Every month we select one logistics startup which represents a positive example of innovation in Logistics and Supply Chain and has the potential to alter the way the industry operates. This month, Transmetrics selected СargoX, an innovative Blockchain-based Bill of Lading solution, as the February “Logistics Startup of the Month” for its outstanding contribution to the development of smart, secure and digital logistics.
In order to learn more about the startup and what it does, we have talked with CargoX COO Igor Jakomin Ph.D. about the business and how Supply Chain and Logistics can be improved with Blockchain.
First of all, congratulations on becoming the Logistics Startup of the Month! Can you please briefly introduce our readers to CargoX and share the story behind the company? What are the key benefits of Blockchain-based bill of lading for the logistics and supply chain players?
CargoX is a compact team of very experienced industry veterans from the logistics and software development sector. We all had experience with ocean shipping from previous ventures, where we had to operate with paper Bills of Lading. There was simply too much hassle with them – they got damaged, lost, or even stolen. Because they are documents of title, this means that shippers and importers are vulnerable to theft – if somebody steals the documents, they could steal the goods from the ship.
So we designed an extremely secure solution, based on the public blockchain Ethereum Network. Blockchain provides complete event transparency when encrypting relevant shipping documents (Smart Bills of Lading™, Certificates of Origin, Invoices, and other documents), but lets us hide the documents’ content from unwanted eyes.
Our CargoX platform for the shipping industry is based on our Blockchain Document Transaction System (BDTS) technology, but we can design tailored applications for any industry, or public governance environment if an opportunity arises.
What is the role of Blockchain in your solution and why do you believe Blockchain is the right framework for the digital Bill of Lading you are developing? In your opinion, would it be possible to develop such a solution without using the Blockchain?
We use blockchain to validate document transactions, i.e. transferring the ownership of the goods that are being shipped. That is why we use a public blockchain, the Ethereum Network, as otherwise, a private blockchain wouldn’t have a similar effect, because it is not sufficiently transparent.
Such solutions as CargoX are impossible in a centralized software architecture, as there is always some central owner of the database involved, and that administrator could, theoretically, always just switch parameters in the database to accommodate private interests or the interest of direct employers or customers.
On a public blockchain, when an employee of a company transacts the documents to the next person in the workflow chain, that employee loses ownership of the document, and there is no force in the world, currently, to help them get that document back – unless the next person is willing to transfer it back to them.
Before the arrival of the public blockchain, such solutions were not possible. This brings a completely new level of trust to the business environment on the internet.
With all the hype surrounding the Blockchain technology, and the ongoing projects in the industry, do you think that Blockchain is just a buzz or can it truly change the logistics? What are your further steps with the technology?
If we thought it was just a buzz, we would not be in this business! We believe that the public blockchain will empower the evolution into the “Secure Internet 3.0” servicing businesses, where trust will be ensured at a level not seen before.
Our Smart Bill of Lading™ is just the first in a line of products we have planned for our CargoX platform. We are already fully committed to launching our Smart Letter of Credit in 2019, and then we are planning to develop other trade finance products to help companies.
One of the downsides of Blockchain as a technology is the inability to remove the data when it is entered there. What happens if one of the parties entered the incorrect data into the blockchain? How do you solve such a problem?
Inability to change the data on the blockchain is actually a benefit. It prevents frauds from the start. Fixing incorrect entries is a process problem, not a technical issue. Trust has to be established between legal entities first, then among the people who collaborate in a process. This is finally enabled in the software.
If there’s a need to change data on an already issued or transferred document, certain flow needs to be obeyed. The current holder of the document needs to transfer it back to the issuer, and request the document be rescinded. The issuer can then “destroy” the document, essentially marking the document as invalid and final on the blockchain. He may then reissue another document in its place. Such rescinded documents are “cemented” on the blockchain and cannot change hands anymore. The metadata about the original document still remains on the blockchain, along with the information that the document has been cancelled.
In the end, while from the technological view we haven’t “changed” any data, this is exactly what happened from the process point of view. There’s a great additional consequence of this process. We automatically get exact audit trail of when, how, and why was the original document rescinded, which is rarely available with paper documents.
This mimics what – at least in theory – happens in practice, and is what all participants in the processes are well acquainted with.
Could you please share any specific CargoX customer success story?
We have a lot of partners who are integrating our solution into their workflows as we speak, among them Milsped, Fracht AG, OceanX, Global Cargo Alliance, Mana, TPG Logistics, DBA Group, Actual Group, Europacific, Freightalia, Globalink, Global Value Network, Sprint, ConsolFreight, and RoadLaunch. They all are amazed at the level of efficiency that is provided by our CargoX platform – efficient document creation, sending, and receiving in a fully secured environment. We cannot speak about their financial details because the number of Bills of Lading processed is a business secret, but we ensure up to 85% savings on each and every single Bill of Lading is processed through our CargoX platform.
You’ve developed an outstanding partner ecosystem. As a startup, how did you succeed in gathering all of these companies? What are the benefits that they receive by being a part of this ecosystem?
Our partners are truly amazing, as they are the ones that will drive innovation in the logistics industry forward.
CargoX employs some of the best-connected logistics veterans, so we established business contacts with some, and some of them found out about us through our marketing and business development activities. We have a pipeline of new partnerships that are being processed for 2019!
The benefits are clear – they improve their platforms, which then improves the business processes for their customers, too. We have also put in place a commercial benefit scheme for partners, where they receive a price discount for the Smart B/Ls™ generated and transferred through the CargoX platform.
In 2018 CargoX raised $7 Million in 7 Minutes via the Initial Coin Offering (ICO). Congratulations on that! ICO is a relatively new way of funding your projects, but we’ve seen a lot of companies scamming people using this method. What were your biggest challenges in this process? Could you please give advice for other logistics startups on how to do ICO the right way?
Our biggest challenge was ensuring that everything was done right. We did not get greedy, as at that point interest in our company was huge and we could have raised much more money. We calculated the cost of our platform development and marketing on a realistic budget, and we communicated that with the community very faithfully.
If there is one single bit of advice we can give to new companies that are going down that path, it is – do not take anything for granted, as this crowdfunding market is hyperdynamic, it evolves week in and week out. Always challenge your own perspective of things, but do not lose sight of your goal!
What are the big plans of CargoX for 2019?
We are already in talks with some potential investors that would enable us to broaden our platform’s reach into the air freight industry, and we are also stepping up marketing activities to secure more contracts.
Our solution is robust, it works, it is now proven in business, and we can now unleash our next level marketing activities.
We are focused on our vision all the time – to provide a powerful, secure and easy-to-use platform for ocean, air, and road transport logistics, where both important business documentation and real-time freight information can be exchanged, either by the solutions on CargoX platform or through our partners’ solutions.