Blockchain is one of the most hyped technologies of this decade. To many people, it is synonymous with Bitcoin. But if you look beneath the surface, blockchain has a limitless number of potential applications beyond the volatile world of cryptocurrencies. In maritime, the applications for the technology span right across the industry from trade facilitation to ship operations. But what is blockchain and, beyond the hype, how will it be used in the shipping industry?
What is blockchain?
A blockchain is a growing list of records called blocks. Each block contains transaction data, a timestamp, and a cryptographic key to the previous block. Blocks are stored on a distributed network of computers, there is no central database where information is stored. Data is only added to the blockchain when enough of the computers in the network agree that it should be.
The cryptographic link between blocks means that it is very difficult to retrospectively edit data in a single block without editing the subsequent blocks of data in the chain. Further, the distributed nature of the system means that any attempt to retrospectively edit data will need to happen across multiple computers in the network at exactly the same time. This makes it very difficult, though not impossible, to hack into and change transaction data. As well as being secure by design, the distributed network makes blockchain highly fault-tolerant. This means that, unlike centralised systems, if a computer goes down it is unlikely to interrupt the rest of the network.
The timestamps, cryptographic chain, and distributed network of computers recording data make blockchain a viable method of underpinning transactions without the need for verification from a central authority. Blockchain’s design helps solve difficult problems like double spending and fraud. This is what allows Bitcoin and other cryptocurrencies to function; there is no need for a bank or financial institution to oversee transactions because the system’s design builds trust.
How is blockchain used?
Cryptocurrencies are the most talked about use case for blockchain, with the volatility of Bitcoin and other major coins making headlines around the world. As well as volatility, the hype around cryptocurrencies has lead to countless get rich quick schemes and accusations of fraud.
Cryptocurrencies may be the most talked about use but the real value in the technology is its ability to underpin any type of transaction and act as a deed of title. The process of buying and selling land, cars, goods, music, even ships can be made more efficient through the use of blockchain technology.
There are countless examples of large registers of ownership that need to be maintained by central authorities. In the UK for example, the Land Registry is a government database recording land ownership. Transacting land is expensive, takes a long time and requires significant resource from the government, lawyers, and estate agents. In April 2019, HM Land registry successfully trialled using blockchain to manage the sale of a semi-detached house in Kent, making the transaction process quicker and more simple than traditional methods. This approach to blockchain opens up a whole world of possible use cases. Anywhere that a trusted authority exists to verify something; whether it’s ownership, provenance, identity, or a transaction of money or assets, blockchain can help.
Blockchain applications in shipping
Startups in the maritime sector have already explored some of the more obvious use cases for blockchain in the industry. The use of cryptocurrencies to underwrite maritime assets has been attempted with limited success by a number of startups.
In 2018 Danish startup Blockshipping attempted to raise money through an initial coin offering of their Container Crypto Coin (CCC) token. Designed to underpin a global container sharing platform, they offering raised USD$2.5m. Though respectable, it was a long way short of their planned goal. The performance was blamed on a “difficult market situation” by the startup’s founder and the coin is now trading on an open exchange at USD$0.001 (November 2019). Despite the disappointing performance of their coin, Blockshipping is pushing ahead with its Global Shared Container Platform. The startup is developing new tools including one to predict import dwell time and a blockchain container register.
Another startup that attempted to pursue the ICO route was Hong Kong based 300 Cubits. Their TEU token was designed to help shippers and carriers solve a contractual reliability problem by acting as a booking deposit. The coin was pulled in September. The founders cited low transaction volumes as the principal factor in their decision.
Beyond cryptocurrencies, there are a number of startups working to use blockchain technology to transform how we transact and verify information in shipping:
CargoX has developed a smart Bill of Lading that is a commercially viable alternative to traditional methods. Bills of Lading are transferred instantly between shippers, carriers, and receivers securely using public key infrastructure. The transfer history is stored using blockchain technology, ensuring the record of ownership cannot be edited maliciously or otherwise.
Blockchain Labs for Open Collaboration designs and develops high quality, reliable, sustainable, and resilient digital infrastructures to support social and economic development, with a focus on equitable and secure access. One of their early projects, BunkerTrace, added synthetic DNA to bunkers to move them as they moved through the supply chain. Combined with a blockchain ledger, this creates an immutable record of bunker supply making it possible to verify the source and quality of bunkers before they are burned in a ship’s engine.
Marine Transport International brings technology and logistics together, keeping customers in control of their cargo through high performing, low cost software products. Their projects include a method of using blockchain to securely distributing SOLAS VGM data to the right supply chain parties. The same technology has been applied to create a secure audit trail for waste logistics; Traca uses a data adaptor to allow users to upload data to the blockchain without changing their own processes. Data and documentation is then shared using smart contracts, ensuring a compliant, verifiable, and immutable audit trail for the waste supply chain.
Navozyme exists to enhance the reputation and standards of the maritime industry. Their products include blockchain enabled platforms for certificate management, port clearances, and vessel registration. By using blockchain in the certificate management process, Navozyme is able to cut fraud, reduce administration costs, and improve transparency.
There is no question that blockchain technology will transform the logistics industry, but probably not in the way the hype would have you believe. Despite the PR that crypto coin offerings tend to achieve, it is the innovators working on using the technology to solve difficult problems, rather than raise money, that are achieving the greatest traction with customers.
The shipping industry is beset with trust problems. Whether it is fake seafarer certificates, bad bunkers, or forged bills of lading, blockchain offers a viable solution. On top of the trust problem, blockchain can streamline the bloated paperwork requirement that comes with operating ships around the world. The hype and subsequent trust problem have likely damaged the short term adoption of the technology. But looking ahead, as adoption grows in other industries, blockchain will continue to be adopted in maritime too.