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Upending Maritime and Military Operations Through Blockchain

Tuesday, December 5th, 2017

Cryptocurrencies such as the Bitcoin’s gold, Ethereum, Zcash, Litecoin, Dash, Ripple, Monero etc. have created enormous excitement among the global financial community. Some states have adopted cryptocurrency as a legal form of payments and tool of exchange, and others have set timelines for its implementation. Interestingly, a few have chosen to annul its usage and announced their own version of cryptocurrency. Many developing countries are yet to internalize the use of digital currency/cashless transactions; however, in the financial services sector where credit card has been a long-standing tool for banking and payment services, has now accepted it as a means of monetary transactions.

At the heart of cryptocurrency is the Blockchain technology which offers secure, efficient, encrypted and tamper-proof monetary transactions. From a nebulous invention in 2009 by a Japanese scientist, the technology is in essence “a way to digitally and anonymously send payments between two parties without needing a third party to verify the transaction” with great speed, pellucidity, and no costs in cross-border payments. Put simply, Blockchain is a digital ledger on a Blockchain-as-a-Service (BaaS) platform and is made of data blocks which are linked together with cryptographic validation providing security and is not stored in a master location, and it’s not managed by any single entity. Significantly, Blockchain can help manage a variety of administrative activities keeping privacy and security at its highest for transacting data on “land titles, loans, trades, intellectual property, identities, votes etc.”

Blockchain technology has found application in a number of sectors such as education, healthcare, aviation, power grid management and interestingly in diplomacy. In the US, the Centers for Disease Control and Prevention (CDC) is exploring the possibility of using Blockchain technology to share information about infectious diseases with state and local health departments ‘in a timely and efficient manner’. Also, the technology will potentially enable storing and sharing of data rapidly “while still complying with laws pertaining to user privacy and security”. In the aviation sector, Air France KLM is optimistic of using it for monitoring maintenance of its fleet of aircraft, and in the education sector it can provide “graduates easy access to verifiable, tamper-proof version of their diploma that they can share with potential employers”. The US State Department is keen to use Blockchain technology to make its foreign policy more robust by monitoring foreign aid, to promote democracy, and governance of political institutions of its alliance partners. The Blockchain is slowly resonating in the maritime and the military domains. A number of sectors are excited and are steadily introducing this technology in their operations.

Marine Insurance
Perhaps one of the early users of Blockchain technology is the marine insurance sector which involves a wide network of parties such as shipper, packer, freight forwarder, transporter, stevedore service providers, banks, custom agents, broker, etc. which generate a long trail of data. This is prone to anomalies due to human error, and vulnerable to tampering by external intervention thereby adding risks to the high-transaction volumes particularly with the seaborne trading processes. These result in lack of transparency of goods being transported, weaken regulatory compliance mechanisms, and affect the business of marine insurers and shipping companies. Further, the enforcement agencies of the government such as the customs, regulators and security agencies are confronted with major challenges such as legitimacy of the goods being transported, truthfulness of bills of lading, cargo manifests, and port documents. Industry experts believe that distributed ledger of the Blockchain technology will enhance efficiency through aggregation of data, increase transparency, reduce human error, and limit reconciliation and administration costs. It will put together information about shipments, risk and liability, and to help firms comply with insurance regulations. In essence, it will ensure transparency across an interconnected network of clients, brokers, insurers and other third parties.

Marine Logistic Eco-system
A port is an important node in the maritime eco-system and is a facilitator of international sea based commerce. It is here that cargo moves between different modes of transport and routes, and requires good management of data of the cargo and its packaging such as a container, as also information is exchanged among involved parties. A Blockchain platform enables exchange of information on the “provenance of goods, tariff codes, classification data, import/export data and certificates, manifests and loading lists, customs values, status information, and all other information about goods within the supply chain ecosystem was available for all parties involved at any time and everywhere”.

What emerges is protected and a paperless supply chain which contributes to not only transparency but also enables track and-trace. For example , a ship before entering a port to discharge it cargo transmits a variety of data to the port operators, customs department, security agencies and other service providers which can be authenticated and approved through artificial intelligence tools and speed up pre-arrival requirements thereby adding to efficiency, reduces turnaround time of ships and delivery of cargo to the end-users.

Container Shipping
The introduction of shipping containers in 1956 was a revolution in the process of shipping vast amounts of goods across the ocean in boxes, which can be easily shifted to railroad cars or trucks. In the 21st Century, containerized cargo system has emerged as the most convenient, safe and cost effective mode of transporting large volumes of goods. The global container trade accounts for approximately 60 percent of the value of seaborne trade or more than US $4 trillion worth of goods annually and the container shipping fleet is still relatively young at 10.5 years.

