“How many of you have a good understanding of blockchain?” Few people indicated that they do.
So, although blockchain is a much-discussed topic in the media, it appears to remain somewhat a mystery, even to a freight forwarding crowd. First speaker Rui Fernandes, a partner at law firm Fernandes Hearn LLP, noted that this session was thus intended to be a “Blockchain 101” lesson.
Trying to make sense of blockchain as a “distributed ledger” doesn’t clear up the confusion for newbies, said Fernandes. He suggested an analogy with banking, in which the bank is like blockchain’s central server and the customer’s bank book a ledger. Multiple decentralized platforms—multiple computers—are used to verify a transaction, then the record of the transaction is distributed in a network, explained Fernandes. “Someone would have to hack at least 51 percent of the computers in the network to break the blockchain’s security,” he noted.
Blockchain also enables “smart contracts,” which, as Fernandes translated, are self-executing agreements for which information is automatically updated as steps are completed. Each party to the contract has access to always up-to-date information on the transaction status. If lawyers drafting smart contracts don’t understand the industry’s processes, though, warns Fernandes, the self-executing contracts could be full of errors.
Fernandes revealed that legal issues to be considered in the use of blockchain technology relate to taxation, privacy, liability, intellectual property, data ownership, and the lack of flexibility in smart contracts. He believes that early adoption of the technology would be a mistake.
Don Miller, VP of Global Sales and Marketing for Globe Tracker, a provider of supply chain visibility solutions, said that, although several blockchain initiatives for the supply chain are in place, “the program that will be widely adopted has not even been created yet.” He suggested that freight forwarders need their own blockchain.
The merits of blockchain, according to Miller, include prevention of theft, counterfeit and fraud, and potential decreases in insurance costs; applications cover proof of delivery, compliance monitoring, and transfer of risk and payment.
Alison Clafin, Director of Network Development, Maersk -TradeLens Inc., believes the supply chain industry is “ripe for change and innovation.” Noting that some shipments involve up to 200 people—and thus loads of room for errors and delays-Clafin emphasized “the immutability from end to end” of documents in a blockchain. Immutable records, she said, provide proof of transactions that enable trust.
The TradeLens platform, designed and developed by IBM and Maersk, is “available to all,” said Clafin. She underlined that freight forwarders, who deal with questions all day long from customers about the status of their containers, can avoid such queries by joining a digital platform like TradeLens, allowing employees to use their time instead to boost offerings and sales.
Fernandes was concerned that “driving customer expectations through the roof” involves a lot of risk. He also noted that “garbage in, garbage out” does not cease when blockchain technology is used to track a shipment. Clafin agreed: Blockchain use “can’t guarantee or help ensure that lettuce arrives fresh”; it just allows supply chain partners to “see where it is in the system.”
The three speakers agreed that there is still much to be sorted out in the world of blockchain, but the opportunities for supply chain efficiencies that it presents are immense.