The whirling hype of blockchain and the race to benefit from its instant click efficiency and spiralling profitability continues to generate truckloads of excitement. It is rocking captains of industry and the maritime sector is on the frontline of all the buzz.
But what really lies behind the seductive spin?
As a decentralised ledger database recording the history of transactions via encryption, blockchain does away with a deluge of paperwork and the reliance on go-betweens. This are its two most appealing attributes providing music to the ears of shippers who for centuries on end have had to contend with the myriad intricacies and inherent fragmented nature of transporting goods across rivers, seas and oceans. Blockchain speeds up and secures documentation (particularly the costly yet invaluable Bill of Lading) contracts and payments (especially in relation to VGM messages) and the ability for all stakeholders to communicate with each other in real time and track a consignment at whatever point it happens to be. It is a tracking system made in cyber heaven which renders a time-consuming supply chain a thing of the past.
Even the bureaucratic nightmare of a damaged/lost/stolen Bill of Lading and consequent delays and astronomical expenses become history. Security is said to be ensured by hashing each new block of records with past blocks, any attempt to alter or tamper with a historical record is easily detected because every node has a copy of the ledger and can compare encrypted hashes for authenticity.
In today’s digital world, the time is clearly ripe for a paperless, inter-connecting recording system. This demands a total switch to a digitalised mentality. The generation gap among stakeholders is inevitable; more so given the dizzying swiftness of today’s technological leaps. And some will sink rather than swim. Nevertheless, this is no insurmountable stumbling block. Think of today’s mobile phones. It is not just the young and trendy who hog their smart phones and cannot live without them. Or use them as a social statement.
Blockchain also offers a level playing field to all shippers because the small players, who can never compete with the reputation, clout and assurance of the bigger shots, will no longer need intermediaries and brokers to build trust. This is any shipper’s dream, which gets even sweeter when computer giants like IBM promise unprecedented levels of collaboration, trust, transparency and accountability thanks to Blockchain’s use of public-key cryptography. Significantly, IBM are not merely touting a slick marketing campaign. They are collaborating with Maersk, the Danish shipping conglomerate, to tailor make the tracking of individual shipment of containers rather than an entire shipment.
Blockchain applications are indeed mushrooming and morphing at breakneck speed to respond to individual, fully customised requirements – yet another crucial, logical development to cater for the different needs of chartering, bunkering, transporting passengers and goods, dry- and wet-bulk, small and large consignments, short and long distances, different border compliance policies, insurance regulations. The list goes on and on. Sceptics should look up visionaries like Alexander Varvarenko, owner and CEO of VARAMAR Group who has succeeded in automating and digitalizing dry-bulk, wet-bulk and heavy cargo and is now intent on integrating Blockchain and introducing crypto-currency exchange in sea-freight. An ambition that is the natural next step after his shipping company was the first to introduce and use Bitcoin in exchange for transportation.
That Blockchain empowers the shipping industry makes more than a compelling argument.
Yet as it hurtles it into the omnidigital age, critical thinking needs to be applied. After all this is a nascent technology where its creators as well as users are still taking toddler steps, learning as they tread thrilling ground with an eye on unimaginable prospects on the horizon.
For shippers to truly taste Blockchain success, all users must go digital at the grass-roots to collect and store information. Barriers of lack of knowledge and the challenge to keep up with a rapidly evolving digital system cannot be glossed over. Nor can the considerable capital outlay it involves. Does this not automatically create and consolidate an even more oligarchic maritime industry in the hands of the richest, tech-savvy players? It would have to be much more affordable and accessible to really get all shippers on board.
Unlike aviation, sea rules and regulations are far from streamlined. How does Blockchain apply IMO (and the even more stringent EU) maritime policies? Does it prevent any user from ignoring these rules and regulations?
Tailormade applications for individual users together with a quick response to collective economic problems are the main spur for Blockchain success and development. The multiple platforms in the maritime industry call for short, segmented different parts of the chain which must have a beginning and an end. This will not only keep them manageable but more importantly reduce the risk of cybercrime. At the same time, such short chains must be part of a bigger network to achieve a truly interoperable system, which will even enable entire industries to work together. In other words, collaboration is key. So are mutually agreed upon structures.
Trust remains a big issue. If a lack of trust plagues maritime operations today, how does Blockchain build trust in an environment that steers clear from personal rapport? This may not be such a hurdle since many people today are already living in their own bubbles. But how does it safeguard against error, misuse and fraud? Does not the basic GIGO (Garbage In/Garbage Out) concept still hold? Data entry, distribution and storage must be 100% secure for all users, entailing much more than password protection. Access must be well controlled and defined to stave off cyber criminals who are becoming clever and clever. And how will stakeholders ensure that all users will have the time, diligence and willingness to compare hashes for authenticity.
The basics of ‘Who is who?’ and ‘What is what?’ and ‘How is how?’ point to how fundamental it is for Blockchain to be part of a bigger security and operations framework. Again, who will be in control of all the buttons?
Barebone answers will eventually deliver the security, accountability and transparency of Blockchain.
*This article has been published on Mondaq on 26th September 2018.