Container shipping’s first dedicated crypto currency
The first-stage rollout of a new blockchain application designed to streamline the container shipping booking system is scheduled to start today.
300cubits, a start-up established last July, pledged to distribute its own dedicated crypto-currency in the form of free TEU tokens to industry participants including leading forwarders from 1 February. This is the first step ahead of a scheduled 15 June launch of the booking deposit system, which will use blockchain technology and the TEU tokens to try to address the problem of cargo ‘no-shows’ and ‘rollovers’.
Tokens will also be sold to the public from 15 March and live booking trials of physical shipments using the new currency are scheduled for later this month.
Johnson Leung, 300cubit’s co-founder, said that the new system would address kinks in the slot booking system that impact on supply chain efficiency. “Carriers told us that 25%-30% of the bookings never show up,” he told Alphaliner’s latest weekly report. “About 70% of the carriers’ operating expenses are fixed costs, which makes yield management critical for the carriers. It is impossible for the carriers to have effective yield management when they have to guess which bookings will show up.”
He said shippers had also complained that rollovers were a key impediment to fulfilling ‘just-in-time’ supply chain strategies. “Contrary to the perception, rollovers are not a problem only for the medium and small shippers,” he added. “The large shippers told us that rolling also happens to them despite having the so-called ‘no rolling’ clause in their service contracts with carriers. To all customers, rolling always happens in the most inconvenient time − that is, peak season when there are fewer alternatives to ship.”
Leung said the advantage of using TEU tokens to make booking deposits was primarily the commitment both carriers and shippers thereby made to abiding by their obligations as counterparties, while spending TEU tokens instead of cash or more established crypto-currencies offered cost savings.
“Putting down a cash deposit requires more working capital and interest expenses for the shippers,” he said. “The same interest expenses will apply with the use of bitcoin.
“TEU tokens would be given for free to the industry participants. When the industry participants use these TEU tokens, the transaction fees could also be paid out of the TEU tokens given to them.”
300cubit will charge 0.7% of the total deposit amount of each booking as a transaction fee, in effect harvesting a percentage of the TEU tokens distributed for free as its income. “We can also sell these TEU tokens in the public exchange,” said Leung. “To the users, they effectively return a portion of TEU tokens given to them. So it is free for them.”
He admitted that eventually the new currency could become volatile, but insisted the benefits would outweigh the risks. “Once the booking counterparties have a financial stake in the booking process, they tend to fulfil their obligations when a booking is made – that is, the shippers will send in cargo and carriers will load the cargo,” he added. “So the booking deposit serves more as a deterrence to default on a booking than a transfer of value from one party to the another.
“Hence, value storage may not be an important function in a booking deposit. In the unlikely event that one party defaults and the value of compensation matters, having a deposit that is volatile in value is still superior than today’s status quo where the parties receive zero value in compensation.”
Other start-ups attempting to tackle the problems of cargo roll-overs and no-shows include the New York Shipping Exchange (NYSHEX), which aims to bring greater certainty to the contract-negotiating process between ocean carriers and shippers. As reported in Lloyd’s Loading List, Maersk last month became the latest line to invest in NYSHEX, joiningthe other two founding members Hapag-Lloyd and CMA CGM. Carrier members MOL, OOCL, and COSCO are able to publish their respective offers on the exchange, which is free for any carrier members to join.
NYSHEX went live in August 2017 after several months of trials, so far handling more than 3,000 TEU worth of trades, all involving transpacific shipments. It plans to expand the business into other markets, with the exchange’s backers hoping transactions via NYSHEX could eventually cover as much as 15% of the global box trades and save the industry up to $23bn a year.
That would be achieved by making contracts enforceable and eliminating broken contract commitments by both parties, with transactions via NYSHEX monitored and penalties imposed for non-compliance