Bitcoin has many innovative attributes just waiting to be unleashed to the public. One of them is how the blockchain could help shape the future of industrial trade by recording activity with more precision and taking quite a bit third party costs out of the equation. Recently, during the first week of January, Wanxiang Blockchain Labs and Deloitte hosted the Shanghai Blockchain Hackathon with participants hacking away for prizes. Bitcoin.com got together with Dominik Schiener, who won a$30,000 1st prize at the event for his CargoChain project. Bitcoin.com spoke with Schiener to give our readers an inside look at the hackathon, his winning concept, and a few opinions concerning the crypto-environment today.
International trade today is hugely inefficient and still relies on physical paper that is being sent back and forth between parties.
Bitcoin.com (BC): How and when did you hear about Bitcoin and Blockchain technology?
Dominik Schiener (DS): The first time I heard about Bitcoin was in 2012, but I seriously got involved as a dedicated member of the community in 2013. I actually started out by mining Altcoins with the AWS Credits me and a friend had received for a previous Startup. Since then the Blockchain space has basically been part of my daily life and even got me to found my own Bitcoin Startup in Switzerland and the UK.
BC: What can you tell our readers about CargoChain?
DS: CargoChain digitizes international trade by creating a secure, eternal record of important trade documents on the Blockchain and establishes ‘smarter’ contractual relationships between trade parties. International trade today is hugely inefficient and still relies on physical paper that is being sent back and forth between parties. Because of this, documents can be easily forged, which can lead to millions of losses in stolen payments and cargo.
This huge inefficiency that we’ve spotted in the backbone of our economy was the motivation behind creating CargoChain. The main advantage of CargoChain is that it offers a clear Chain of Custody, thus making it possible for everyone involved in the shipment of products to have a single source of truth that provides an overview of the origin, owner and the destination of the cargo. This makes international trade cheaper, more efficient, faster and fraud-proof.
The actual application was built in less than two days (with lots of jetlag and little sleep) using Meteor, Ethereum and IPFS. I also wanted to utilize the Bitcoin Blockchain to anchor trade document hashes, but sadly didn’t have enough time to finalize that for the deadline. Here is the Github of the app: https://github.com/domschiener/cargochain
The Blockchain can be the disruptive 10x force that can help bring international trade and the entire shipment industry up to date to today’s technology standards.
BC: What inspired your team to join the Shanghai Blockchain Hackathon?
DS: I was actually invited to the Hackathon by the Wanxiang Blockchain Lab. I had previously received a research grant from them for developing Liquid Democracy on the Blockchain. Through an interesting coincidence, I met my partner of the Hackathon (John Freeman) on Reddit (the power of borderless communication!). We teamed up, met for the first time in Shanghai and hacked straight away!
BC: How can blockchain technology help international trade prosper in contrast to the traditional way it is handled today?
DS: International trade, similar to the Banking industry today, is still based on hugely inefficient and outdated processes and technologies. To quote “around $17 trillion worth of export and import trade is carried out each year, and according to Shipping Association BIMCO, each one of those shipments requires, on average, 36 original documents, 240 copies and the involvement of 27 entities.” This is not only a waste of time and money but it also directly affects our nature.
This is where the Blockchain can be the disruptive 10x force that can help bring international trade and the entire shipment industry up to date to today’s technology standards. Not only can we enable mutually untrusted parties to finally trust each other by having a single source of truth (the Blockchain), but we can also create a Chain of Custody, which will lead to more accountability, less fraud, and faster customs clearance.
I very much believe that the Blockchain will have as much of an impact on international trade as it will have on Banking.
Through Smart Contracts we have an autonomous agent sitting on the Blockchain taking over the job the Bank had so far, trustless, cost efficient and actually on time.
BC: Can you explain CargoChain’s escrow system?
DS: Getting paid for the sale and delivery of certain products is still largely based on Letter of Credit today. Basically, a physical paper stating that Bank A will send money to Bank B if certain delivery conditions were met. Because it is a physical paper, it can be forged and the seller of a product defrauded. BPO (Bank Payment Obligation) is slowly gaining more attention, but it is far from being adopted by the entire industry and has issues of its own.
This is why I’ve created an automated escrow system based on Smart Contracts. The Buyer of a product upon agreeing to the shipment terms is required to send money (Ether tokens) to the Smart Contract’s escrow system. The Smart Contract will then hold the money in escrow until the Buyer has either released the money, or the money is released automatically once certain conditions are met.
