90 percent of everything we buy reaches us via freight ships. You would hope an efficient and pragmatic system would be in place by now, but like trucking, oceanic freight is rife with fraud and mismanagement. Shipping transactions require a high volume of papers: bills of landing, sales contracts, charter agreements, credit letters, and other documents. Shippers and carriers don’t always have access to critical information, either, so overseers often schedule routes without accounting for practicality or reaching full vessel capacity. This process is excruciatingly time-consuming, and all anyone wants to do is get products where they need to be on time.

Blockchain technology has the power to revolutionize the shipping industry. Those of us at Fr8 Network are working on applying it to terrestrial freight at the moment, but blockchain is ready to disrupt oceanic freight as well, and it’s only a matter of time before the shipping industry realizes the potential benefits.

How blockchain can help

According to OpenSea.pro, regarding container shipping:

“Blockchain could turn the whole process into a paperless paradise by which all the related parties in each transaction (i.e. sellers/buyers of cargo, ship owner, charterer, banks, agents, customs, port authorities, etc.) with the use of public and private keys could come in contact with each other, perform physical transactions, exchange and store information in encrypted format and perform their contractual obligations, give and accept instructions, and securely exchange payments.”

Blockchain’s extreme transparency and decentralized nature essentially removes the need for intermediaries, so all parties could view relevant information to make informed decisions and engage in seamless communication. Paper would also be unnecessary, so mailing documents along a chain of actors would be obsolete.

Another major advantage blockchain proposes are smart contracts. Once parties have agreed upon conditions, smart contract computer programs can automate the completion of terms. This process dramatically limits the possibility for human oversight, ensuring that payments and communications (such as departure and arrival times) are delivered immediately. Because blockchain displays their histories on its public ledger, smart contracts are also resistant to tampering, which prevents parties from manipulating or skirting on deals.

Reducing carbon emissions

Container ships are also responsible for an extreme amount of greenhouse gas emissions. Carbon pollution is a serious contributor to global warming, and ineffective logistics management exacerbates the rate at which fossil fuels are burned. The International Maritime Organization projects that, at its current pace, emissions from the oceanic freight industry will spike by as much as 250 percent by 2050.

The United Nations and the IMO are all putting high pressure on shipping companies to reduce their carbon consumption, fortunately. The recent Paris Agreement decreed an ambitious goal of reducing global warming to 1.5 degrees Celcius from pre-industrial levels. Besides implementing clean energy technology into daily use, the only way to meet this goal is to optimize shipping logistics, ensure vessels are always loaded at full capacity, and to not schedule shipments before appropriate times.

Blockchain can also help circumnavigate financial barriers that prevent the adoption of green energy solutions. Projects can take years from proposal to installation, but blockchain’s transparency and immutability can expedite funding and implementation into carrier ships.

Is anyone working towards implementing blockchain?

Besides OpenSea, there are multiple companies that recognize blockchain’s potential and are working on actionable solutions. A Danish conglomerate called Maersk (which happens to be the largest supply vessel and container ship operator in the world) recently partnered with IBM to digitize its business operations. Digital Journal notes:

“The blockchain solution developed between Maersk and IBM is based on Hyperledger Fabric, which is an open-source collaborative effort created to advance cross-country industry blockchain technologies. The stated aim is to manage and track a documented trail comprising of tens of millions of shipping containers throughout the world. This is by digitalizing the supply chain process from beginning to end… The digitalization process will enhance transparency and introduce a faster and considerably more secure means for sharing of information from one trading partner to another.”

Port Technology also reports that IBM conducted an experiment with Pacific International Lines and PSA International. The companies shipped products from Chongqing, China to Singapore to test their blockchain application that traces ships in real-time, enables multimodal logistics capacity booking, and ensures executions are compliant with government regulations. The trial was considered a success, so PIL, PSA, and IBM believe that the technology is ready to progress to the next stage.

Blockchain has revolutionized the financial industry, but its positive implications for freight are extraordinarily wide-reaching, even world-altering. Integrating blockchain technology into shipping is well on its way — and it’s long overdue.