Original author: TokenFi
Compiled by: Koala, Mars Finance
The maritime industry is the backbone of global trade, ensuring that products get from one end of the world to the other. Imagine a large cargo ship sailing the ocean or a busy port crammed with goods – the costs of running these operations are high. Because of these high costs, it is not easy to quickly buy or sell maritime assets such as ships or port facilities.
At the heart of the shipping industry are ships, which transport goods across oceans, connecting producers and consumers around the world. These vessels are the lifeblood of maritime operations, transporting everything from raw materials to finished products.
Ports play a central role in this network. They are the stops where ships unload their cargo. Once unloaded, the cargo is temporarily stored before being distributed to its final destination. The entire process is essential to maintaining the flow of goods in the global supply chain.
Building a cargo ship or developing a port facility requires a lot of capital. The high costs make offshore assets such as ships and ports difficult to sell or buy quickly, adding to the challenges of the industry.
According to the United Nations Conference on Trade and Development, maritime trade is expected to grow by more than 2% annually between 2024 and 2028.
The maritime industry is the cornerstone of global trade, transporting approximately 80% of the world's goods. In 2022, the global maritime industry contributed approximately US$1.5 trillion to the world economy and plays a vital role in international trade and economic development.
As of early 2023, the world fleet consists of more than 100,000 merchant ships, including container ships, tankers, bulk carriers, and specialized cargo ships, facilitating global maritime trade.
Challenges of the Sailing World
The shipping industry faces several major challenges. Everything in the industry requires a lot of capital investment. Whether it is buying new ships, maintaining the existing fleet, or building and upgrading port facilities, the costs are huge and continue to increase.
Operating in international waters means complying with a multitude of regulations from different countries. Each country has its own set of rules and compliance requirements, making the regulatory environment confusing and cumbersome for shipping companies.
The maritime industry’s supply chain is notoriously slow and inefficient. Traditional logistics and transportation methods often lead to delays, miscommunication and increased operating costs, disrupting the entire trade process.
The vast and sometimes lawless high seas present significant security challenges. Piracy, theft and other maritime crimes continue to occur, making it difficult to ensure the safety of ships, cargo and crew.
How tokenization can address maritime challenges
Now, imagine if you could turn these large ships and port facilities into digital assets. This idea is called maritime tokenization, and it could solve many of the industry’s problems.
Tokenization has the potential to provide practical solutions to some of the industry’s toughest challenges. Tokenization is the process of converting any asset into a digital token recorded on a blockchain.
Coming back to the main question, how can tokenization help solve maritime challenges?
Let’s say a ship is worth $100 million. Traditionally, only a few wealthy investors or large companies could afford to invest in it. Tokenization changes this by breaking down the value of a ship into smaller, more affordable parts. For example, the ship could be represented by a million tokens, each worth $100. This fractional ownership allows a wide range of investors, from individuals to small businesses, to own a portion of a ship. This collective approach to investing helps spread the financial burden, making it easier to finance the purchase or construction of new offshore assets.
It is worth noting that every transaction will be recorded and displayed on the blockchain.
Let’s say a shipping company operates in multiple countries, each with its own set of rules and regulations. Keeping track of compliance across different jurisdictions can be a logistical nightmare. Tokenization, powered by blockchain technology, can simplify this process. Every transaction associated with a ship—the purchase of a token, the sale of a token, the transfer of ownership—can be recorded on a blockchain. These records are immutable and transparent, making it easier for regulators to verify compliance with international standards. For example, if regulations require proof of origin for a shipment, a blockchain record can provide an unchangeable history of that shipment’s journey, ensuring easy compliance with the rules.
Traditional supply chains often face delays and inefficiencies due to a lack of transparency and real-time data. Imagine using blockchain to track the journey of a cargo ship.
Each stage of cargo transportation—loading at the port, the ship crossing the ocean, and unloading at the destination—is recorded and updated in real time. This transparency prevents delays caused by miscommunication and provides accurate, up-to-date information to all stakeholders. For example, if a shipment is delayed due to bad weather, all parties in the supply chain can immediately access this information and adjust plans accordingly, reducing losses and inefficiencies.
The shipping industry is under increasing pressure to adopt environmentally friendly practices, which can be costly. Let’s say a shipping company wants to invest in cleaner ship technology but needs additional funding. They could issue “green tokens” to raise funds explicitly for this purpose. Investors keen to support sustainability initiatives could buy these tokens, providing the necessary funds for the company to invest in environmentally friendly technologies. Not only would this help the company meet environmental regulations, but it would also attract a socially conscious investor base.
Security issues in the maritime industry have always been a concern, with risks such as piracy and theft emerging. Traditional methods of verifying ownership and tracking cargo can be slow and vulnerable to fraud. Blockchain can enhance security by providing a tamper-proof way to record ownership and transactions.
For example, each container has its own unique digital token that represents ownership and the contents of the container. If theft or piracy occurs, blockchain records can quickly verify the legal owner and accurate contents of the container, helping to resolve the issue quickly. This transparency makes fraudulent activity more difficult to ignore.
Challenges of tokenized applications
Adopting tokenization in the shipping industry faces several challenges. First, the industry has traditionally been slow to embrace new technologies, which can make implementation difficult. Secondly, there is a lot of uncertainty in the regulation of digital assets, making it difficult for companies to know which rules to follow. Finally, convincing industry stakeholders to trust and engage with this new technology, rather than relying on traditional methods, will be a hurdle.
