We foresee the challenge of establishing the identities as well as the network effect, wherein the proposed system offers no incentive to early adopters. In the second stage, we recommend a blockchain based smart contract for executing a charter party agreement and propose that in such a system the contracting parties will not be involved with them.
Smart Contracts have some the following advantages for the shipping industry.
— Real-time updates and faster processing time: No need to mail documents to various parties, information can be exchanged instantly and procedures which usually take weeks to be completed now take only a few minutes. Tasks which could be manually accomplished now can be automated with a slight change in coding.
— Better accuracy: The errors are bare minimum since all the execution of contracts and other processes are automated.
— Full Transparency: Everyone has access to information provided they have the required access key. This gives full transparency to market participants and also the counter-party risk’s evaluation is easier when anyone can have access to the transactions previously performed by each party.
— Better security: Information encryption is something which adds security by its own.
Users can’t interfere with the system and change the information stored in the blockchain as it protects the market from fraudulent activities.
— Cheaper Alternative: A major part of the trade financing costs is related to documentation, procedural delays and errors. This can be avoided and and replaced by a much cheaper cost of the blockchain.
— Tracking: Tracking your shipment has now become transparent, easily accessible and cheaper since the number of third partied has reduced and everything is automated.
A consortium of various stakeholders in the ocean-freight market, such as the ship-owner, the charterer, the trader, the terminals, the customs, the suppliers, the receivers, etc. can use the platform to engage with each other. Such a consortium based platform can assign tokens to its users. New joiners can buy the tokens to gain a stake in the system and these tokens can be used in a reputation system. The participants can trade value among themselves using these tokens. As with time the system becomes more efficient and more inclusive increasing the value of the token. This would give a good incentive to the early adopters to join the platforms and accumulate tokens.
The entire end-to-end process can be done through various applications built over the blockchain. There will be an application for fund transfers which the charterer, the bank and the ship owner use through a certain user interface and there can be another application to facilitate the documentation among other parties. A similar application can be built for identity management of each entity for creating a marketplace where the charterers and the ship owners can find each other for trading cargo and any other asset relevant to the ecosystem.
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