value such as currency (money, stocks, bonds), tangible assets (goods, property, energy) and intangible assets (votes, identity, ideas, personal data). Coded and programmable blockchain applications are then built on top of this public ledger that help to facilitate the coordination, tracking and exchange of these assets.”

“This is technically achieved because anyone can add a transaction to a block containing millions of other transactions to be added to a chain of other blocks. First the transaction must be validated as having taken place through state-of-the-art cryptography. The blockchain database is then made more secure through then being automatically copied, distributed and stored in real-time on thousands of computers across the world that maintain it. Participants in the network can have different permissions to view the blocks based on public and private cryptographic keys and one can remain anonymous when transacting as each individual or corporate identity is securely attached to a unique and permanent blockchain identity. This creates a common database of assets and a transparent and globally distributed historical record of tamper-proof transactions.”

“Ultimately, this results in three profound changes to the current system. First, it creates trust amongst all parties due to the pseudo-anonymity and secured transactions and thus removes the need to use third party trust brokers, or middlemen (such as banks). Secondly, the removal of the middlemen empowers society on all levels from the individual to the corporate to frictionless and instantaneous peer-to-peer trade on a global scale. Finally, the transparent and tamper-proof nature of this system creates an accountability mechanism on a scale never before seen for example, behavior and practices are permanently tracked on each blockchain identity and supply chain traceability is now possible. This is a revolutionary new approach to the accessibility, reorganisation and coordination of assets and goods around the world and naturally this is why we have focused on the impact of blockchain on global trade.”

“The maritime industry is facing a tough and unpredictable future. Overcapacity, trust issues, decreasing rates and increasing competition from non traditional players and outdated systems will have a fundamental impact on the industry’s long term prospects. These challenges along with higher demands from society for transparency, accountability and responsibility in the logistics chain will drive the industry towards exploring new solutions.”

“We see blockchain as one of those solutions due to its ability to deliver on these demands and enable frictionless trade.”

KNect365: “How does it work for a company to get involved with your open labs?”

BLOC: “We have created an open community for those interested in learning and engaging with blockchain technology and critically discussing the problems facing the industry. So the first step would be to reach out to us to become a part of the co-generation of knowledge taking place on our platform. Additionally we co-develop impactful blockchain solutions with the community, for the community. Because of such a diverse source of input from various perspectives we are able to better understand the most pressing issues that are contributing to the highest economic, social and environmental costs to the maritime industry, as well as take deep dives into the utility of blockchain and complementary technologies in solving these issues. For each specific use-case we connect the most relevant partners and stakeholders to take part in our open innovation labs where we collectively have joint ownership in prototyping, scaling and implementing case-specific solutions. It should also be said that because we are engaged in the entire value chain we are also able to take part in the overall technological upgrading of the maritime industry through a systems design approach to allow for these solutions to be integrated with others in a holistic way.”

There is a big pull from the industry in wanting to explore what blockchain is

KNect365: “Can you name any of the companies you work with?”

BLOC: “While it is still early as we just launched, we have been in dialogue with several leading maritime companies and the reception has been great so far. There is a big pull from the industry in wanting to explore what blockchain is and the opportunities it brings but to also dive deeper into finding solutions for the many challenges facing the maritime industry today.”

“For example, through engagement with the Maritime Anti-Corruption Network (MACN) and their collective action approach we have identified concrete use-cases where blockchain applications could play a role in the elimination of corrupt practices. We have also been in discussions with Maritime Transport International regarding the potential for blockchain to be influential in the outdated paper based bill of lading process that currently causes costly delays and is highly vulnerable to documentation fraud.”

“Very recently we held our first workshop as a part of the Danish Maritime Days and in partnership with Business for Social Responsibility (BSR), Dare Disrupt and Copenhagen Institute of Interactive Design (CIID) where cross-sector maritime leaders were in attendance and where we crowd-sourced potential use-cases that we will collectively develop on an ongoing basis.”

Blockchain will exponentially increase the amount of big data we already have and are just barely starting to utilize now

KNect365: “Do you think Blockchain will be the norm at some point, any predictions on when?”

BLOC: “I think it will be one of the many layers of technology that we use systematically as a society to solve the grand challenges facing us. I see blockchain as a layer on top of the Internet and feeding into the layers of other technologies that will operate on top of them both. When you think of it simply as a digital database securely holding all things of value, blockchain will exponentially increase the amount of big data we already have and are just barely starting to utilize now. It is going to require the collective willpower and ingenuity of society in applying blockchain in combination with several other disruptive technologies to address our challenges. These technologies include blockchain applications and machine learning algorithms to optimise the tracking and coordination of these assets and cloud computing or potentially quantum computing to ensure the system remains robust, secure, distributed and scalable. Although blockchain will likely become a norm in future, it will not stand-alone and will likely be one of many components of a larger system that comprises the interaction between society and technology.”

KNect365: “Why would a company not use blockchain? What are some of the cons?”

BLOC: “On a general level there are technical barriers right now that cause relatively high transaction costs that may act as a hindrance in the short term and also future challenges that must be met to ensure existence of blockchain. Such barriers include such a lack of storage infrastructure, the high carbon footprint associated with it and the fact that there are few blockchain developers and even fewer ‘miners’ that can validate transactions to keep up with demand.”

“On the organisation level, due to the fact that blockchain is still in its early stages of development and is rapidly changing, it makes it a difficult technology to concretely assess, pin down and apply just yet because an application that is missing today might be there tomorrow. That being said, not all companies need the blockchain and not everything a company does needs to be put on the blockchain. Only the transactions that involve an exchange with other entities or high social, economic and environmental costs or that are liable to become corrupted or tampered with are those that stand to benefit from being put on the blockchain. It is important to remember that some of the principles and applications of blockchain can still be designed into less costly digital solutions and algorithms in an internal database within a company and do not necessarily need to be stored in a global blockchain database.”

Find out more about the future of shipping at Shipping2030 Europe (co-located with Green Ship Technology), featuring exclusive speaker sessions from global leaders in maritime and digital innovation!

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