Maritime industry article originally published by, and permission to publish here provided by, Jenis Sheth.
A current topic of focus in the maritime industry technology space is Blockchain and how it is going to transform commercial operations.
The Blockchain platform is a distributed ledger which records transactions between parties in a verifiable and, most importantly, permanent way by using a cryptographic hash.
When all major parties approve and implement a single blockchain system, then the entire commercial channel would be transformed into a super rapid, secure and totally digitalized environment.
Multiple Blockchain Initiatives:
A rapid growth in the development of blockchain initiatives from various industries using different technologies such a Ethereum, HyperLedger, R3, Corda etc.
From March 2017, there are various Blockchain initiatives developed by liner shipping companies, and none of them have persuaded their major competitors to join their platform and consolidate the Blockchain networks.
Only Global Shipping Business Network (GSBN) was relatively successful in gathering 4 liner shipping firms on their platform (Oracle Blockchain with CargoSmart). In other words, none of the Blockchain systems are welcomed as the maritime industry standard of a legitimate monopoly in the network. Most probably, that will not be happening in the next decade (even longer).
Thus the emergent question is how these liner shipping blockchains will communicate with each other…!!
Distributed digital ledgers can mitigate the mistrust that exists among transacting parties. Yet this same mistrust makes it hard to bring together diverse participants into a common blockchain ecosystem.(Resolving the Blockchain Paradox in Transportation and Logistics, B.C.G.)
Policies & Standards:
Blockchain platforms of today are more of a document digitalization instrument instead of an ideal system as mentioned above. In any case, a Blockchain system may help to bypass various paperwork and customs operations which are significantly painful in undeveloped and developing countries. Even in a One Company-blockchain System, it has productivity gains and improved efficiencies for internal operations.
The idea of Blockchain is initially expected to lift boundaries between transacting parties by offering a new way of authentication and digital ledger. When all parties agree and join one single Blockchain initiative, all paperwork and transactions would be securely shifted to this new digital space. By utilizing the digital distributed ledger system, there would be no gap left to manipulation.
The creation of shared policies and standards that maintains the Blockchain’s global interoperability for digital supply chain. Policies are built on the framework, principles, procedures that shape the use of the technology; Standards help to define common protocols, languages, semantics, messages and formats.
In the last few years, many carriers have invested in Blockchain initiatives and collaborated with leading Blockchain developers. Currently, there are five major blockchain initiatives that digitizes the global trade, which differs from their corresponding liner shipping alliances!
For example, all carriers in 2M+H alliance have their own Blockchain initiatives disconnected from their partners in the shipping alliance (i.e. Trade Lens, Maqta Gateway and Samsung SDS). Inconsistency between shipping alliances and blockchain initiatives will eventually cause posterior problems such as interoperability and disconnection.
An average freight forwarder working with various carriers will need to connect with these disconnected blockchain initiatives in different standards and protocols. There is no dedicated connector for this blockchain network.
Conversely, CargoSmart has pooled a significant number of carriers in its initiative, “GSBN” consisting of The OCEAN ALLIANCE members and Yang Ming Marine Transport Corp, and currently leads the blockchain space with over 30% market share (as per cargo volume).
Out of the top 10 liner shipping firms, only HapagLloyd has not released an announcement on developing a blockchain initiative in digitizing the global trade. However, since Yang Ming Marine Transport Corp – a member of THE ALLIANCE has joined GSBN, it gives Hapag-Lloyd a justifiable reason to be a part of it.
Interoperability & Services
The absence of a connector in the Blockchain network is a growing problem, and no organization has claimed the responsibility for this problem yet. In this circumstance, and that gains strength with the delay of such connectivity platform and standardization of Blockchain data exchange protocols.
Who is going to be the connector, the orchestrator, of this maritime industry network?
Most importantly, the connector of this network must be an impartial and trustable institution which would be adopted as the supreme authority. So, the Blockchain idea has initiated an institutional demand for interoperability and connectivity of many bounded initiatives.
A complete interoperable blockchain ecosystem that connects operations and services globally. The ecosystem lowers the barrier of entry that expands the pipeline and growth in international trade.
There are international organizations such as World Trade Organization (WTO) or the United Nations Conference on Trade and Development (UNCTAD) which essentially promotes and deals with trade facilitation. WTO or UNCTAD may take a role on this gap. Classification Societies have a long history of being adopted as trustable agents by governments and organizations. They may intervene in this growing deal.
Following the International Maritime Organization (IMO) that has a long history in the safety and security of shipping, the concept of creating international shipping standards could be interchangeable and adopted by WTO or UNCTAD. By providing a forum where international standards can be discussed, created, agreed, adopted and implemented by member states could help facilitate the movement of digitalizing the global trade.
Ultimately, all 3 that was mentioned are under the United Nations and could set a new beginning that will facilitate the development of Blockchain. Blockchain may be an ignition point of discussions on legitimacy and standardization of various digital initiatives.
Conclusion: In search of a Maritime Industry Supreme Orchestrator Floating Model
A floating model needs a standard data exchange protocol which is currently ignored in the Blockchain space. Initial attempts to establish a de facto standard for the maritime Blockchain space did not really work. Efforts on the de facto standard for enterprise Blockchain need to evolve into an interoperable level.
Currently most Blockchain initiatives have challenges:
- No interoperability due to own unique data protocols
- Areas of trade practices
- Customs Procedures
- Legal Jurisdiction
- Financial Interest of differing countries
- Set of interoperability issues: organizational interoperability, legal interoperability, semantic interoperability and technical interoperability
Because of this Blockchain governance needs to be developed to create policies and standards that help to achieve interoperability. It can only be achieved with a co-operative standardization among diverse initiatives and the governance of it is not governed by not one person, company, organization or government.
The big question is who is going to be the supreme orchestrator?
The future of blockchain technology that has the ability to recognize, interact and communicate across all Blockchain networks, which itself is a globally distributed network. The network is to be governed by a decentralized and interconnected by a group of international multi-stakeholders consisting of international and national organizations, governments, the private sector and core developers.
In future, it is expected that there will be new Blockchain initiatives, but they are not concentrated in providing solutions to the inefficiencies of any industry. Instead, it will be a chain of initiatives that will connect the industry in Blockchain to achieve interoperability. These initiatives will help to decentralize the network further into the macro level environment.
However, an international body is required to direct these initiatives into a co-operative standardization. Without it, the scalability of interoperability will not be at maximum. Recently, a group of digital leaders from Maersk, CMA CGM, Hapag-Lloyd, MSC and ONE started discussing the creation of common information technology standards.
In years to come, when these initiatives are realized and connected by co-operative standards, we can proudly say that Blockchain has revolutionized the global trade volumes leading to an increase in volume of goods transported and every stakeholders of the supply chain will profit from it.