By Paola Hadjilambri
The new era we live in entails digitisation, computer coding, digital information, while recent technological infrastructures are taking their place as the leading mechanisms around the world.
Major organisations and corporations are changing their infrastructure and their business model to respond to the demands of this new era, and the shipping industry could not be left out of this innovation and change.
It was not until recently we heard of blockchain and digital currencies.
Many connect blockchain with bitcoin, and there are negative and positive opinions on the matter.
To set the record straight, blockchain technology is based on a complex branch coming out of mathematics, and it is called cryptography.
We all know what a ledger is, so picture it has the form of an organised distributive ledger where all transactions in the network are linked in a sequence of blocks.
These blocks can be closed, or they can be locked.
When a new block opens, new blocks can be added to the chain through digital coded transactions.
The blocks are stored and recorded in a sequential manner with fixed, specified numbers.
Cryptography verifies information in permanent blocks of data. That is how it makes it secure because, during the process of verification of transactions, the timing of the transaction is recorded, while the system ensures only the intended recipients can have access to the information.
Blockchain is capable of moving digital assets.
For example, in cryptocurrency, the asset is a digital coin.
Professionals from different industries are looking into the benefits the application of blockchain can bring to the shipping industry, thus introducing “smart shipping”.
Before analysing the advantages of blockchain in the shipping industry, let us see how the shipping industry has worked all these years.
There is no doubt that hundreds of billions of dollars are tied up in disputes for payments in the transportation industry daily since, on average, a company waits 42 days before receiving payment for an invoice after it has been issued.
The processing and administration costs have risen to as high as 20% of transportation’s overall costs due to over-reliance on paper transactions.
Doing trade on paper and handling documents manually, even when sent by email, fax, or post, slows down logistics and trade facilitation.
As for refrigerated shipments, there we see many procedures that delay and affect the product itself since these shipments need to go through 30-plus different organisations, requiring more than 200 separate communications.
Anything left out or goes wrong in the procedure could cause a container to be held up with the products or goods destroyed or lost.
Many times, mistakes are made in payments, and invoices get lost, whereas there is always the fear of personal data or classified data being leaked owing to human factors.
Implementing new blockchain-enabled platforms will allow easy coordination of documents on a shared distributed ledger, making physical paperwork largely unnecessary.
The shipping industry could be more efficient and faster by using blockchain through smart contracts, approvals and customs clearance, thus reducing processing times for goods at customs checkpoints.
At the same time, the users’ identities would be protected by crypto-programming and permission-based sharing because each party has the right to protect sensitive information, such as customer data.
Moreover, the port authority, carriers and freight forwarders can improve their logistics by viewing the whole progress of the shipment since the blockchain-based tracking system is more accurate.
It enables all members of the platform to see the ledger simultaneously and have access to secured data in real-time.
Each transaction is encrypted using a key that links relevant participants.
All records are individually encrypted. All nodes, which are comparable to small servers, contain a copy of this record.
Considering the changes the pandemic brought into our lives and the rising demand for same-day and one-hour delivery services, we have to admit that traditional tracking technologies are no longer efficient.
Blockchain ensures trustworthy data across the transportation and logistics ecosystem since the entire network contributes to data validation.
That is why organisations in the shipping sector, which may see this new option as a solution, will need updated, secure and authentic data to make decisions.
Blockchain technology could prove to be a powerful tool for the shipping industry.
Companies that play an important role in the global supply chain need to recognise the full potential of blockchain.
If they set to work together to accelerate the pace of change, aiming to reach its full potential, blockchain could be used wisely in conjunction with other technologies, such as big data analysis, robotic automation and IoT.
Blockchain is here and is determined to change the world, with first and foremost the way we transport goods around the world.
It is time for the shipping industry and logistics companies, governments, and regulators to work together to overcome any doubts and fears about the blockchain paradox.
Paola Hadjilambri is Director of Business Development at Michael Kyprianou – Advocates & Legal Consultants
The content of this article is valid at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice.