How Blockchain Technology can be Beneficial to Maritime Industry
Smart Contracts
Besides for its use as a public ledger, one of the greatest revolutions that the blockchain could produce in the shipping industry is the “smart contracts”. These are contracts in the structure of a computer program which are executed by itself in blockchain and automatically implement the terms and conditions of any arbitration between the parties. These charter-party and bill of lading terms and conditions will be a standard part of the software and will not be able to alter by the parties. This way, we are migrating to a digital market where a contract will be declared by the Owner or the Charterer and the other party will confer the price/freight directly by the blockchain network. Then, the smart contracts will be executed by a computer network that uses agreement protocols to ascertain the sequence of actions which result from the contract’s code and this way to automate calculations, approvals and other transacting activities.
Ere the use of blockchain, this type of smart contract was unlikely to happen because parties to an arbitration would maintain separate databases. With a shared database that works on a blockchain protocol, the smart contracts auto-execute, and all parties verify the outcome spontaneously, without consuming time on further exchanges and without the necessity for a third-party intermediary.
Major Benefits
Adapting a blockchain technology, such as Smart Contracts, could have succeeding benefits for the shipping industry.
Fast processing time and real-time updates
Instead of mailing the documents to various parties, the exchange of information can become instant and procedures which currently take weeks to be completed could be done even within a few minutes. The software code of blockchain will also automate jobs that are typically performed manually.
Greater accuracy
As all the execution of contracts and other processes are automated, the mistakes are much less possible.
Full Transparency
The information is stored in a location where everyone can have access if they have required access key. This provides complete transparency to market shareholders and also the counter-party risk is easy to evaluate when anyone can have access to the transactions previously performed by each party.
Tightened security
All information is encrypted, something which adds security by its own. Also, the fact that the users can not intervene with the system and alter the information saved in the blockchain. Hence it protects the market from crooked activities and various documentary manipulations.
Cost Saving
A large part of the trade financing costs pertains to documentation, procedural obstacles, and discrepancies. These costs can be eliminated and entire cost currently spent to various mediators will be avoided and succeeded by a much cheaper cost of the blockchain.
Easy access to the market
All can have access to the blockchain technology and therefore the entry obstacles will be lesser and the market will become more competitive. Furthermore, the parties will be able to develop direct contact without the need for mediators and the overall chain will become lighter.
Recent Developments
The shipping industry has not yet embraced the blockchain technology and whether its old practices will be replaced within the next years from such a technology, we have to wait and watch. However, the first steps have already been made.
Earlier, Mercuria, a shipping and trading conglomerate, stated that they are working with their two financial institutions to adopt a blockchain technology for its trading and shipping business. According to Mercuria, the current system in shipping is archaic and it is anticipated that the trading and shipping industries will be digitalized more within the next couple of years.
Another big shipping company which explores the spending into the blockchain is Maersk who already introduced blockchain shipping solution. In Maersk’s solution, the blockchain is used to manage and trace the millions of shipping containers, by digitizing the supply chain operation to heighten transparency and security of sharing information amongst the company’s stakeholders.
Would you like to know how Augusta’s Enterprise blockchain solution can help your supply chain process to become a more efficient, predictable and secure exchange of information? Contact us here: https://augustahitech.com/contact.html or Dial us at +1 (866)-962–1010 to jump on a quick call for free consultation.
