Impact of Blockchain TradeLens Solution on Global Trade

1. Emerging Information Technologies ITeam #3 Rajesh Khemraj, Binu Jacob, David Lasecki, Edmund Miller and Joe Porter

2. Outline • Abstract • Introductions • Background • Study Requirements • Assumptions • Hypothesis • About Blockchain • About the shipping Industry • Literature Review • Architecture of the solution • Methodology • Data Collection • Data Analysis • Any Algorithms • Implementation of Analysis/Study • Summary/Conclusion • Demo • Q&A

3. Abstract • Approximately 90% of goods in global trade are carried by ocean freight in an industry that has not changed in 700 years since the days of Marco Polo. This presentation and follow-on paper examine how a Blockchain TradeLens solution resulting from a collaboration between Maersk and IBM is affecting the global trade industry. Our analysis also addresses the role that open standards has played in attracting early adopters around the world.

4. Introduction • https://www.youtube.com/watch?v=NTNQMKB0A3A&feature=youtu.be • Global shipping moves $4 trillion of goods every year • Since January 2018, 90+ early adopters have signed on to the pilot • 154 million shipping events captured and growing by one million per day • TradeLens reduced packaging material transit time to a USA production line by 40% - avoiding thousands of dollars in cost. • "where is my container” questions have been reduced from 10 steps and 5 people to 1 step and 1 person • The World Economic Forum (2013) estimates that technologies like Blockchain could reduce the cost of international trade by 15 percent, thereby boosting the global gross domestic product by five percent • https://www.youtube.com/watch?v=tdhpYQCWnCw

5. Introduction

6. Introduction

7. Introduction • Blockchain will improve global trade and digitize supply chains: • Maersk pointed out that a shipment of refrigerated goods from East Africa to Europe can go through 30 people/organizations and involve over 200 communications. And, the lost of a single document can delay a shipment in port from weeks to a month • Maersk and IBM are digitizing and automating the process by putting all parties on a Blockchain • Results: real-time exchange of online documents; automated status and tracking; reduction of fraud, errors and costs

8. Background • Blockchain is a technology which is based on the use of blocks, which are separate records linked to each other. Cryptography plays an important part in providing this link, as well as preventing the data from being modified. • Blockchain used in for digital transactions; • Can be permanently and easily verifiable by any party • Blockchain record gets updated after each transaction it participates in, including information about all past recorded transactions. • Other Benefits of blockchain • Involve smart contracts, distributed ledgers in banking • Governing and tracking all kinds of data, blockchain insurance

9. Study Requirements 1. Database 2. Transactions 3. Trust 4. Disintermediation 5. Transaction Dependence

10. Study Requirements

12. Assumptions • Stakeholders are: traders, shippers, financiers/underwriters, insurers (of cargo), regulators (customs, Homeland security, etc.), ports with silo systems based on old standards • Blockchain will eliminate delays, extensive paperwork and errors • Blockchain Smart Contracts software can be used to enforce contract terms and conditions • Blockchain can reduce cost: “The World Economic Forum (2013) estimates that the introduction of modern information technologies in conjunction with reengineered information management processes could reduce the cost of international trade by 15 percent, thereby boosting the global gross domestic product by five percent.”

13. Assumptions (continued) • Tradelens opened, non-proprietary APIs are expected to align with standards established from working with OpenShipping.org and UN/CEFACT: • OpenShipping.org is a collaboration of shipping's leading digital innovators. Through open source standards and frameworks the shipping industry is enabled to benefit from transparent and readily available digital connectivity • The United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) is a subsidiary, intergovernmental body of the United Nations Economic Commission for Europe (UNECE) which serves as a focal point within the United Nations Economic and Social Council for trade facilitation recommendations and electronic business standards.

14. Hypothesis • The work that is done in the shipping industry can be extended to the other industries where there is delay resulting from manual processes and silo-ed systems (e.g. it may be possible to reduce the 2 months time interval to close on a house purchase) • The 12 month Blockchain Proof-of-concept (PoC) pilot by Maersk and IBM will eliminate forgery of the Bill of Laden via Blockchain Smart Contracts • More key players will join the 94 early adopters already participating (i.e. Port of Philadelphia, Modern Terminals in Hong Kong, etc.).

