Blockpass and Chain of Things host Blockchain for Shipping and Logistics
As part of Hong Kong Maritime Week, we were delighted to host the second annual Blockchain for Shipping and Logistics event alongside IoT focussed Chain of Things and sponsor Ince & Co. Our presenters included Matthew Warner of Chain-Finance.com, Adam Vaziri of Chain of Things, Moses Lin of Incisive Law LLC, Thomas Leiritz of Blockpass and Conor Colwell of Blockpass. The event was a timely one; it’s becoming more and more evident that blockchain technology has the potential to prolifically change the Shipping and Logistics industry. Giants like Maersk and Microsoft are already actively pursuing blockchain solutions to legacy problems like Maritime Insurance. BBVM launched a blockchain solution for tracking and managing document submissions for international transactions this week, while IBM has also recently launched a blockchain solution for shipment tracking. The possibilities for potential applications of blockchain in shipping seem almost endless.
The industry has changed dramatically since we last held this event. Last year, we saw that the concept was new and foreign to many of the participants at both Blockchain for Shipping and Logistics and also the Asia Logistics and Maritime Conference (held during the same week). This year we had a very different conversation and we noticed that interest in the potential is there and more tangible than we’ve witnessed previously. There are still concerns, no doubt, but it seems that the Shipping and Logistics industry is at the forefront of adopting blockchain into everyday practices, and it’s likely to happen soon.
Key speakers on the evening took the audience through everything from the basics of blockchain through to the concepts of Smart Buckets and KYC compliance. Shipping and Logistics is quickly becoming a key opportunity industry for blockchain technology, and as speaker Matthew Warner pointed out, the opportunities to solve key issues is transformative. With headaches including managing Bills of Lading, proving cargo providence and maintaining cargo integrity, it’s no surprise that Shipping and Logistics companies are trying to integrate some of the technology into legacy systems.
One of the first industries that can and should be considered for blockchain is Shipping and Logistics, according to Adam Vaziri, who presented the concept of Smart Bills of Lading. By incorporating Smart Contracts and blockchain into Bills of Lading, participants in the Shipping and Logistics industry are not only held accountable for cargo when it’s in their care, they’re also protected from the errors and missteps of others. Smart Contracts are software protocols that facilitate, verify and enforce the performance of a contract when programmed with specific contract conditions. When you start to combine the power of a transparent and accountable contract and a public distributed ledger (or blockchain), you and your counterparts become accountable for cargo when it’s in your care. According to Vaziri, the changes to the industry are potentially prolific. For example funds, rather than being transferred in advance, will be held in Smart Contracts until successful delivery of cargo, while transfer of asset is immediate and immutable.
While there are many legal benefits to introducing this technology (including lack of delays in cargo release, forgery is impossible, limited human intervention, lower costs and shorter processes to name a few), there are potential hazards that companies need to be aware of as well. So, what are the legal ramifications of introducing such powerful technology into this industry? That’s where the third speaker of the evening, Moses Lin, began. Lin, a practicing lawyer with a particular interest in blockchain, noted various legal issues and three key areas of concern. First there is an issue of determining the jurisdiction of contract enforceability. Blockchain by nature is decentralized, meaning that it could become difficult for companies to determine the jurisdiction in which the contract stands and should be arbitrated if necessary. Lin notes however, that this is easily solvable when companies provide for it in advance by outlining the jurisdiction and agreeing to it before entering into the Smart Contract. The next issue identified was that local laws and regulatory requirements do not, in most cases, apply to blockchain technology yet. These regulations, while cumbersome, protect entities in various jurisdictions by policy, and without regulation of the use of Smart Contracts, could potentially be very complicated. Lin noted that this too was easily solvable when provided for ahead of time. If all parties agree to a cheat sheet listing out the interplay of the various laws in the jurisdiction of the parties involved in the contract they then ensure compliance of the Smart Contract system, and lawyers can then work around the nuances of the wording. The final key issue presented by Lin was the most interesting, data protection and anonymity. Users can actively participate in any form of application on a public blockchain network completely anonymously. When Smart Contracts are entered into, there is no current regulatory requirement that demands users and their counterparts are verified by Know Your Customer (KYC). Companies open themselves up to unwittingly participating in money laundering and terrorist financing.
Thomas Leiritz, CTO at Blockpass, stepped further into the issue of anonymity on blockchain applications and the potential implications for the Shipping and Logistics industry. How do you know who you’re selling to? How do you make sure there’s no criminal activity involved in your transaction? While Smart Contracts ensure the deal is carried out exactly as agreed, there currently is no way to 100% guarantee the identity of your counterpart in that provision. His solution to these questions is Blockpass. Blockpass is an identity verification platform built on the Ethereum Public Blockchain. The application, which is stored on your mobile phone, supports verification of humans (KYC), objects (KYO) and connected devices (KYD), and it will enable the development of new applications that rely on a trusted connection between these parties. Blockpass protects the sovereign identity of an individual by verifying identity data and then destroying it, leaving the consumer with complete and total control of a verified identity package that they can send to service providers when they choose. According to Leiritz, without this link in the Shipping and Logistics industry there is no way to know when entering into a Smart Contract who is on the other side. As government regulatory bodies start to tighten the restrictions on KYC in international transactions and particularly in the blockchain space, the only way to move forward is by way of identity protocol. Beyond that, when looking into the future with the Internet of Things starts to become a reality, there will be a need to verify the device and objects in addition to the human. By connecting all the pieces along the way, each and every participant in a transaction then becomes accountable.
That’s where the final speaker of the evening, Conor Colwell, stepped in and presented the idea of “Smart Buckets.” Smart Buckets is effectively the last piece to the puzzle. By combining connected devices, an identity protocol and smart contracts you are left with a solid and transparent transaction. The only thing missing is how to incorporate “dumb objects” into Smart Contracts. Dumb objects are those that don’t hold a technological aspect, like paper or chocolate. When you add the concept of a Smart Bucket, you essentially transform those dumb objects into smart ones. The idea being that the Smart Bucket is the tech aspect that then permits the dumb object to communicate with the Smart Contract.
What was clear from the evening is that blockchain technology has the potential to transform the Shipping and Logistics industry. The use of a distributed ledger to track, verify and transfer assets internationally will no doubt be implemented soon.
By Caitlin Betts
