Blockchain technology can bring calm seas to global navigation?



14 September 2018 | 09:00 GMT

6 min read

  A container ship is moored at the Mexican port by Lazaro Cardenas in the state of Michoacan on April 4, 2017.



  • The technology of the distributed ledger has the potential to substantially increase the efficiency of the global shipbuilding industry by lowering costs and reducing transit time costs.
  • Early movers will compete to set standards and promote widespread adoption of the technology needed to realize its full potential to change the industry.
  • Because of the size and overwhelming importance of the Chinese global trade market, Beijing and the Chinese companies developing blockchain platforms for the naval industry will hold the upper hand over many of their western counterparts.

There are a handful of technologies that, if widely adopted, have the potential to revolutionize the way the world works. Distributed accounting technology is one such invention and shipping is a sector that would benefit from the adoption of blockchain and other distributed accounting technologies. Given the shipping difficulties and its vulnerability to geopolitical risk, the creation of a transparent and distributed register that would eliminate intermediaries and increase efficiency could help industry to evolve and improve economically. The technology could be applied to several phases of the shipping process, including the tracking of goods and the issue of bills of lading. Furthermore, the blockchain can provide a transparent record for all stakeholders, which would reduce errors, limit corruption and eliminate the need for intermediaries.

Because the shipbuilding industry is so intertwined with the economy and global trade, a study by the 2013 World Economic Forum postulates that the benefits of reducing supply chain obstacles could increase global trade in the supply chain. 15% and the global GDP of 5%. The implementation of blockchain is a potential solution to provide barriers to the chain. To derive the benefits, however, the widespread adoption constraints must be overcome. This challenge highlights a broader struggle to influence global standards in many emerging technologies, a struggle that often opposes the United States (more generally the West) to China. The use of blockchain in global shipping is no different.

The Big Picture

Global shipping seems to be among the first industries to take advantage of the distributed ledger technology. However, as the first movers try to solve the winners and losers before industry and policy standardization, competition between different blockchain platforms may slow down the overall rate of adoption and limit the benefits of the technology.

Some of the players

August, after a year of test questions, the Danish shipowning group Maersk and IBM launched TradeLens, a collaborative effort that provides a blockchain platform for global shipping. With 94 agencies, ports and other shipping companies already participating in TradeLens, its introduction marked one of the biggest and most important launches of a blockchain platform in global transport. But it is not at all unique. Numerous pilot projects are operational with the support of some of the major players in the sector. A short list of initiatives includes Blockfreight in Australia, Skuchain and Hijro in the United States, Provenance and MTI in the United Kingdom, SmartLog in Finland and Wave, based in Israel. All these companies are working on solutions to address different parts of the supply chain. The Chinese company Yuanben has developed a blockchain platform as part of its country's Maritime Silk Road, a component of the Beijing Belt and Road Initiative. Even China Alibaba has created an application that uses blockchain to track various aspects of logistics operations.

The questions about scalability and interoperability of the technology have yet to be resolved. A number of platforms and initiatives will work to improve interoperability and compatibility, and will probably be reduced a little over the next 5 to 10 years. Too many players who can not be used together could force ports, shipping companies and other operators to facilitate more platforms, which would limit the efficiency benefits that could result from the widespread adoption of fewer platforms. It will be important to look at the larger operations like Maersk and IBM to see what kind of support they get from industry and how widely their platforms are adopted. Because the involvement of Maersk raises questions of potential conflicts of interest, TradeLens may have difficulty attracting other shippers to the platform, although smaller lines such as Pacific International and Hamburg South have already agreed to use TradeLens.

On a similar note, there is a debate in the shipping industry, if blockchain platforms are to be public or private. Public platforms offer connectivity and interoperability, both needed to spread the technology broadly enough to substantially increase efficiency. On the other hand, private blockchains are easier to customize and could benefit individual companies or operators by allowing them to meet specific requests, but they would be much more difficult to implement on a global scale.

  A chart that explains the use of blockchain technology in global shipping.

Setting the standard

The lack of an industry standard remains an obstacle to widespread adoption as traders are waiting to see which platform emerges victorious. At the same time, some participants will be scouring over the next five years to become the biggest and the fastest in order to establish a de facto standard. Since politics and standardization are often lagging behind technological developments, we will see the first engines, both at the company level and at the national level, compete to conquer the largest market shares. Although port operators will probably be forced to accommodate more platforms as the technology starts to spread, large port operators could also help to declare winners and losers as any blockchain application chosen by these huge commercial nodes would have an advantage over competing platforms . 19659014] As with many emerging technologies, even systems governance once they are up and running remains an uncertainty. And as with many disruptive technologies, blockchain and shipping are shaping up as a potential struggle for the control of standardization and the domination of industry between China and the West.

Who Is the Kingmaker?

Any distributed registry platform looking for global success must win the support of the Chinese shipping industry. China accounts for 17% of world exports and about 12% of world imports. While the United States and the European Union also command similar shares of global trade, China is home to seven of the 10 largest ports in the world. All three Chinese giants – Tencent, Baidu and Alibaba – are working to compete to develop various blockchain technologies in a wide variety of industries. Beijing has long supported the shipbuilding and maritime transport sectors. Although there are participants in TradeLens based in Hong Kong, Chinese ports and shipping companies are more likely to opt for the blockchain platform of Yuanben, Alibaba or another Chinese company or a combination of Chinese platforms, especially given that trade and infrastructure are strategic components of the Beijing Belt and Road Initiative.

This likelihood does not nullify the possibility of a global platform in the future. However, it will probably require cooperation or partnership with Chinese operations, just as we see in other emerging technology sectors, such as electric vehicles. However, collaboration with China on distributed register technology may be more difficult to obtain than some other technologies. Like artificial intelligence technologies, distributed accounting technology is based on data and the European Union and the United States are increasingly reluctant to share data and intellectual property rights with Beijing. Even if the widespread use of a limited number of platforms would lead to greater efficiency gains, it is likely that the technology will be implemented in a fragmented way over the next few years, with ports and operators using multiple platforms. While some platforms are being eliminated and others are successful, even more partnerships are taking place between companies and across national borders, even though concerns over intellectual property rights will keep a mistrust in the West about working with Chinese companies despite China's huge role in trade global. [19659029] Linked content

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