15. About Blockchain “In simple terms, a blockchain can be described as an append-only transaction ledger. What that means is that the ledger can be written onto with new information, but the previous information, stored in blocks, cannot be edited, adjusted or changed. This is accomplished by using cryptography to link the contents of the newly added block with each block before it, such that any change to the contents of a previous block in the chain would invalidate the data in all blocks after it.” – Forbes, April 2018

16. About Blockchain (continued) • In December 2015, Hyperledger, a Linux Foundation project was announce to advance cross blockchain technologies based on open source, open standards and open governance • Hyperledger Fabric is a framework under the Hyperledger umbrella and has many contributor (i.e. IBM, Fujitsu, etc.) • IBM Blockchain is unique to IBM and often includes hosting on the IBM cloud/Bluemix. The TradeLens solution uses an IBM Blockchain solution • Other Blockchain solutions may not have the support and governance as the Linux Foundation of which IBM is a member. For example, Microsoft’s Blockchain solution is based on Ethereum which is developed by the Ethereum Foundation of which Microsoft is not a member)

17. About Blockchain (continued)

18. About Blockchain (continued) • The TradeLens Solutions enables: • A Network layer which allows collaboratioin, etc. from a network of organization who have been verified and have permission to participation in the ecosystem • A Platform layer which runs on the IBM Cloud and uses open APIs • An Application and Services layer which allows anyone in the network to share and collaborate with each other

19. About the shipping industry • “A central document in international trade is the Bill of Lading, a physical document that does not only serve as a contract of carriage and as a receipt that the goods have been loaded, but also as a title to the cargo. Hence, possession of the Bill of Lading is equivalent to the ownership of the cargo it represents (Schmitz, 2011). The Bill of Lading and several other documents need to be physically presented to authorities on request. Given that many dozen actors (i.e., authorities, service providers, etc.) can be involved in a single trade (Jensen et al., 2014) and several of these actors may possess the Bill of Lading at some point, the process is failure-prone and risk-laden: the document might get lost, destroyed, stolen, or a fraudulent Bill of Lading might be forged (Bassindale, 1996; Jensen et al., 2014). ”

20. About the shipping industry (continued) • What could go wrong during shipping: • It could be discovered that the owners of the shipment/consignment is on the “no trade list” when shipment arrives at a port. The shipment could be owned by N. Korean, Iran, China, etc. • I) A seller may fraudulently say that the selling company complied with contract terms to avoid a buyer’s refusal to pay due to contract violations; II) A company may try to claim someone else’s cargo (false bill) and pretend to sell it to a buyer • To illustrate the lack of a tightly integrated information flow with an example: When shipping a container of perishable goods from East Asia (i.e Mombasa) to Europe (i.e. Rotterdam), nearly 30 different organizations respectively people are involved. They exchange information on about 200 separate occasions – often through printed paper-work. It is no surprise that the cost of the paperwork processing can easily surpass 15 to 20% of the shipment costs for the ocean voyage.

21. Literature Review • (Ed)Mainell and Smith have explored the concept of Mutual distributed ledgers (MDLS), and their impact on organizations, concentrating on study of a blockchain based (and therefore MDL-related) InterChainZ project. • The study of related ledger variants and the derived MDLs has shown their potential related to increase of trust in the third parties which resulted in overall positive impact on financial services (2015) • Placeholder • (Joe) References contain pointer to articles, etc. related to the shipping industry and IBM’s Blochain solutions

22. Literature Review

23. Architecture of the Solution

24. Architecture of the Solution

25. Architecture of the Solution

26. Methodology

27. Data Collection • 1. Legacy method • Speed • Accuracy • Security • Authentication • Work Flow • 2. Block Chain Meth • Speed • Accuracy • Security • Authentication • Work Flow

28. Data Analysis • Speed of transactions • Efficiency of moving goods • Redundancy • Auditing of lost containers / shipments

29. Any Algorithms • Shipping solution using IBM Hyper ledger composer • Install nodes in VPN systems/each test computer • Run the block chain application • Compare Results

30. Implementation of the Analysis/Study Challenges • Choosing the right technology • Do your research to understand how a particular company implemented its blockchain solution • Ways to filter • Determining a way to reduce the time spending way too much time and money on just running various proofs of concepts could be a challenge

31. Implementation of the Analysis/Study Challenges • Reinvent the wheel? • Determining whys solution is best and if you need to develop a solution from scratch • Choosing the right technology partner • Make sure you find a partner that has a proven track record of working with and implementing blockchain

32. Implementation of the Analysis/Study • Practical Implementation • Learning from Other’s Lessons • Conduct Smart Q & A sessions • Understand the business • Research Thoroughly • Building a Center of Excellence • Building a Core allows you to build a bridge between various people involved

33. Summary/Conclusion • We can conclude that the blockchain technology, while still being a new player in the field of cyber technologies, has already proven to be effective when it comes to a variety of uses. However, the impact of blockchain on the preceding technologies was not always seen as favorable, and initially there was a limited degree of compatibility. Indeed, blockchain technology can be used to efficiently eliminate many problems with paperwork and streamline the process of electronic transactions – but a lot of careful planning must be made in order to fully harness the power of blockchain without any side effects.