This is something that was never before possible. So far trade partners had to rely on a trusted third party (the Bank) to give the assurance that the payment will be held in escrow and released if the conditions are met. Through Smart Contracts, we have an autonomous agent sitting on the Blockchain taking over the job the Bank had so far, trustless, cost efficient and actually on time.
BC: What is your opinion of the Bitcoin environment currently?
DS: Bitcoin is going through an evolutionary phase where it’s trying to figure out what it truly is and what it’s purposed for. I think that Bitcoin is right now largely in an identity crisis, as there are two different factions advocating different visions of the future of Bitcoin. Either Bitcoin itself is going to be a transactional network similar to Visa with a high limit of transactions per second, or it will be a robust store of value with limited transaction throughput and the outsourcing (through side chains) of core functionality.
The recent Mike Hearn post, though largely exaggerated since Bitcoin is clearly not dead and will not die, serves as a wake-up call that Bitcoin’s current governance model is fundamentally flawed. Bitcoin needs to be surrounded by an environment where actors with vested interest reach consensus on important issues, instead of playing political power games.
Interestingly enough, I am currently developing exactly such a system for decision making in large communities, called Liquid Democracy. It is basically a meritocratic system where those with the domain-specific knowledge are the ones making the decisions.
One aspect of Bitcoin that I dislike though is the Reddit Bitcoin community. The /r/bitcoin community has devolved into a protected safe space where any critique against Bitcoin and Core is being censored. This creates a hostile environment, where anything non-Bitcoin is being perceived as a clear threat to Bitcoin, its integrity, and future.
What I think this community needs to realize is why many of these projects were created in the first place, and that they don’t directly compete with Bitcoin, but largely supplement it in achieving its vision of enabling P2P value transfer. Bitcoin needs to get back to its activist roots and realize that other projects are not a threat to the cause; they are allies. Bitcoin was created by criticizing the current banking and payment industry – therefore, the only way to improve and evolve is by being criticized and improving upon this critique.
BC: Do you think people will trust blockchain verification over human documentation concerning international trade?
DS: Absolutely! The true beauty about the Blockchain is that you don’t need to trust a trusted third party with delivering you the rightful data, but you can actually check the truthfulness of the data yourself (end-to-end verifiability). The Blockchain is a single source of truth, which makes it possible for even competitors to trust each other that the data that is input in the Blockchain is the correct data.
Initially, though, I think it may take some time for current organizations and people in the industry to get accustomed to interact with a distributed ledger instead of physical paper. But I’m confident that this will be overcome quickly; paving the way for ever more frictionless trade, powered by Blockchain.
There is a clear demand to reduce costs and make international trade more efficient by finally getting rid off all the paperwork and redundant processes.
BC: Do you believe this will eliminate people’s jobs within the international trade industry or possibly add jobs to the workforce?
DS: As with any introduction of innovations, the status quo will go through a fundamental paradigm shift from the bottom up, leading to more efficiency, cheaper and faster production and inevitably, certain jobs becoming superfluous.
I think that we will see in the future (in the next 40 – 60 years) a tipping point, where technology will have replaced a large portion of our workforce, leaving the majority of them without jobs or requiring them to adapt to the market by acquiring new skills (e.g. coding and engineering). Those who are unable to adapt to the market will be left with no job and no income. That’s why I am an advocate of Universal Basic Income, as it is the only viable solution preventing a disastrous future from happening.
BC: What other blockchain projects did you see at the hackathon that you thought were innovative?
DS: The one project of all presented that interested me the most was FoodChain. It basically placed the entire origin and supply chain of food production on the Blockchain, making it possible for consumers to find out more about the origins of their food. A lot of the other applications were focused on trade finance and also charities on the Blockchain, which were quite cool.
BC: After winning the hackathon what’s the next step for CargoChain?
DS: CargoChain was well received at the Hackathon, and people from Deloitte and Wanxiang loved the idea. There is a clear demand to reduce costs and make international trade more efficient by finally getting rid off all the paperwork and redundant processes.
I very much believe that Blockchain, as well as next-generation IoT protocols such as IOTA, can really help in improving international trade. I’m currently assessing potential opportunities. But I think that it would be amazing to help reshape the backbone of our economy with a Blockchain-based system that benefits all the actors involved in trade. Always open for people to contact me about this and work on this together!
Thanks, Dominik, for giving us an in-depth look at CargoChain and the hackathon. We look forward to seeing your upcoming developments. Good luck with all your endeavors.
Do you think blockchain technology can revolutionize industrial trade? Let us know in the comments below!
Images courtesy of Dominik Schiener, Shutterstock, and Pixbay