A Hong Kong-based company 300cubits has put out expression of interest to “to partially replace U.S. dollars in the container shipping industry with a token soon to be launched on Ethereum (a cryptocurrency that provides for transferring between accounts). It plans to sell tokens to industry practitioners which will be “ used as booking deposits for container shipping where value could be lost if a customer does not turn up with a cargo or a container liner does not load a cargo according to a confirmed booking”. This is consequent to the company’s belief that trusts between liners and customers are critical given that “customers in container shipping do not bear any consequences for not showing up for bookings”.

Military Applications
The military has not been a silent onlooker or a bystander of the varied uses of Blockchain technology and finds a number of opportunities in this technology. At least one military has sought separate funding for the development of Blockchain technology for upending operations. For instance, the US’ $700 billion dollar defense bill now includes special allocation for the US Department of Defense to study Blockchain and “how foreign nations and enemies of the US could potentially use the technology- for either good or nefarious activities”. Further, the technology can potentially help explore “offensive and defensive cyber applications of Blockchain technology and other distributed database technologies and an assessment of efforts by foreign powers, extremist organizations, and criminal networks to utilize these technologies.”

Blockchain has enormous advantages for the US military which has a very complex supply-chain and logistics network to support global operations. It is useful to mention that the US Department of Defense has supported pioneering initiatives in the past such as the GPS and the internet.

Blockchain technology can potentially transform military communications. The US Department of Defense (DoD) and NATO have expressed interest for “military-related apps built on Blockchain” for secure communications. In 2016, the US Defense Advanced Research Projects Agency (DARPA) announced Request for Proposal (RFP) for a Secure Messaging Platform using a Blockchain framework with the objective of creating “secure messaging and transaction platform that separates the message creation, from the transfer (transport) and reception of the message using a decentralized messaging backbone to allow anyone anywhere the ability to send a secure message or conduct other transactions across multiple channels traceable in a decentralized ledger”. DARPA also warned that “Legacy messaging and back office infrastructures, traditionally based on centralized, unencrypted hub-and spoke database architecture, are expensive, inefficient, brittle and subject to cyber-attack. The overhead costs of maintaining such architectures are rising rapidly. Many organizations unknowingly keep duplicate information and fail to ensure synchronization thus amplifying the potential for data theft and data corruption/rot,”

Nuclear Decision Making
Blockchain technology can also be put to use in nuclear weapon launch decision making process. Given that nuclear weapons are catastrophic weapons, the decision to launch is made after serious consideration by a number of responsible people in the national decision making apparatus. However, the final authority to order nuclear strike generally rests with the Head of the State or a person designated by the national executive. To ensure that no single individual should have the authority to start nuclear war, or prevent any impulsive or irrational choice to launch, the decision-making process can be based on Blockchain technology and digital signatures.

Homeland Security
The US Department of Homeland Security (DHS) is exploring Blockchain technology to secure transmission and storage of data collected by security cameras, sensors and internal databases. Currently, these devices rely on an outdated system based on centralized servers and databases, which are vulnerable to sophisticated malware-related attacks.

Additive Manufacturing
Blockchain has inspired the navies too and some have drawn plans to use the technology in their operations. For instance, the Naval Innovation Advisory Council is conducting proof-of-concept trials for the US Navy’s various 3-D printing sites and has stated that “The ability to secure and securely share data throughout the manufacturing process (from design, prototyping, testing, production and ultimately disposal) is critical to additive manufacturing and will form the foundation for future advanced manufacturing initiatives.”

Future Outlook
Blockchain is a disruptive technology and ‘a new Internet that puts the users first’. It is expected to find use in a variety of domains such as businesses, governance, management, security and defence as also in human social engagements. The current trends in the use of Blockchain technology are indeed very promising and the Blockchain market is estimated to grow from US $210.2 million in 2016 to US $2.31 billion by 2021. The commercial maritime world has already embraced the technology, through in a limited number of sectors, but its use in other marine related activities will potentially change the industry making it more transparent, efficient, and secure.

Blockchain will certainly impact military planning involving combat operations, intelligence, surveillance and reconnaissance, logistics and supply chains, engineering and maintenance, and human management. Advanced militaries such as the US and NATO members will start internalizing Blockchain, though it may however, take several years for other militaries to do so.

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