According to law firm Reed Smith the biggest opportunities for shipping in blockchain lie with digitising the supply chain, electronic bills of lading, marine insurance and smart contracts.
A white paper by Reed Smith shipping lawyers Noah Jaffe and Rebecca Lewis took a closer look at challenges and opportunities for using blockchain in the shipping industry.
On the opportunities side using blockchain in the supply chain where all parties could upload and share documents securely and instanteously could reduce costs by up to $300 per container, as well as reducing the risk of fraud and data loss.
In a similar area electronic bills of lading on blockchain could reduce the issues of legal distinctons between the paper and electronic documents. “The technology guarantees that each e-bill is and remains entirely unique. This ensures that only the holder of the e-bill can exercise the right to claim the goods, making blockchain e-bills better suited to use as a document of title than traditional e-bill,” Reed Smith said.
When it comes to marine insurance the law firm said that innovation was “long overdue” and that new blockchain based platform from EY, AP Moller-Maersk, Microsoft and Guardtime could revolutionise the sector.
Marine insurance is historically a cumbersome, paper-heavy industry, and estimates are that the new platform could significantly reduce paperwork, delays and disputes in the $30bn marine insurance market. It is expected to bring about faster billing and collection, greater
clarity on claims histories, more accurate exposure management and improved compliance,” it said.
Blockchain would also enable smart contracts where the contracts terms are automatically executed if conditions are met stopping the withholding of payments.
There are also some challenges facing blockchain and Reed Smith highlighted that for sophisticated transactions human judgement would still be needed. “While the technology will become increasingly sophisticated over time there may be no substitute for human judgment,” the firm said.
For blockchain to be truly effective there will need to be widespread adoption among all parties in the supply chain. Also a reliance on GPS in shipping could expose blockchain to hackers.
“A chain is only as strong as its weakest link, and for blockchain technology, the weakest link might be the one where the digital world meets the physical one,” Reed Smith said.