From secure digital bills of lading and smart contracts to supply chain traceability solutions, there is a wide range of potential applications for distributed ledger technology in shipping. Because of this, many companies are starting to believe that blockchain could transform the industry. A number of projects from the likes of Maersk, DNV GL, and Port of Rotterdam are proving that blockchain does indeed have potential. On the other hand, there are numerous sceptics who argue that various hurdles will stand in the way of industry-wide adoption.
Multiple obstacles blocking the way
The maritime industry is notoriously resistant to change. But for blockchain to work in shipping, the way different parties interact with one another, as well as many processes and structures, would need to be altered. Instead of simply forcing blockchain solutions to fit existing processes, all organizations involved will have to rethink their way of working in order to reap the benefits of the technology.
Additionally, because of the international nature of the transactions involved, laws and regulations present a challenge. While it is possible that new legislations could be made, this is likely to take considerable time. And some sources believe it is unrealistic that multiple sovereign states will pull in the same direction to adopt international rules for blockchain.
High hopes for smarter shipping
Nevertheless, the potential applications of blockchain are exciting—and several projects have already proven its viability in shipping. For example, if laws and regulations were to accommodate the new technology, smart contracts will solve issues that have negatively affected global trade for years. By minimizing paperwork and enabling faster customs clearance, smart contracts would significantly boost the efficiency of business transactions and reduce costs.
Another promising benefit of decentralized ledgers is the improved traceability and transparency that they bring. In one pilot project, the Commonwealth Bank of Australia (CBA) collaborated with five other organizations to demonstrate the possibilities of a new platform. Using a combination of blockchain technology, smart contracts, and the Internet of Things, CBA was able to track a shipment of 17 metric tons of almonds from Australia to Germany and even check storage conditions. The platform helps streamline supply chain processes and reduce administrative workloads.
As more and more startups experiment with blockchain, more references and use cases will be available. With each success, blockchain will gain momentum. So despite initial doubts, we could soon see the transformation of core shipping processes—making the sector more competitive in the future.
Blockchain is a decentralized shared database that creates an unchangeable,
time-stamped record of users’ transactions. Once a transaction (or ‘block’)
has been validated by users, it cannot be modified. There are two types of
blockchain: private, where users require permission to access the database,
and public. Choosing which type of blockchain to use depends on the
specific use case, although some experts believe that blockchains need to
be public to achieve their full potential.