A friend of mine once described the shipping industry in London as “an old boys club for men in grey suits”. Whether you agree with it or not, this stereotype exists because the maritime industry is based on trust. What if you could transact with a complete stranger or unknown entity and be confident that you can trust them? What if there was a way to use technology to remove the need to trust? This is where blockchain enters the equation.
There has to be an inherent level of trust built into a system that has millions of dollars of machinery and cargo entering and leaving hundreds of different ports all over the world. It’s very difficult to trust a ship, her crew, and her cargo to a complete stranger or an entity we know nothing about. Therefore the solution is to do business with the same people you’ve known for the last 20 years. If you’ve done business with the same people for decades it’s a fairly safe bet that they aren’t about to run off and hide in Panama with all of your money. This need for trust is the reason you often see the same people having the same discussions in the same room year after year – welcome to the old boys club.
What is blockchain?
Blockchain is beautifully simple, but a bit of an abstract concept. For most people, it is synonymous with ever-so-shady digital currency bitcoin but it’s so much more than that. Blockchain is the underpinning technology that allows bitcoin to work and its implications will reach far beyond digital currency.
Simply put, a blockchain is just a record of events recorded on a digital ledger that is split across a distributed system. Apologies if that sounds face-meltingly complicated, let’s unpack it a little:
- A record of events: this could be anything that happens. Whether it’s a transaction, the movement of a ship or cargo, the signing of a bill of laiding, or someone winning a game of tiddlywinks. Any event that can be recorded can go onto a blockchain.
- A digital ledger: this is just somewhere that those events can be recorded digitally.
- A distributed system: this is where it gets exciting. A distributed system is just a whole bunch of different computers in different locations that are connected up through a network. Each one has its own copy of the digital ledger.
When something happens, it gets recorded on the ledger, not just on the computer where it happened, but instantly across all of the computers in the entire system making it almost impossible to edit an event after it has been recorded. This can act as a record of transaction, movement, ownership, or just about anything and it is very difficult to fake.
Sounds great, where do ships come in?
If you’ve ever been on a ship just before departure you will know how much paperwork gets passed around. The master, loading master, customs officer, and immigration officer (to name but a few), all need to sign, countersign, stamp, and counterstamp enough paper to wipe out a small forest. All of this paper can be lost, stolen, damaged, copied, or forged and is an inherently inefficient system for proving events because it is so heavily reliant on trust and physical documents.
By placing all of this into a digital ledger that instantly makes information available to all stakeholders whilst simultaneously creating a record that cannot be edited or removed there is no longer a need for physical documents, or even trust.
Maersk has seen the potential in the technology and is currently testing out IBM Watson’s new enterprise blockchain system to track the movement of its cargo. Although it’s estimated it could take them up to a decade to fully move over to the system, the potential cost saving could be huge.
Is blockchain the future?
As with most of these things, it’s too early to tell just how far reaching the impact on the maritime industry will be. The power of blockchain is being explored in a myriad of other industries though, there are a whole host of start ups popping up attempting to use blockchain for everything from music streaming to ride sharing to land ownership.Perhaps the most significant current use is in financial services.
Perhaps the most significant current use is in financial services; Digital Asset, led by Blythe Masters of JP Morgan Chase fame is currently trying to recreate the clearing process for financial transactions with blockchain. Thereby reducing the time it takes for a large transaction to clear from days to minutes and massively reducing the possibility of fraud in the process. They have some pretty serious backing, including most of Wall Street.
There are so many disparate stakeholders in shipping. The varying levels of technical capability (and investment) that exist in the industry mean that I would be amazed if we completely abandon physical paperwork in the next 20 years, if ever. The power of blockchain is yet to be fully realised in any industry but the possibilities that exist for the tech in the shipping are hard to ignore.