34. Demo

35. References • Pervasive Decentralisation of Digital Infrastructures: A Framework for Blockchain enabled System and Use Case Analysis https://aisel.aisnet.org/hicss-50/da/open_digital_services/4/ • A permissioned blockchain network: https://ieeexplore.ieee.org/abstract/document/7846933 • A blockchain based access control network:  https://onlinelibrary.wiley.com/doi/full/10.1002/sec.1748 • Architecture of the Hyperledger Blockchain Fabric∗ Christian Cachinhttps://pdfs.semanticscholar.org/f852/c5f3fe649f8a17ded391df0796677a59927f.pdf • The blockchain as a decentralized security framework https://www.researchgate.net/profile/Saraju_Mohanty/publication/323491592_The_Blockchain_as_a_Decentralized_Security_Framework_Future_Directions/links/5aa202e5aca272d448b4c297/The-Blockchain-as-a-Decentralized-Security-Framework-Future-Directions.pdf • Sharing ledgers for sharing economies EY Global Fina Srv Institute - Winter 2015 Vol 3 - Issue 3 | http://bytacoin.io/main/Economies.pdf • Blockchain to Rule the Waves....| https://pure.itu.dk/ws/files/82337540/N_rland_et_al._2017.pdf • Blockchain Technology in Business & Information System Dec 2017 Vol 59 - Issue 6 | https://link.springer.com/article/10.1007/s12599-017-0505-1 • Infrastructural Grind: Introducing Blockchain Technology in the Shipping Domain | Attached pdf • Mapping the Se of Opportunities: Blockchain in Supply Chain and Logistics | link

36. References • Link to IBM Blockchain information in general: https://www.ibm.com/blockchain?lnk=ushpv18c10&lnk2=learn • link to .pdf describing “The paper trail of a shipping container “How blockchain will help manage and track the paper trail of tens of millions of shipping containers across the world:” https://www-01.ibm.com/common/ssi/cgi-bin/ssialias?htmlfid=XI912347USEN • Manav, G. (2017), Blockchain For Dummies, IBM Limited Edition, Hoboken, NJ: Wiley;  https://bertrandszoghy.files.wordpress.com/2017/05/ibm-blockchain-for-dummies.pdf Page 29 on Supply Chain Management; Page 34 on How Can IBM Help Developers Innovate with Blockchain; and Page 41 on Developing and Deploying Chaincode. Binu, see see “IBM Blockchain 101: Quick-start guide for developers” at http://ibm.biz/QuickStartGuide. • Link to .pdf presentation from  Ramesh Gopinath, VP of Blockchain Solutions, IBM. Click this link and scroll down to find the presentation on “How Blockchain is Transforming Industries by Reimagining Business Interactions” at this link: https://ecc.marist.edu/web/conference2017/schedule • Link to  article on “IBM vs Microsoft: Two Tech Giants, Two Blockchain Visions” – see this link: https://www.coindesk.com/ibm-vs-microsoft-two-tech-giants-two-blockchain-visions/

37. References • https://opensea.pro/blog/blockchain-for-shipping-industry • https://cointelegraph.com/news/scandinavian-start-up-to-track-worlds-shipping-containers-through-blockchain • https://www.wsj.com/articles/todays-top-supply-chain-and-logistics-news-from-wsj-1523876003 • http://www.wfw.com/wp-content/uploads/2018/03/WFWBriefing-Blockchain-and-Shipping.pdf • https://coincentral.com/blockchain-logistics-changing-the-world-or-just-marketing-hype/ • https://coincentral.com/blockchain-shipping/ • https://themarketmogul.com/shipping-logistics-blockchain/ • https://techcrunch.com/2017/12/15/ups-bets-on-blockchain-as-the-future-of-the-trillion-dollar-shipping-industry/ • https://www.forbes.com/sites/bernardmarr/2018/03/23/how-blockchain-will-transform-the-supply-chain-and-logistics-industry/#604c475f5fec • https://www.supplychaindive.com/news/3-blockchain-applications-to-watch-in-logistics/528823/ • https://tubdok.tub.tuhh.de/bitstream/11420/1447/1/petersen_hackius_blockchain_in_scm_and_logistics_hicl_2017.pdf • https://www.researchgate.net/publication/320559792_Blockchain_in_supply_chain • https://www2.deloitte.com/content/dam/Deloitte/us/Documents/strategy/us-cons-supply-chain-meets-blockchain.pdf

38. Thank You!