• Sunday, November 18, 2018
Home

Blockchain and the maritime industry

By BCShippingNews 26 October 2018
Blockchain and the maritime industry
By Georges LaRoche LaRoche Marine Consulting

The 21st century has seen some innovative and amazingly productive technology being introduced and successfully applied to the marine industry, increasing efficiency, safety and improving customer service in ways never seen before. Companies must sit up and pay attention more so today than ever or risk losing their competitive edge on their competitors. Advances in technology such as electronic charts/satellite navigation and A.I.S. (Automated Identification System) have launched the marine industry into an era of increased efficiency and environmental awareness in all the processes. One of the new technologies to present itself is the Blockchain system.

Photo above: Marine Blockchain network sample (click here for details).

Blockchain technology is promising to revolutionize and elevate data recording and sharing to a whole new level, decreasing operating costs by eliminating time-wasting issues such as duplication and the problems associated with erroneous data entry. In this article, we will introduce you to Blockchain and explain how this technology will benefit both stakeholders and regulatory organizations. We will demonstrate how ports and shipping companies are now joining the system and how they are to profit from this new venture. Basically, it is said that Blockchain will do for transactions what the Internet did for information.

History

The Blockchain system, developed by IBM, has a Linux form structure which is accessible by everyone, therefore eliminating the costly monopolies often associated with various programs and their creators. Think of it as an operating system, like Windows or IOS (Apple). Where Blockchain was mostly used in the beginning to conduct and record Bitcoin transactions, it has the ability to run several applications. (Bitcoin is a digital currency that was created in 2009 by a person or persons known only by the pseudonym Satoshi Nakamoto.) Blockchain and Hyper Ledger were developed to address the need for an efficient, cost-effective, reliable and protected system for effecting and documenting the financial transactions associated with this new digital currency. It has since been applied to many industries such as the medical community (have you ever tried to chase down medical records?) and many other companies that administer the flow of goods and related disbursements or enable manufacturers to share fabrication logs with original equipment manufacturers (OEMs) and regulators to reduce merchandise recalls and to track shipments.

What is Blockchain and how can it benefit the maritime industry?

With customary processes for recording transactions and tracking related cargoes, participants on a network keep their own books and other records. This traditional method can be costly, mostly because it involves intermediates that charge fees for their services. It can be inefficient, mostly due to delays in implementing agreements and the duplication of effort required to maintain numerous ledgers or record books. Old methods are also sensitive because if a company’s internal system is rendered insecure, due to fraud, cyberattack, or merely a single data entry error, the entire company network is affected. Blockchain provides an efficient and secure platform that virtually eliminates these issues. The Blockchain format gives stakeholders and regulatory bodies the ability to share a ledger that is updated, through peer-to-peer replication, whenever a transaction occurs. Peer to-peer replication means that each participant (node) in the network acts as both a publisher and a subscriber. Each node can receive or send transactions to other nodes and the data is synchronized across the network as it is entered into the system. Gone are the delays caused by waiting for secondary data entry or inspection of records. Duplication is eliminated as the original entry is visible instantly to all interested or authorized parties. Transaction periods for complicated, multi-party interactions are cut from days and weeks to simply minutes. Contract resolution is much quicker, because it doesn’t require delays waiting for authorization by any main authorities or regulatory organizations. It will also allow some audits to be conducted at a desk and computer, as the auditor has all the required information concerning the port or vessel directly in front of her/him. Blockchain technology is now active in tracking container shipments but will soon be applied to the full range of cargoes being carried globally.

So, what is Blockchain? The name “Blockchain” stems from the method it uses to store transaction information or data. The Blockchain system is organized in blocks that are linked together to form a chain. Various stakeholders become participants and as the amount of transactions increase, so does the size of the blockchain. Blocks record and confirm the time, information and sequence of transactions, which are then entered into the Blockchain through a “Shared Ledger” within a discrete network governed by parameters agreed on by the network participants in a series of individualized “Smart Contracts.”

Each block contains a hash (a digital identification mark), timestamped groups of new authentic transactions, and the hash of the previous block. The previous block hash connects the blocks in a chain and inhibits any block from being altered or any blocks being created between any two current blocks. Subsequently, each block reinforces the validity of the previous block and therefore, the entire blockchain. This system renders the entire chain incorruptible, giving it the essential element of inalterability and secure entry. All Network Participants create parameters of data viewing and entry within a Smart Contract, thus retaining sensitive information confidential and available on a “Need to Know” basis in the Shared Ledger.

A Shared Ledger is created and updated as required by the various network participants, making information instantly available to all concerned parties. Blockchain reduces the need for re-entry and duplication of data. It is extremely difficult to make any changes once information is entered into the Ledger, thus reducing any confusion or errors and greatly increasing cyber security. As data is entered by any of the participants into the Shared Ledger, it becomes instantly available to all authorized parties.

