In this exclusive contribution, our technology correspondent Brian Pereira reports on the increasing indispensability of blockchain technology and how its applications can save time and costs in the shipping and logistics industry.
Do you know that there are at least 40 ship certificates and other documentation to be checked and verified by the port authorities every time a container vessel docks at a port? This process is called a Port State Control survey (PSC) and it can take days to complete.
A PSC survey is a standard process followed by port authorities to ensure that vessels coming in from international waters comply with the standards set by international maritime authorities. It involves the inspection of machinery, equipment and the ship’s structure—as well as the verification of many ship certificates and documents.
If there is non-compliance, then the PSC is likely to detain the vessel. Every additional day that the vessel is in a port adds to the overall expenditure for the vessel owner or charter company. While the physical inspections follow a standard process that cannot be altered, there is scope for speeding up the paperwork through digitalization—an emerging technology called Blockchain can help.
With digital transformation, businesses are evaluating and adopting emerging technologies like Blockchain, artificial intelligence, machine learning, Internet of Things (IoT) and 5G telecoms. Together, these technologies can unleash applications that will increase business efficiencies, save time and cost, thereby leading to increased revenue.
Blockchain is one technology that has captured business imagination. In the book titled ‘The Real Business of Blockchain’, authors David Furlonger and Christophe Uzureau foresee Blockchain as the solution to bring trust and transparency to digital environments.
Gartner estimates that Blockchain could generate as much as US$ 3.1trillion in new business value by 2030, half of it by 2025, with applications designed for operational improvement.
But what exactly is Blockchain and how does it help?
Decentralising storage with Blockchain:
Transactional information in business is stored as records in a centralized resource called a ‘Database’. A Blockchain is not a database. Instead, the information is broken up into blocks and distributed among a network of computers on the internet, called ‘nodes’.
These blocks are linked together to form a chain, and hence the collective term ‘Blockchain’. In other words, information is decentralized, and its records are now stored in distributed blocks. Blocks store information about who is participating in transactions—and details of the transaction. Each block is a cluster of about 2,000 transaction records grouped together.
All the participating nodes or computers have a copy of the blockchain. While this presents certain advantages, it also raises questions about the security of the information. We can assure you that the information in a blockchain is entirely safe and cannot be tampered with. More details about this later in this article.
By definition, blockchain is a distributed, decentralized, public ledger. The ledger grows as participants transact.
Here’s how a Blockchain works:
- When a transaction like an online purchase occurs, transaction details and the user/customer identity are encrypted. These details are stored in digital form as a block within the blockchain.
The identity of the customer in the recorded transaction is masked using a ‘digital signature’. Each block is uniquely identified by a unique code called a ‘hash’ – a cryptographic code created by an algorithm.
- The transaction is then verified. The verification is done by checking other credible sources for information such as industry registrars, public records from a regulator, or national identities in databases or libraries.
In the physical world, there would be a person responsible for vetting new data entries. A Blockchain does this using a network of computers, or all the nodes participating in the blockchain. The details of the transaction and the identity of the user/customer are verified.
The nature of the transaction varies and depends on the industry. In the case of the logistics industry, the transaction typically has details about the consignment, the airway bill number, contents of the package, value, and addresses of the shipper and recipient.
3. Once verified, the transaction details are assigned to a block. Digital signatures and hash codes are created (as explained earlier). The record is time-stamped.
4. The block is added to the blockchain and becomes publicly available. Anyone participating in the blockchain can see the transaction data. They can also see other details such as ‘Time’ (when the block was created), ‘Height’ (who created the block), and ‘Relayed by’ (who added the block to the blockchain).
Modifying information in a block
While everyone can see the transaction, it is not easy to modify the record. The modification must be done in all copies of the blockchain on all the nodes. There could be thousands or millions of nodes in the blockchain, which makes it difficult to tamper with information.
As we mentioned earlier, it has its own hash, along with the hash of the block before it. Hash codes are created by a mathematical algorithm that turns digital information into a code–a string of numbers and letters. If the information in a block is edited or changed, then the hash code changes as well.
The immutable nature of a blockchain is an important feature of blockchain, and it ensures the integrity of information in the block.
Let’s take a look at some more features.
Features and Benefits:
This decentralised architecture of blockchain presents some inherent advantages. These include:
- Distribution – Blockchain participants are in different locations and not on the same network. They interact through the Internet. If a node is unavailable, the blockchain is still accessible, unlike a database stored on a centralized server.
2. Immutability– The integrity of information is preserved as information in a blockchain cannot be tampered with or easily modified.
3. Decentralization– Since transactional information is stored in a distributed ledger, no single entity owns or controls the information or can modify it. Every node maintains an identical copy of the record.
4. Encryption– Blockchain uses technologies such as public and private keys to store data in blocks securely and semi-anonymously (participants have pseudonyms).
5. Tokenization – Transaction and other interactions and exchanges on a blockchain are done with ‘tokens’. Tokens are digital representations of physical assets and can be used for incentivizing participants—thereby adding value.
How can blockchain help in logistics?
There are many entities involved in the supply chain, with several processes and a load of paperwork. Blockchain can speed up the process of clearances as it enables direct interaction between stakeholders, eliminating intermediaries, who may not have digitalized their operations.
Shipping and logistics companies are now evaluating Blockchain and even considering private blockchains.
Market intelligence firm International Data Corporation predicts that, by 2023, 85% of global container shipping will be tracked by blockchain.
The Transworld Group, which is also a part of the global Worldwide 3PL Network is planning to use blockchain, artificial intelligence and machine learning in a big way.
Another example is Walmart, which has set up a blockchain-based freight and payment network in Canada. Through this blockchain-enabled system Walmart tracks deliveries, verifies transactions and automates payments and reconciliation between the retailer and the truckers hauling inventory, to more than 400 retail locations across Canada.
All data are integrated and synchronised in real time on a shared ledger, which participants access through a web portal and through a mobile application interface.
Walmart is now working with technology provider DLT Labs to set up a full production blockchain solution for an industrial application.
Conclusion
Blockchain can bring improved visibility, transparency and trust to global supply chains. While still in the nascent and proof-of-concept stages of implementation, blockchain will be used extensively by 2025.
The distributed architecture, immutability, and security of blockchain make it ideal for recording transactions and exchanging information in the shipping and logistics industry. Digitalization and paper-less transactions will also speed up processes, leading to cost savings.
Increased adoption of blockchain will also result in new business applications and hence, increased business opportunities in the shipping and logistics industries.
Brian Pereira is a trend monitoring expert and tech influencer with thousands of followers on social media. He is the former editor of InformationWeek and CHIP Magazine in India. He has also contributed to many other leading tech publications.
