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Blockchain: A game-changer in the maritime industry

Learn more about the current state of blockchain technology in the maritime industry and the lessons learned from the blockchain-based platform TradeLens.

 

The shipping industry is responsible for transporting an estimated 90% of the world’s goods. As the industry evolves, technological advancements have become essential for enhancing supply chain efficiency. One such emerging technology with significant potential is blockchain.

Friedrich Lorenz-Meyer, Operations Manager at Kaiko Systems, has published in-depth scientific research on the current state of blockchain in the shipping industry. This article summarizes his findings and highlights various applications of blockchain technology in the maritime sector.

Boosting operational efficiency with blockchain

One of the most significant advantages of implementing blockchain in the shipping sector is the enhancement of operational efficiency. By digitizing and streamlining traditionally paper-based documentation processes, blockchain can significantly reduce time, cost, and errors. This leads to a more transparent, secure, and efficient supply chain.

Additionally, blockchain improves trust and collaboration among various stakeholders, including shipping companies, freight forwarders, and port authorities. By offering a decentralized and secure platform for sharing information, blockchain can facilitate seamless and trusted data exchange. This not only minimizes the risk of fraud and data corruption but also ensures better visibility and traceability throughout the entire supply chain.

TradeLens was initiated to address inefficiencies and improve transparency in the shipping industry’s supply chain. By offering a decentralized and secure platform for information sharing, TradeLens aimed to bring together maritime industry stakeholders, enhance collaboration, and reduce trade costs. Although TradeLens has been recently shut down, its case serves as a valuable foundation for future blockchain endeavors.

TradeLens: a prominent blockchain-based platform 

TradeLens was a blockchain-based platform designed to facilitate document and information exchange throughout the supply chain. Developed by IBM and Maersk in 2018, TradeLens attracted 94 participants by the time of its shutdown, including more than 20 port and terminal operators and 5 of the 7 biggest shipping companies.

The architecture of TradeLens consisted of a permissioned blockchain network that secured and controlled data sharing among parties. Additionally, the platform utilized smart contracts to automate and enforce agreements between parties, reducing the need for manual intervention and minimizing the risk of disputes.

TradeLens was engineered to capture and share information about key shipping container events and to provide a network for increasing trust and enabling encrypted digital copies of trade documents.

The blockchain ecosystem connected all stakeholders in the supply chain, including cargo owners, freight forwarders, inland transportation providers such as rail and trucking, ports and terminals, ocean carriers, customs, and other government authorities. It enabled seamless, real-time sharing of cargo details, trade documents, and shipping milestones, ensuring that critical information was secure, immutable, and auditable through blockchain technology.

Furthermore, TradeLens’s open API environment allowed third parties to build applications on the platform. The various features of the solution were divided into three components: the ecosystem, the platform, and the marketplace. The ecosystem ensured data sharing and access, the platform served as the technological foundation of TradeLens, and the marketplace functioned as an open application and service platform for third parties to offer their products.

TradeLens aimed to reduce trade costs, increase visibility, improve operational efficiency, ensure data security, and prevent fraud.

TradeLens shutdown and lessons learned

Despite its promising start and ambitious goals, the recent shutdown of the TradeLens platform, as reported by Gartner, marks the end of an era for enterprise blockchain. By examining the lessons learned from the TradeLens case, future blockchain initiatives can better navigate the complexities of the maritime industry and avoid similar pitfalls.

Industry collaboration is key

TradeLens highlighted the importance of collaboration among various actors in the shipping industry. The platform failed to achieve widespread adoption due to the lack of a network effect. The platform needed a critical mass of industry participants to create value for its users. Additionally, TradeLens was criticized for being too controlled by IBM and Maersk, leading to concerns about centralization and potential conflicts of interest. Competing companies may have been hesitant to join a platform heavily influenced by a major industry player like Maersk. To be successful, a blockchain solution in the maritime industry should be more open and foster collaboration among all participants.

Establish interoperability and standards

TradeLens faced barriers in integrating with existing systems and establishing common data standards. Industry participants use various data formats and systems, making interoperability crucial for a successful blockchain solution. The platform should be designed to work seamlessly with existing systems and promote data standardization.

Focus on cost-effectiveness

TradeLens was an expensive platform to build and maintain. The high costs may have deterred potential smaller participants and attracted mostly the biggest industry players. It made it difficult for the platform to demonstrate a strong return on investment. Future blockchain initiatives in the shipping industry should prioritize cost-effectiveness and clearly demonstrate value.

The closure of TradeLens is undoubtedly a setback for the maritime industry’s blockchain ambitions, but it also provides valuable insights for future endeavors.

‍Future applications of blockchain in the maritime industry 

As blockchain technology continues to evolve, its potential applications in the shipping industry are expected to expand. Blockchain could also provide opportunities in supply chain optimization, environmental sustainability and finance management. 

Supply chain optimization

Blockchain technology can provide end-to-end visibility and traceability. By recording and sharing every transaction and movement of goods on a blockchain, stakeholders can gain real-time insight into the location and status of their shipments. This transparency can help reduce bottlenecks, optimize inventory management and minimize delays.

Environmental sustainability and compliance

By providing an immutable record of the environmental performance of vessels, blockchain can help regulators and industry participants monitor and enforce compliance with environmental regulations. Additionally, blockchain can be used to track the lifecycle of shipping containers and other assets, facilitating a more circular economy and reducing waste.

Decentralized finance solutions

Blockchain can enable the development of decentralized finance solutions tailored to the maritime industry. These solutions can facilitate secure, transparent, and frictionless financial transactions among industry participants, including payment settlements, financing, and insurance. By leveraging decentralized finance, shipping companies can reduce transaction costs and streamline financial processes.

While the shutdown of TradeLens is a setback, it provides valuable lessons for future blockchain initiatives. By recognizing the importance of industry-wide collaboration, interoperability, and cost-effectiveness, the widespread adoption of blockchain projects can be achieved. Blockchain has the potential to revolutionize the maritime industry by offering improvements in operational efficiency, transparency, and collaboration.

 

This article is shared by courtesy of Kaiko Systems https://www.kaikosystems.com/

For more articles about Blockchain in the maritime, click here.

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