TradeLens connects shipping, customs and trade finance
If there’s one blockchain project that really shows what the technology is capable of, it’s TradeLens, which has connected almost every part of the global shipping industry.
Created in 2018 by container shipping giant Maersk and IBM Blockchain, it had big dreams and big hurdles. TradeLens wanted to create a blockchain-based supply chain management tool that would convince all competing players across all industry segments to work together to trust the incredibly complex exchange of information needed to make trading mobile widgets worldwide. seamless flow to a distributed ledger.
This includes shipping companies, of course, but also port operators, customs agencies, rail and trucking companies, industrial software developers and financial service providers who make sure everyone gets paid. .
TradeLens is an enterprise blockchain, designed to allow the many links in a supply chain to work together on a single, trusted database.
It’s a shared information network that allows customers to track their freight containers in real time to see any issues in the supply chain, allowing them to do things like make inventory decisions. . Port authorities and trucking companies can see when ships will be delayed or arrive early, and reschedule accordingly.
In February, TradeLens reached a milestone when Swiss agrochemical company Syngenta and HSBC bank used a fully digital letter of credit to pay for a shipment of goods on Maersk’s Sealand shipping line between South Korea and Bangladesh. using a digital bill of lading. Less than 0.1% of those bills of lading are scanned, TradeLens said in a statement calling it the “holy grail of shipping.”
Syngenta estimated that the blockchain transaction saved them 10 days of paperwork, getting product to the customer much faster. It helped that the South Korean port authority and customs agency were also members of TradeLens.
“Removing paper from the process should not only increase the efficiency and speed of trade, but also enhance the appeal of the letter of credit as a trade finance solution,” said Sanjay Tandon, Chief Operating Officer commodities, global trade and receivables finance at HSBC for Asia Pacific.
Trust the Blockchain
The blockchain has brought two great strengths to the task of unraveling this incredibly complex network of transactions: it is immutable and it is trustless.
See more: PYMNTS Crypto Basics Series: What is a Blockchain and how does it work?
Once written on a decentralized blockchain, transactions cannot be modified – in other words, they are immutable – because they are visible to anyone. The digital ledger is stored on many nodes, all of which must agree to write new transactions and are all interconnected like links in a chain. So changing anything to transaction data would require changing everything that came after it.
Second, one of the main purposes of blockchain technology is that it enables what cryptographers call “trustless” transactions, i.e. a transaction in which two (or more) parties who do not not trust can carry out transactions without going through a trusted third party such as a bank.
And because everyone can see everything, it’s easy to trace a cryptocurrency token along a convoluted, cluttered path.
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That last sentence should have a big asterisk at the end, because TradeLens is an enterprise or permissioned blockchain – unlike bitcoin, for example, not everyone can set up a node, keep a full copy of the ledger, and perform there transactions.
In addition, it is possible to restrict access to certain information written on the blockchain.
For example, the farmers, truckers, suppliers and distributors who deliver romaine lettuce to Walmart all put information on the IBM Food Trust blockchain that Walmart can see in real time. But the trucking companies that bring these products can’t keep up with competitors’ platforms. Nor can Walmart see the trucks of these companies that transport products for Dole, which is also on the IBM Food Trust. But truckers can see their entire fleet.
When building TradeLens, the first job was to get major shipping carriers to agree to work on a system created and operated by a competitor. Today, five of the six largest shipping companies are on TradeLens, including No. 1 MSC, No. 2 Maersk and No. 3 CMA. The 10 members represent more than half of the world’s shipping containers.
Back when TradeLens was getting started, Susan Joseph, who worked for B3i, a company developing a similar product for the insurance industry, told a conference panel that “technology is tough, but people are more difficult. It’s really a social issue. You gather a group of competitors and you have to trust them. Only you’ve never done it before. This is, I think, the major problem.
That is, it requires a trustless solution.