Shipping Network GSBN Talks TradeLens Blockchain Shutdown – Ledger Insights

Last week, shipping company Maersk announced the closure of its five-year-old blockchain project TradeLens, a joint initiative with IBM. The Global Shipping Business Network (GSBN), backed by COSCO Shipping Lines, Hapag Lloyd and six others, will be considered TradeLen’s most direct competitor. GSBN CEO Bertrand Chen shared his views on what went wrong, how GSBN has a different strategy, when blockchain is relevant, and the evolution of digitization in the shipping industry.

Instead of being dismissive, Chen gave credit to the TradeLens team. “We’re super impressed (with) how they built this network,” Chen said. – I think it was a great achievement. I didn’t think they would succeed at first, but they did.”

He believed the new TradeLens CEO’s strategy of building partnerships was the right way to go, and was as shocked as anyone when Maersk announced they were throwing in the towel.

Is blockchain the problem?

A question asked by many is whether TradeLens points to a problem with blockchain or a business failure. Chen thinks it’s the latter, but noted that it may have focused on technology more than necessary. Ultimately, the emphasis must be on solving business problems rather than using a particular technology.

Some previous blockchain solutions used the technology everywhere rather than selectively, where it adds value. It was also Accenture’s observation in its review of the failed ASX CHESS project. Chen also believes that some projects started during the 2018 hype phase did not make sense.

He observed that blockchain is an important part of the toolkit, but not the only technology available now. A distributed ledger is a useful tool in situations involving multiple parties where there is a trust issue and a need to ensure that data is tamper-proof. GSBN is also beginning to explore the use of other technologies, such as confidential computing, with their partner Decentriq.

The main reasons for TradeLen’s downfall

The GSBN boss attributed the downfall of TradeLens to several issues that boil down to being profit, being too big and facing too much competition.

While Maersk managed to register several other shipping companies, at the end of the day it was seen as a Maersk offer. It was a large ambitious project that Maersk was responsible for alone, although there was a long-term vision to get other stakeholders to contribute. In contrast, GSBN had eight defenders from the start.

Second, TradeLens was a for-profit initiative aimed at monetizing data. GSBN is a non-profit organization.

Strategically, Tradelens delivered a vertically integrated solution involving both the blockchain infrastructure and applications. A key TradeLens offering was a visibility solution that is easy to sell, but also exposed it to significant competition from non-blockchain solutions.

So when COVID came and brought the boom in the shipping industry, it should have been a blessing, but it turned out to be a curse.

“All of a sudden you have a lot of money coming in, VCs investing in logistics technology. And you have competitors popping up left and right that basically have a ton of money to burn,” Chen said. And a lot of those competitors were, like TradeLens, targeted at visibility solutions and had much less baggage, Since the startups were not associated with shipping companies, they were more trusted by freight forwarders and could move faster than TradeLens.

Apart from the differences already highlighted, GSBN has a long-term view and is focused on providing infrastructure to integrate application providers rather than the applications themselves. In a mobile phone analogy, Chen describes it as providing the iPhone operating system instead of the apps. Businesses can use the backend to create applications.

The road to digitization of shipping

One of the most important areas of use in shipping is bills of lading. On the digitization front, all industries are becoming increasingly digital. “Because TradeLens closed, it doesn’t mean that there is no more digitization. That would be a big mistake to make, Chen said. Estimates in the shipping sector put the digitization of bills of lading at between 1.5% and 2%, which seems on the high side in Chen’s view.

He would not commit to a percentage of adoption that would mark the tipping point or how long it might take. However, he doesn’t think that will happen within a year or two. A time frame of five or ten years is more likely.

So what is the path to adoption? Many in the industry see the electronic bill of lading (eBL) as the basis for digitalisation, but it has only been used modestly so far.

The three sets of players needed are the companies, the banks and the shipping companies.

It is relatively easy for the shipping companies to adopt it, but the driving force must be the companies. The primary corporate incentive is if the banks require it for trade finance or offer better rates.

“Banks are in a wait-and-see mode. They’re waiting for a solution to emerge as the clear winner, but they don’t want to bet,” Chen said. They want customers to tell them which solution to adopt use, but they are not concerned with implementing and maintaining 15 solutions.

An answer to this conundrum may be on the horizon. The Digital Container Shipping Association (DCSA) has run interoperability trials to develop a standard that enables the different eBL solutions to be technically and legally compatible. Several eBL providers, such as WaveBL, CargoX, edoxOnline, essDOCS, Bolero and IQAX eBL participated.

The DCSA interoperability pathway could unblock the banks.

GSBN’s role

“I’m not an eBL solution provider, so I don’t really care who wins. I want people to adopt eBL regardless of the solution,” said Chen. He described DCSA’s interoperability efforts as “critical” to the adoption of eBL.

Chen sees GSBN as the perfect infrastructure to bring this interoperability between the various eBL solutions to life. So far, GSBN has partnered with IQAX to enable the IQAX eBL solution, which has been adopted by COSCO Shipping Lines, OOCL and Bank of China. But he is concerned that GSBN should cooperate with all the other eBL suppliers.

Electronic bills of lading are only a subset of one of GSBN’s primary business objectives: enabling paperless trade. It also has a load release solution that works hand in hand with eBL solutions.

GSBN’s other major business objective is to address ESG. At a recent industry event in Hong Kong, Chen observed that digitization was given little airtime, but decarbonization dominated the conversation. One driver is the EU’s inclusion of shipping in its Emissions Trading System (ETS). Another is shipping companies that commit to sustainability.

Chen sees a role for GSBN in using the blockchain infrastructure to help shipping companies and their customers keep track of the actions they are taking to address decarbonization.

This circles back to the need for any business, blockchain or otherwise, to solve a real business problem to find product-market fit. Chen said of ESG: “There is a pent-up demand for it, a need. And we want to be part of the solution.”