Last week, shipping company Maersk announced the closure of its five-year-old blockchain project, TradeLens, a joint initiative with IBM. Global Shipping Business Network (GSBN), backed by COSCO Shipping Lines, Hapag Lloyd and six others, would be considered TradeLens’ 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 digitalization in the shipping industry.

Rather than be dismissive, Chen credited the TradeLens team. “We are very 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 managed to do it.”

He thought the new TradeLens CEO’s strategy of building partnerships was the right path, and was as surprised as everyone else when Maersk announced it was throwing in the towel.

Is the blockchain the problem?

One question that many ask is whether TradeLens points to a problem with the blockchain or a trade failure. Chen thinks it’s the latter, but noted that he may have focused on technology more than necessary. Ultimately, the emphasis should 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. That was also Accenture’s observation when reviewing the failed ASX CHESS project. Chen also believes that some projects started in the hype phase of 2018 didn’t make sense.

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

The root causes of the fall of TradeLens

The GSBN CEO blamed the fall of TradeLens on several issues that boil down to being for-profit, being too big, and facing too much competition.

While Maersk was able to sign up many other shipping lines, at the end of the day, it was seen as an offer from Maersk. It was a big and ambitious project for which Maersk was footing the bill alone, even if there was a longer-term vision to get other stakeholders to contribute. By contrast, GSBN had eight sponsors from the start.

Second, TradeLens was a for-profit initiative with an eye to monetizing data. GSBN is a non-profit organization.

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

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

“Suddenly a lot of cash comes in, venture capitalists invest in logistics technology. And you have competitors popping up left and right who basically have a ton of cash to spend,” Chen said. And many of those competitors, like TradeLens, were targeting visibility solutions and had a lot less baggage. Since the startups were not associated with shipping companies, they were more trusted by carriers and could move faster than TradeLens.

Aside from the differences already highlighted, GSBN takes a long-term view and focuses on providing infrastructure to integrate application providers rather than the applications themselves. Using a mobile phone analogy, Chen describes it as delivering the iPhone’s operating system instead of apps. Businesses can use its backend to build apps.

The path to digitization of shipping

One of the key applications in shipping relates to bills of lading. On the digitization front, all industries are becoming more and more digital. “The fact that TradeLens has closed does not mean that there is no more digitization. That would be a big mistake,” Chen said. Estimates in the shipping industry put digitization of bills of lading at 1.5-2%, which seems high in Chen’s opinion.

You wouldn’t commit to an adoption percentage that would mark the tipping point or how long it might take. However, he doesn’t think it will happen in a year or two. A term 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 foundation for digitization, but so far there has been only modest uptake.

The three sets of players needed are corporations, banks, and shipping lines.

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

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

An answer to this puzzle could be on the horizon. The Digital Container Shipping Association (DCSA) has been conducting interoperability tests to develop a standard that allows different eBL solutions to be technically and legally compatible. Several eBL providers participated, including WaveBL, CargoX, edoxOnline, essDOCS, Bolero, and IQAX eBL.

The DCSA interoperability path could unblock the banks.

The role of GSBN

“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,” Chen said. He described the DCSA’s interoperability work as “critical” to eBL adoption.

Chen sees the GSBN as the perfect infrastructure to bring this interoperability between different 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 interested in GSBN working with all other eBL providers.

Electronic bills of lading are just a subset of one of the GSBN’s main business purposes: enabling paperless trade. It also has a cargo release solution that works hand in hand with the eBL solutions.

The other important business purpose of the GSBN is to address ESG. At a recent industry event in Hong Kong, Chen noted that digitization was given little airtime, but decarbonization dominated the conversation. One of the drivers is the EU’s inclusion of shipping in its emissions trading system (ETS). Another is shipping lines that commit to sustainability.

Chen sees a role for GSBN in using its blockchain infrastructure to help shipping lines and their clients track the actions they are taking to address decarbonization.

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