A new platform powered by blockchain technology and cryptocurrency could help save the shipping industry US$5.7bn annually.
That’s the aim of Blockshipping, a new Danish company which is soon to launch an initial coin offering (ICO) to kickstart a project that they say will change the way shipping containers are managed.
Blockshipping has been started by a group of Danish shipping and technology experts, with several former Maersk employees on its executive team. One of them is Peter Ludvigsen, the Blockshipping CEO, who has been working in the container industry for almost 40 years, including as CIO for Maersk Line.
Speaking to GTR, Ludvigsen says their platform, which will go under the name Global Shared Container Platform (GSCP), will promote a sharing economy model in the shipping industry – providing an Airbnb-style service for containers.
Based on blockchain technology, the GSCP will serve as a real-time global registry for shipping containers around the world, tracing their locations and operators – a potentially huge market, considering there are currently about 27 million metal freight containers worldwide.
The main target clients are the big container carriers – the likes of Maersk Line, Hapag-Lloyd, CMA CGM and COSCO, but the platform will eventually also include ports, terminals and transport companies. The firm is, according to Ludvigsen, already in dialog with four of the world’s 10 biggest container carriers.
He says the platform will allow carriers to efficiently manage transactions related to container handling. Functions include identifying empty containers from other shipping lines, and working with other companies to fill them up.
“When a full import container is being delivered to a warehouse, then normally when the cargo has been stripped it would be returned back empty to the port or to a container depot,” Ludvigsen says. “But with our system, we are able to identify that there happens to be an exporter who needs an empty container nearby in the same timeframe. Then we can highlight to the exporter that there is actually an empty container here to use. That means the importer and exporter are each saving an empty container trip, which could have cost as much as US$500 each. So it’s an enormous amount of money that they will be saving.”
The platform will also seek to automate various processes, such as payments via smart contracts: when a container has arrived, the payment for the service will be automatically processed.
And unlike many other pilots in this space, which still involve payments being done via traditional methods, Blockshipping has issued its own private cryptocurrency, the container platform token (CPT). Pegged to the dollar, CPT allows for clearing and settlement of transactions between the users of the platform. This is not only faster than fiat currency settlement, but it also avoids banking fees and exchange rate fluctuations, Ludvigsen says.
Raising US$24.8mn in an ICO
Having already received funding from the Danish Maritime Fund and private backers, the ICO allows supporters to invest with the potential for return. The pre-sale by invitation has now started, and the public token sale opens on April 15. The firm’s target is to raise US$24.8mn.
Currently, the company is finalising the specifications for 14 different products, including a container ledger for title of ownership, real-time container location tracking and blockchain-based smart contracts. When the ICO is complete, Blockshipping will appoint three to four software development companies to build the platform.
According to Ludvigsen, an ICO allows them to adopt “an accelerated development approach” and start developing products in parallel.
“If we were obtaining financing in the ordinary way, we would first have to get a small chunk of financing for the first product,” he says. “We would then launch that product and then go to the venture capital companies and ask for funding for the next product, and it would take probably three or four years before we would have developed all these 14 different products that we have in our product roadmap.”
While the ICO will be Ethereum-based, raising money in its cryptocurrency ether, Blockshipping is yet to make a decision on the architecture of the GSCP. Microsoft’s Coco Framework and the Bigchain Database, both private permissioned blockchains, are possible options.
The company hopes to have the first version of the platform ready to pilot in August, before going into production with phase one in January 2019. This will be followed by two further phases where Blockshipping will build and deliver additional products, including using the internet of things to test the use of sensors for real-time container tracking.
An industry ripe for disruption
There is no doubt shipping is an industry in dire need of increased efficiency and transparency – and not least digital transformation. Container shipping accounts for 60% of all the world’s seaborne trade – valued at around US$12tn in 2017. Despite this, it is an industry that has been troubled for years with challenges such as overcapacity and collapses of big container lines. Not helping is the fact that the industry is still dominated by manual and paper-based processes and lack of co-ordination between carriers.
“Many carriers struggle with old systems,” Ludvigsen says. “Many of them have 30 to 40-year-old container management systems that that they are spending a fortune maintaining, Yet the operational systems area is not considered high priority for them.”
The launch of GCSP is not the first attempt to bring blockchain to the shipping industry. Maersk, for one, is working on a blockchain-powered platform for the entire shipping ecosystem, together with IBM. Earlier this year the parties took their partnership to the next level, launching a joint venture to commercialise and scale their platform.
But Blockshipping does not consider the Maersk-IBM venture a competitor. Whereas the GCSP manages the physical containers, the Maersk-IBM platform aims to streamline processes and documentation related to the content of the containers, such as digitising the bill of lading and automating customs clearance processes.
And as opposed to Maersk’s project, the group behind Blockshipping believe the fact that they are not associated with one single carrier will enable them to attract a wide range of carriers, albeit competitors, to collaborate. The goal within the next three to four years is to achieve 60% market coverage with 16 million container units.
“Several of the carriers are in financial dire straits, and we are giving them an opportunity to save US$5.7bn a year, and that’s very hard to say no to if you are losing money,” Ludvigsen says, although he admits that not everyone would want to work together.
“Maersk may not want to exchange equipment with other east-west carriers, but they may be interested in exchanging containers with north-south carriers, where they have a different mix of customers, so the platform allows a more granular selection of who they want to swap containers with on our platform,” he says.