The Grid
By Citizen of the Future
Paperless Trade Transformation: Interoperability of SCF Platforms
Welcome back Citizens to the 5th edition of the Lighthouse Report. In this edition, I am going to introduce you to some concepts around “interoperability” of supply chain finance platforms and show you why it’s one of the most important words a citizen studying cryptocurrency should understand.
To sum up the previous edition, I provided you with a fundamental breakdown on how global trade is being updated to a 21st century paperless-trade-facilitation system, and how global trade intermediaries are implementing distributed ledger technology to empower this digitalization transformation. Since I highlighted the basics, I want to bring you to the bigger problem in global trade – The Digital Island Problem. This refers to a system that is “siloed”, or that is not easily interoperable with other systems, due to various reasons.
In the picture below, to show proof of this concept, I created a grain silo that is on an island. If it doesn't “speak the same language” or meet global standards, the grain cannot be transported to other systems. This causes fragmentation, aka, a digital island. But if the silo can meet global standards, the grain inside can easily be connected to other platforms and can frictionlessly transport grain between the other ecosystems.
For DLT technology to be adopted by entities and global intermediaries in the world of trade, some of the characteristics it needs are yet to be proven to: work flawlessly with no offline risks, meet global regulatory standards and frameworks, and have interoperability with other trade ecosystems. This is why I tell people to stay away from speculative small cap coins and to find ecosystems with real world connections. When regulations come into play, only networks with strong connections will remain, and the small cap coins will get shut down due to regulatory standards. Centralized exchanges may lose the ability to list shitcoins.
Three Interoperability Proof of Concepts and Events in the Global Trade Industry.
Now I'm briefly going to explain to you some proven interoperability proof of concepts in the global trade industry that deserve further investigation. As always, none of this information is financial advice and is just my vision based on my research.
#1 Quant Network Overledger (Operating System) - A Network of Networks:
Quant has created the world’s first blockchain-agnostic API gateway. Overledger acts as an operating system as it sits on top of existing and future blockchains. By entering a couple lines of code into any computer it allows a user to connect to Overledger (OS), which securely inter-operates values and other data between different DLT networks. Examples of projects that could use this technology are: BTC, XRP, XLM, XDC, XLM, IOTA, Hyperledger, Corda, TradeLens and Contour. This connection can be made by using gateways and APIs. This enables interoperability by connecting legacy businesses to multiple new-era public and private distributed ledger networks, as well as CBDC sidechains. This gives new access to the liquidity of digital assets and allows an enterprise-chain to upgrade at scale across their business.
#2. Singapore Settles its First Legal Electronic Bill of Lading Transaction
In 2021, Singapore made an amendment to its Electronic Transactions Act (ETA) and adopted the UNCITRAL Model Law on Electronic Transferable Records (MLETR framework), which grants eBLs (electronic bills of lading) the same legal status as paper equivalents. On a side note, I covered UNCITRAL MLETR framework in The Grid Edition #3.
This paved the way to allow the first-ever electronic Bill of Lading transaction to happen in Singapore with a cargo of nickel matte shipped on an Ocean Network Express (One) Vessel from Australia to China on July 29th 2022.
The eBL process was facilitated by tech firm essDOCS’ CargoDocs and their paperless trade platform, which updated the terms of its electronic Documents Services & Users Agreement (DSUA) in 2021 to align with the changes in Singaporean law and ensure the validity of eBLs on its system.
The transaction involved the sale of nickel matte in containers by BHP to Jinchuan Group under a letter of credit (LC). The trade was supported by the Hong Kong branch of the National Australia Bank, acting on behalf of BHP, and a Chinese-trade-finance bank acting as issuing bank on behalf of Jinchuan Group.
BHP’s Chief Commercial Officer, Vandita Pant, made the following statements: “Regulatory reform will play a critical role during this transition, and we firmly support efforts such as Singapore’s ETA. We were pleased that essDOCS enabled the first ever electronic Bill of Lading (eB/L) transaction governed by Singapore law between BHP and Jinchaun.”
