Clarifying the path to tokenization
On the 8th of September (4pm - 6pm CEST/UTC+2), 2Tokens, together with Blocklab and the InterWork Alliance, hosted a webinar on the use-case Electronic Bill-of-Lading (e-BL). Read more about e-BL and this webinar below.
Download the executive summary of the EBL use-case!
What is a Bill of Lading?
A Bill of Lading (BoL) is 'a document of title, a receipt for shipped goods, and a contract between a carrier and shipper'. It is issued by a carrier (or its agent) and passed to the shipper when the goods are loaded. As such, it functions as receipt of the goods described in the BoL by the carrier. This role even predates the Middle Ages; as early as Roman times this was common practice. Between ports, it serves as a contract of carriage for the goods being transported, before being presented at its destination port in order for delivery to occur.
A BoL must include consignor’s (i.e. the entity or person sending the goods) and consignee's (i.e. the entity or person receiving the goods) name, the departing and destination ports, the vessel’s name, departure and planned arrival dates, an itemized list of goods, identifying marks on the packaged goods, the weight of said goods, and the freight rate.
Furthermore - and most importantly for this project - the BoL can serve as proof of ownership of the cargo at each stage of the transit process if made to order. When this is the case, the original consignee, by endorsing (signing) the back of the BoL, transfers title of the goods to another party who then becomes the new consignee. This proof of ownership is the focal point of the TradeTrust project.
There is an implicit business case involving the digitization of the validation and transferal process in an open and audited code environment. The digitization of the BoL, the so-called e-BL, leads to a more resilient supply chain, reducing idle time in the physical movement of goods as a result of inefficient paper information flows. For highly perishable goods, such as fresh produce, a 24-hour delay can result in the value of the cargo diminishing by 10 to 15 percent.
Also, digitization can bring significant efficiency gains. The Digital Container Shipping Association estimates that the that the industry could potentially save more than $4 billion per year if just 50 percent e-BL adoption is achieved
The business case for the negotiable e-BL, the focal point of TradeTrust, is very much linked to its role as collateral for banks when issuing a so-called Letter-of-Credit (LoC). A LoC is basically an IoU issued by a bank to the seller’s bank guaranteeing payment in case of buyer insolvency.
Issuing a LoC results in the creation of an off-balance sheet item for which they need to provide backing in the form of a certain percentage of the nominal value. This percentage is dependent on the risk associated with the LoC. In case there’s collateral in the form of a (paper only!) BoL the transaction is considered to be of medium/low risk, a bank only needs to put up 20% of the nominal value. When there’s no such collateral this percentage goes up to 50%.
As in most countries, including the Netherlands and Singapore, the e-BL is not considered to be a valid collateral, trade finance transactions based on LoCs rely on paper BoL, significantly increasing the cost of doing international trade. Finally, we expect that, for as long as the most important international shipping document remains paper-based, the industry and consequently international trade, will remain paper-based.
The TradeTrust project envisions the creation of a sandbox environment in which the first legally binding, interoperable, paperless transfero of ownership of an e-BL can be conducted on a live shipment. TradeTrust allows for the creation of assets wrapped in a token, and therefore able to be owned by an entity represented by an Ethereum address, with the current owner of an asset being kept track of by a Smart Contract which acts as a transparent and cryptographically-secure “Single Global Registry”. These tokens adhere to the ERC721 Token Standard, meaning that each TradeTrust allows for the creation of assets wrapped in a token, and therefore able to be owned by an entity represented by an Ethereum address, with the current owner of an asset being kept track of by a Smart Contract which acts as a transparent and cryptographically-secure “Single Global Registry”.
These tokens adhere to the ERC721 Token Standard, meaning that each token is non-fungible; each token is unique, and therefore perfectly suited to acting as a wrapping for unique hashed documents such as a BoL. This uniqueness or non-fungability is key as each BOL has to be unique, as it contains for example different number of containers, different goods and consignee. Indeed, these assets are designated by TradeTrust as “an Electronic Bill of Lading (e-BL)”.
Board of advisors
Why this guide
+31 10 206 02 04
Sign up for our newsletter
© 2020 all rights reserved by 2Tokens foundation
This Privacy Statement applies to personal data collected, used and stored by 2tokens.org. This Statement explains the types of personal data we collect from and about you as well as how we use, disclose and protect the data.
Which personal data do we collect and for which purposes?
In order for us to register you for a round table and provide you with a high-quality event experience, we collect information about you as an identifiable person. Such information includes, for instance, your name, contact details, email address, and other personal details. We collect this information directly from you. We might also combine it with the information from other public information sources such as social media.
The following are examples of how we may use the personal data we collect:
– Provide you with the services you request from us and communicate regularly with you to inform you about updates and content that may be of interest to you regarding 2tokens.org
Photography and videorecording
By attending any of the round tables you agree that
You may appear in the photos and videos produced at the event
The organizer may use the photos and the video recording for marketing purposes
Disclosure to third parties
The personal data you provide to us in relation to the 2tokens.org round tables will be shared for the purpose of research with regards to the token financing guide. The personal data shared will be anonymized. It will not be possible to trace the data back to individual participants.
With the exception of the case specified above, we do not disclose your personal data to third parties unless we are legally entitled or required to do so or when we believe that disclosure is necessary to protect our rights, your safety or the safety of others. We may disclose your personal data to third parties with your prior permission to do so.
Your personal data may be transferred, stored and processed in the Netherlands or in any other country in which 2tokens.org maintains facilities. We will take all steps reasonably necessary to ensure that your data is treated securely and in accordance with this Privacy Statement.
2tokens.org may send you newsletters with regular updates. If you do not wish to receive the newsletter, you can always unsubscribe through the link in the email footer. If you continue to receive email communication you do not wish to receive, please contact email@example.com
Your privacy rights
You are entitled to know whether we hold personal data about you and, if we do, to have a copy of that information. Furthermore, you have the right to request us to correct, update or delete your personal data in our records and/or inform us about any misuse of your personal data.
Links to other websites
This Privacy Statement applies only to personal data collected, used and restored in connection with the DutchChain & Odyssey websites. In case we provide links to other websites, we are not responsible for the information practices of other websites.
Changes to this statement
This Privacy Statement may be changed from time to time. Please check our Privacy Statement frequently to stay informed about how we use your personal data. This Privacy Statement is effective upon posting. This Statement was last updated on January 8, 2019.
If you have any questions regarding this Privacy Statement or your privacy, contact us at: firstname.lastname@example.org.