Recognizing the key business benefits for business, blockchain has the following specific benefits:

  • Time savings: Transaction times for complex, multi-party interactions are slashed from days to minutes. Transaction settlement is faster, because it doesn’t require verification by a central authority.
  • Cost savings: A blockchain network reduces expenses in several ways:
  • Less oversight is needed because the network is supervised by network participants, all of whom are known on the network.
  • Intermediaries are reduced because participants can exchange items of value directly.
  • Duplication of effort is eliminated because all participants have access to the shared ledger.
  • Tighter security: Blockchain’s security features protect against tampering, fraud and cybercrime. If a network is permissioned, it enables the creation of a members-only network with proof that members are who they say they are and that goods or assets traded are exactly as represented. Not all blockchains are built for business. Some are permissioned while others aren’t. A permissioned network is critical for a blockchain for business, especially within a regulated industry. It offers:
  • Enhanced privacy: Using IDs and permissions, users can specify which transaction details they want other participants to be permitted to view. Permissions can be expanded for special users, such as auditors, who may need access to more transaction detail.
  • Improved auditability: Having a shared ledger that serves as a sole source of truth improves the ability to monitor and audit transactions.
  • Increased operational efficiency: Pure digitization of assets streamlines transfer of ownership, so transactions can be conducted at a speed more in line with the pace of doing business. 
    (Source: IBM)

How is Blockchain being applied today in the marine industry?

Maersk and IBM have recently joined in a venture to create a global system called “TradeLens,” a Blockchain shipping program that has been designed to promote more efficient and secure global trade. IBM and Maersk have announced that over 94 organizations are, or have agreed to participate in Trade Lens, including several port and terminal operators worldwide. Participants in the TradeLens platform include the Ports of Rotterdam and Halifax, as well as numerous container terminal operators and container carriers including Pacific International Lines (PIL) and Hamburg Süd. Nations such as Peru, Singapore, Australia and the Netherlands also presently have their Customs Authorities involved in TradeLens, thus rapidly increasing data flow as well as reducing arrival and departure delays. B.C. Ferries has begun using a blockchain system in its crew hiring and training and processes, making any entries or changes to a crew member’s certification or training instantly visible to all concerned participants within the network.

William D. Friedman, President and CEO of the Port of Cleveland/Cuyahoga, a major Great Lakes port, recently announced that the Port has begun its own Blockchain implementation to provide increased efficiency and customer service within its system. In fact, the entire city structure is planning to incorporate the Blockchain system, not only in port and cargo logistics, but in several other sectors such as the medical community and all manners of city-wide certification. The City of Cleveland is furiously planning to host its first Blockchain conference, named Solutions, at the Huntington Convention Center from December 1 to December 4, 2018. The “Solutions” concept also has the full backing of auto magnate, Bernie Moreno’s Blockland Group, which also includes David Gilbert, CEO of Destination Cleveland.

In short, Blockchain systems are being implemented at a rapid rate in many facets of the marine sector and amongst many other industries as well, such as the manufacturing, pharmaceutical, medical and automotive sectors.

Conclusion

It is very evident that traditional shipping technology and operations are changing exponentially in this century. Electronic charts and satellite navigation, autonomous operation of vessels, clean fuel propulsion and of course Blockchain are either in place now or being implemented worldwide and are pushing the port and ship operators to either adapt now or in the near future, or fall in the wake of global and domestic trade which can prove to be quite competitive in these times.

The shipping industry, especially locally in North America has made many changes over the last 30 years to continue to make it a viable and cost-effective way to move cargo. New developments in technology are arriving at an accelerated rate now as many breakthroughs have occurred in the last 10 or 20 years. Companies and ports would serve themselves well to stay up to date and listen carefully to evolving ideas in the sector as they are quickly becoming functional options and are presenting a definite competitive edge over those who choose to remain with the traditional operating methods, rather than be open to new methods and technology.

Marine Blockchain network sample

  1. Shipyard fabricates Newbuild, Regulators issue Class, Certificates, etc.
  2. Ship owner can monitor the construction and certification process.
  3. Once ship owner takes delivery of vessel, then the charters/ship operators can see the change in inventory and current information concerning the new vessel (capacity, type, speed, etc.). Some of this information also becomes available to the cargo vendors and buyers and terminal operators.
  4. Once a cargo has been purchased, the information is automatically shared with the ship owner, terminal operators and other interested parties. The parties then select a vessel and trip information can be entered and updated into the ledger as needed throughout the voyage.
  5. Port arrival information is also shared automatically with the concerned government and regulatory parties concerning the vessels voyage and port entry (e.g., customs, inspectors, environmental regulators and monitoring organizations).
  6. The voyage information is similarly shared with various service providers required by the vessel in port or otherwise. (e.g., pilotage, towing services, ship repair, chandlers, crewing departments/agencies, agents).
  7. As various entries are made throughout the voyage or otherwise, the information becomes readily available to all interested participants. For example, a crew member upgrades his/her certification and the information is entered by the certifying organization and is now available to the shipping company. Another example would be if a vessel has changes or repairs made during the voyage. Once work is completed, all pertinent data, invoices and certification are updated for all network participants that are designated to have this information.
  8. Once the ship is sold or scrapped, the information is entered into the Shared Ledger, allocating the data to all relevant participants (e.g., regulatory bodies, charterers, etc.)