“This transaction is a significant milestone for digitizing global commodities trade, and we are thrilled to lead the way on a journey with the aim of achieving digital trade at scale.”
#3 Digital Container Shipping Association - eBL Interoperability Proof of Concept (PoC) Moves to Phase 2
The Digital Container Shipping Association (DCSA) is a non-profit working on establishing standards for a common technology foundation that enables global collaboration for digital trade. It is working to address the legal framework needed between these tech companies to enable cross-platform eBL transfers.
Phase 1 of the PoC, funded and supported by all DCSA carrier members, was completed in May 2022 with seven carriers, including ExxonMobil and four of the six IGP&I-approved eBL software providers, namely CargoX, edoxOnline, essDOCS and WAVE BL. IGP&I stands for The International Group of Protection and Indemnity Clubs, and they provide liability coverage for 90% of the world’s oceangoing tonnage.
On July 12, 2022, The Digital Container Shipping Association (DCSA) launched phase two of its electronic bill of lading (eBL) proof of concept (PoC) project, working with essDOCS, Cargo X, edoxOnline and WAVE BL to establish platform interoperability and ensure data can be flawlessly exchanged between the different providers’ applications. The companies will implement DCSA eBL Interoperability Standards to test eBL interoperability through the full Bill of Lading lifecycle by using data that mirrors a live shipment.
The companies involved will implement DCSA’s eBL Interoperability Standards to harmonize on data formats before proceeding to test eBL interoperability through the full bill-of-lading lifecycle by using data that represents a digital twin of a cargo shipment. This second PoC will be completed before the end of 2022. Upon completion of the PoC, the DCSA standards list will be officially released and free to download for any platform provider to incorporate into their eBL software to ensure interoperability.
Important quotes to note here:
“Collaborating with DCSA and industry stakeholders to standardize paperless bills of lading and facilitate interoperability is an important part of the work we do,” says Stefan Kukman, CEO at CargoX. “eBLs will bring countless benefits to the industry, including greater sustainability and efficiency. With CargoX for blockchain document transfer (BDT), eBLs are smarter and more secure than paper-based alternatives.”
“For the global supply chain, fully interoperable eBL is a starting point for digital trade. It will make today’s practices more efficient, reliable and sustainable, but ultimately it will provide a foundation for further digitalization,” commented Thomas Bagge, CEO of DCSA. “Actors in global supply chains want to be able to choose the best platform for their needs. For service providers, interoperability will remove barriers to adoption and create an operational foundation that fosters innovation and collaboration. According to our year-end 2021 research, less than 1.2% of all bills of lading were electronic. We urge ALL industry stakeholders to get involved and be part of the movement to work towards 100% eBL adoption.” - DCSA
The Conclusion
Pay attention to that last fact that less than 1.2%of ALL global bills of lading documents are electronic! With 98% still being paper, this should showcase how early we are in this paperless trade platform revolution. This is the reason I try to inspire citizens to dig into this regulated rabbit hole, as anyone can find ways to make money from the paperless trade transformation this early. I hope my content inspires and one day changes many people’s lives.
Just remember, this is not a get-rich-quick scheme. There is still a long road ahead to get all supply chain finance intermediaries to adopt interoperable eBL standards and implement the technology into their value-chain process flow. In order for mass-scale adoption of digital trade platforms, we need global trade jurisdictions to harmonize standards & legislation to allow industry 4.0 technology to be used at multinational scale.
This ends my summary of some of the recent advancements in the paperless-trade transformation. I hope my content sparks a fire inside some of your deep-thinking minds and inspires you to abandon the crypto meme coin chase by looking into the regulated side of the blockchain and DLT revolution.
This transformation only happens once in the history of the globe, as the world has relied on paper for 400-plus years since the 1600’s; we are now transforming to a new digital standard of trade documents.
What a time to be alive… We are at the forefront of the fourth-industrial revolution, so keep researching, keep learning, and keep smiling, because one day, our dreams will come true.
Thanks for reading.
Sincerely,Citizen of the Future.
