Industry Veterans Raised Questions About Blockchain in Shipping — And We Answered Them
Convincing people to change is hard, especially when they have been doing things the same way for decades. We put a man on the moon almost fifty years ago, but we are still spending billions of dollars every year moving paper documents around the world in much the same way our grandparents did, with couriers. In maritime shipping, these bill of lading documents have been used to transfer ownership rights for centuries, allowing global commerce to flourish, while maintaining clerical order across a complex web of trading networks and partnerships.
Even though it’s always sad to see a venerable institution fade into history, CargoX is excited to be part of a disruption that will eliminate the need for paper documents. We are replacing these outdated documents with a blockchain-based bill of lading platform called Smart B/L. A global first, our Smart B/L solution is based on a trusted decentralised platform that shaves days and hundreds of dollars from the transport and archiving procedures associated with bills of lading.
What’s the catch?
There isn’t a logistics manager alive who doesn’t want to get rid of cumbersome documents and cut costs, but blockchain technology is still new, and questions remain. Is it secure? Do I retain ownership and control of my trade data? How does it work? Is this just a passing fad?
CargoX’s team has decades of experience in both the tech and logistics sectors, and we understand the desire to stick with proven technology when you are managing millions of dollars’ worth of supply chain inventory. That said, change happens fast and over the last year, several blockchain-based shipping solutions have started appearing. The global transport of oil is one area where blockchain has already demonstrated its potential, spurring a consortium of shipping and energy companies, and is just the beginning.
The first-movers are in a position to save millions and gain market advantages. With our market-neutral blockchain-based bill of lading platform, our goal at CargoX is to empower shippers, hand them the keys to the car, and put them in control of their supply chains like never before.
If you’ve still got questions, we’ve got answers:
1. How safe is blockchain, and will I still have control over my data?
It’s easy to confuse cryptocurrencies with blockchain, since they are so closely connected. But while the value of cryptocurrencies like bitcoin can fluctuate wildly, blockchain, the underlying technology, is a permanent distributed ledger that records transactions between two parties efficiently and in a verifiable, secure and permanent way, without the need to trust one centralised entity, or anyone at all for that matter. So while cryptocurrencies are still in their infancy, the technology that underpins those transactions is stable and proven. Every hour, blockchain technology enables millions of transactions, and secures assets of over USD 450 billion in value. To date, nobody has hacked the blockchain.
Even if CargoX disappears, Smart B/L will continue to function and you will remain in the control of your B/Ls. CargoX is purposely designed in such a way as to present no additional security exposure, on the contrary, it brings security benefits.
2. There are major shipping companies and startups working on blockchain shipping platforms; is there room for a new startup, such as CargoX?
Maersk and IBM have received a lot of publicity for their blockchain-based trade platform, and several companies seem to be working on something similar. That said, blockchain is spurring innovation across the industry, and everyone has their own approach. This explosion of investment in blockchain proves the potential of this new technology. And unlike old-fashioned logistics, size isn’t alway an advantage because of how easy it is to go global with blockchain.
The Maersk-IBM project is very different from ours. Although they haven’t released all the details, they will find it hard to convince customs regimes in countries such as Brazil, Russia, and China to sign up for a private ‘blockchain’ project in the near future. Moreover, Maersk’s competitors are unlikely to join a platform they can’t control.
What is important is that shippers’ data is secure, which is why there is so much demand for neutral solutions, where users maintain the ownership. Blockchain platforms guarantee that sensitive trade data is encrypted and only visible to parties that have the right keys. By keeping that platform neutral, it adds another layer of credibility, because there’s no vested interest other than ensuring that everyone’s data is secure.
3. My business runs on dollars, do I need to use bitcoin to use the blockchain platform?
No. CargoX will support all traditional banking payment options. We will however promote service payments with our own CXO tokens. For users that use or hold our CXO tokens, there will be additional features in the system available at a lower price or even for free. Regarding other cryptocurrency payments — we will be looking into all options. Cryptocurrencies are still new, and their instability might deter some users. But still, while we let users pay with fiat currencies, we want to promote the use of cryptocurrencies.
Once cryptocurrencies gain mainstream appeal, they will actually increase flexibility and lower costs for our users. We have partnered with MakerDAO, who are developing a stable cryptocurrency pegged to USD, called DAI. We are also exploring gold and other collateral-backed cryptocurrencies, which might be added to the platform at a later date. Such on-blockchain payments and settlements will be cheaper, faster and safer — and will enable CargoX Smart Contracts to automatically transfer the bill of lading ownership after payment, eliminating the need for the old-fashioned letter of credit, escrow or even trust between parties…
4. Is the shipping industry ready to embrace new technology?
Some aspects of shipping haven’t changed in many years, and people who work in this industry are often set in their ways. That’s why we aren’t even bothering with carriers (shipping lines) right now. Getting them to adapt will take too long, and there are too many obstacles. With that in mind, choosing our target group was easy. We needed to partner with companies (apart from shipping lines) that also issue bills of lading, operate in a competitive market, and are willing to go the extra mile to deliver added value to their clients. Those companies, of course, are logistics companies.
With all that in mind, it’s not so much a question of whether the industry is “ready” but a matter of how soon they will be pushed towards adoption. Plenty of companies weren’t ready for the internet, but once its advantages reached the market, it was a matter of going online or going out of business. Blockchain will have a similar impact on logistics. Platforms like CargoX will allow logistics companies to offer their customers savings and an improved user experience (among other benefits). Importers/exporters are going to start asking their logistics providers for Smart B/L due to associated cost savings. When that happens, we will be there to meet that demand.
5. How easy is it for logistics companies to onboard the technology, and what are the associated costs?
Switching to blockchain will actually be a lot easier than previous industry pivots. There’s not a lot of new technology, its as simple as changing procedures and downloading the right app. We are working on delivering a smooth procedure for companies of all sizes. Every customer will register and complete a KYC (Know Your Customer) process, where we will also verify NVOCC licenses to establish roles and permissions on the platform. Once companies register, they will set their public and private keys for signing the Smart B/Ls. This will be done either in the Smart B/L distributed application provided by CargoX, or with the help of the CargoX Smart B/L API integrated into the company’s existing system.
Generally, the companies can start using the system within days, and there will be online training provided, just to make sure everything goes smoothly. When the CargoX Smart B/L API needs to be integrated into the company’s systems, this might take a couple of days, or a couple of weeks, depending on the workflow of the company. CargoX will provide integration services as well, through a network or partners.
Many of us are old enough to remember the dot-com crash, which reminded us that if something sounds too good to be true, it probably is. With recent cryptocurrencies’ price appreciation, those same rules apply. That is why it’s important to separate the hype from reality. Will cryptocurrencies turn you into an overnight millionaire? Probably not, but blockchain, the underlying technology, could easily save you thousands of dollars and valuable time if you are in the logistics industry. In the months ahead, CargoX will engage in several important tests to prove our technology. We’re working with some of the biggest logistics companies in the industry to make sure that when you sign up for our platform, you’ll never want to turn back.
Want to have a first-row seat in the logistics transformation process? Want to actively participate in reshaping the future of logistics with us? CargoX is looking for partners!