After more than 200 years of the same workflow, one technology has come along which could change the oil trade forever: blockchain!
Dannish sea transport giant Maersk announced, earlier this year, that they’d be joining forces with IBM to implement a blockchain solution to sea shipping. According to the announcement, over 80% of customer goods, a $4 trillion value, consumed in the world today are transported by sea.
Cryptocurrency investors and startups have not overlooked this major niche and solutions are already being developed for the global sea logistics business. For example, Israeli company WAVE has released their own blockchain solution to replace the bill of lading.
Bills of Lading
For hundreds of years, the oil trade has depended on a piece of paper called the Bill of Lading, or BoL for short. The BoL acknowledges to the shipper that a cargo has been loaded onto the ship and is therefore under the care of the captain until its destination. It is both a guarantee for the shipper and the carrier themselves. Upon arrival to the destination, the carrier then is able to prove the completion of his part of the contract by delivering the goods and using the BoL as the cargo receipt.
This is how the oil trade has functioned for well over 200 years and some even speculate that a similar system was used for other forms of transportation as far back as in the Roman Empire.
Enter the Blockchain
By definition, the business rules of BoL’s match the blockchain application perfectly.
- You need a manifesto of what has been loaded onto the carrier. A kind of merkle tree can be used to guarantee that the manifesto has not been tampered with.
- You need acknowledgement and instant knowledge to all parties involved that the ship has been loaded.
- You need acknowledgement that the cargo has been received at the destination.
By marking each of these events on the blockchain, shippers, carriers and receivers have instant and irrefutable knowledge of the status of the shipments. No longer is a tiny piece of paper needed to be carried by a ship captain, this new “sheet of paper” is now a distributed ledger that can be verified by anyone involved.
By adding a value token and smart contracts to the equation, you get self-enforcing shipping contracts that automatically pays the shipment company once the contract is executed. The ship crew gets automatically paid once the shipment is delivered! By offering an exchange where the token can be traded for money, there will be added value to the token itself, as a tradeable digital asset, and to the professionals who get paid in this cryptocurrency.
The blockchain has the potential to streamline the entire oil industry’s logistical process, promote lower costs and revolutionize the entire sea transportation industry and this is no longer the future, but is being implemented by several companies as we speak.
Photo Credit: GTraschuetz via Pixabay