Discover how the shipping industry can transform itself with blockchain and smart contracts, enabling enterprises to be more successful and efficient.
Discover how the shipping industry can transform itself with blockchain supply chain management and blockchain smart contracts, enabling enterprises to be more successful and efficient
Despite the latest technical developments, shipping is still a conventional industry. In many instances, the procedures adopted by the stakeholders are mostly outdated. Many maritime deals usually include a wide range of records, such as vessel and freight purchase arrangements, charter group contracts, transportation bills, port papers, letters of credit, and others.
These papers continue to move across various participants. It is because both the different participants need to receive a variety of transfers. Also, the carriage and distribution of the shipment to occur are of high priority. See, for instance, the lading bills and the long route they pursue: they travel through many banks starting from the shipping companies at the loading port before they meet the recipient. The steps followed in the process are intricate and time and cost consuming. Thus, it gets normal that shipments arrive at the releasing point, ahead of the lading bills.
The shipping industry is exploring the potential of blockchain technology in an attempt to automate existing procedures. Blockchain tech builds on fully decentralized, open-source, peer-to-peer applications, and the network collectively handles all purchases or issues new currencies. The software uses a cryptographically encrypted blocks' chain for the administration of all these transactions and comes in use as a public ledger that tracks all transactions.
These blocks get timestamped and are related to the previous blocks in the chain. Further, the network reaches a consensus to validate the authenticity and completion of each transaction.
After the storage of information in the block, no participant can change it. It can only change if we change the following blocks, or the majority of the network agrees upon the deletion of information. User intrusion in the blockchain network thus appears unlikely, and the device remains completely waterproof.
Also, Read | Mining Supply Chain Meets Blockchain for End-to-End Tracking
The blockchain concept initially facilitated and executed authentic financial transactions among parties without requiring any intermediary intervention like a banking institution. As a decentralized and encrypted public ledger, the use of blockchain may be used in different shipping applications and carry a revolution in the way the trading gets executed, almost identical to the evolution introduced by OpenSea in the industry on the way ship chartering takes place.
Blockchain transforms the entire process into paperless operations. It enables all parties involved in a transaction, including freight sellers/buyers, shipowners, charterers, banks, officers, customs, port authorities, etc.) to directly contact each other through the use of public and private keys. They can carry out actual transfers, exchange, and store information in an encrypted format, and carry out their encrypted data.
Also, Read | Streamlining Supply Chain Management with Blockchain Technology
Besides the usage as a public ledger, blockchain technology offers the shipping industry smart contract implementations, one of the major revolutions in recent times. Smart contract solutions are contracts that operate and self-execute in the blockchain network as a computer program. They automatically follow the terms and conditions of a business contract or a transaction among various parties. The charter group and bill of lading terms and conditions can be standard functions of the software that no party without consensus can change.
Subsequently, we are moving into a digitally transformed marketplace. A market in which an owner broadcasts a contract and the other party directly negotiates the price/freight by accessing the blockchain network platform. Thereby, smart contracts can be enforced by a computer network that employs consensus mechanisms to determine the series of actions resulting from the contract code. As a result, it enhances measurements, approvals, and other transaction activities.
This sort of smart contract was unlikely to exist before the use of blockchain since parties to an arrangement must maintain different databases. Smart contracts auto-execute with a decentralized ledger that operates a blockchain algorithm, and both participants verify the result instantaneously, without losing time on more transactions and without the need for a third-party intermediary.
Also, Read | Making Supply Chains Smarter with Blockchain Smart Contracts
For the maritime industry, applying a blockchain system, such as Smart Contracts, may have the following benefits.
The exchanging of information will become instantaneous and processes that usually take weeks to be finished even within a few minutes instead of mailing the papers to separate parties. The blockchain's machine code will also simplify manual functions.
Because all contract execution and other operations are automatic, failures are far less conceivable.
The data remains in a location where anyone with permission can have access, providing that the access key is required. It provides market participants with complete clarity and also makes it possible to assess the counterparty risk if anyone can access the transactions previously done by each party.
All data remain secured, which protects in its way. Further. protecting the business from deceptive practices and various distortions of records are preventive. It is because users cannot communicate with the system and change the data stored in the blockchain.
Most of the cost of industrial finance attributes to paperwork, administrative complications, contradictions, or mistakes. Blockchain can avoid such challenges and expend the overall costs on multiple intermediaries.
Anyone with permission can use the blockchain technology, so the penetration barriers remain smaller, and the industry becomes more competitive. Furthermore, without requiring third-parties, participants can directly form contact, and thereby the overall chain will become lighter.
Also, Read | Driving Supply Chain Innovation with Blockchain Solutions
Maersk is another major shipping corporation investigating the prospect of participating in the blockchain. It has developed a partnership with IBM to develop blockchain technology used in the container industry. In this scenario, it will digitize the supply chain to increase the efficiency and protection of exchanging information among stakeholders. It will enable the controlling and monitoring of millions of shipping containers. According to Maersk, it will save the industry billions of dollars per year.
Oodles is a leading blockchain application development company providing services for the shipping business digitalization. We closely track all recent trends in this sector to continue to provide our customers with unique services. With blockchain, we strive to make the shipping industry more open, technologically mature, and efficient.
An efficient way to explore the potential of blockchain in shipping without heavily investing is developing a blockchain PoC or connect with our development experts to know more.
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