21 March 2024
Blockchain use in the Shipment of Gold
November 2023 marked the 40th anniversary since the Brinks-Mat robbery, and recent coverage brought this legendary gold heist back into the public consciousness. Despite Lloyd’s of London offering a GBP2 million reward for locating the gold, the majority of the three tonnes was never recovered; by 1996, at least half the gold was believed to have returned to the legitimate market.
Absorption of this amount of illegal gold into the legal market would now be virtually impossible. Yet gold sourced from conflict zones or criminal gangs still enters the legitimate market. International NGO Global Witness reports that conflict, human rights abuse and environmental problems are still connected to the gold supply chain.
Trade data should help to signal red flags but there is much room for improvement in the availability and quality of data, according to Global Witness. Currently, the data can contain errors that mask problems rather than expose them.
There are also significant gaps in existing data. Of the 154 countries reporting gold trades in the UN Comtrade Database in 2021, only 70 provided full datasets. Special economic zones act as free trade zones and also do not report data. There are now around 4,500 zones in over 130 countries. In the EU there are over 80 free trade zones and 1000s of free ports.
How does Blockchain work in shipping?
There is significant potential for blockchain technology in shipping. Nevertheless, TradeLens, a blockchain-based platform developed by Maersk and IBM in 2018, ceased operating last year. At the time of its shutdown, the platform had 94 participants, including more than 20 port and terminal operators and five of the seven biggest shipping companies.
TradeLens did not achieve widespread adoption, and it needed mass industry participation to be successful. According to media coverage, the project encountered hurdles in integrating with existing systems and establishing common data standards.
Despite its failure, industry experts have argued that TradeLens will pave the way for future blockchain endeavours and has helped to highlight the benefits of this emerging technology. In December 2023, Hapag Lloyd and Vodafone announced a partnership with Deloitte to use a public blockchain for cargo identification and tracking.
In shipping, smart contracts can automate and streamline processes such as freight bookings, cargo tracking, and payment settlements
Smart contracts
Blockchains enable the use of smart contracts, which are self-executing contracts with predefined rules. In shipping, smart contracts can automate and streamline processes such as freight bookings, cargo tracking, and payment settlements. These contracts are stored on the blockchain and are executed automatically when the predefined conditions are met.
The decentralised and immutable ledger allows all participants in the shipping process, including manufacturers, suppliers, carriers, and customers, to have real-time visibility into the movement of goods. Each transaction or event related to the shipment, such as loading, unloading, and customs clearance, can be recorded on the blockchain, providing a transparent and auditable history of the shipment.
Shipping involves a significant amount of paperwork, including bills of lading, certificates of origin, and customs documents. Blockchain digitally stores these documents securely, reducing the risk of fraud, loss, or tampering. Authorised parties can access and verify the authenticity of these documents in real-time, eliminating the need for manual document verification and reducing delays in the shipping process.
Blockchain can enable end-to-end traceability of goods in the supply chain. By recording each transaction and movement of goods on the blockchain, it becomes possible to track the origin, location, and condition of the products at any given time. This helps ensure the authenticity and quality of goods, preventing counterfeiting, and improving product recalls and warranty claims.
By using cryptocurrencies or digital tokens, payments can be made directly between parties without the need for intermediaries or traditional banking systems. Smart contracts can automatically trigger payment releases when predefined conditions, such as successful delivery or inspection, are met, reducing the time and cost associated with traditional payment processes.
There is a clear argument for the use of blockchain, both for the transportation of gold and more widely in the shipping industry.
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