Blockchain in Hamburg: the port sets the agenda

A bill of lading is a document of title: whoever holds the original can claim the goods. That is why it has survived on paper into an era when everything around it is digital, and why it is couriered between continents at the speed of a courier while the ship moves at the speed of a ship. A copy is worthless, because the whole point is that only one party can hold it.

This is the problem a ledger solves directly, and almost uniquely well. A record that cannot be duplicated and whose current holder is unambiguous is exactly what a document of title requires. The financing follows: a bank lends against the goods, and the security for that loan is control of the document. If control can be proved on a ledger and transferred in seconds, the financing can move at the speed of the trade instead of the speed of the paper.

The obstacle is not technical, it is legal and commercial. A document of title only works if every party in the chain, including a court in a jurisdiction neither party chose, accepts the electronic record as the original. That is why Hamburg's projects are consortia of carriers, forwarders, IT firms and universities, and not software launches: the record has to be accepted by everyone who touches the shipment, and a product nobody else adopts secures nothing.

Hansebloc, from Hanseatische Blockchain-Innovationen für Logistik und Supply Chain Management, set out to make the electronic exchange of freight documents secure across all three transport modes. It started in April 2018 with a total volume of around 3.1 million euros, of which the Federal Ministry of Education and Research funded roughly 1.9 million, and it ran to September 2020.

The consortium's composition is the interesting part: ten northern German partners from the Logistik-Initiative Hamburg network, with four logistics companies, Emons, Kroop, Sovereign Speed and Shot Logistics, four IT service providers, and two university partners in HAW Hamburg and the Kühne Logistics University. The Hamburg Business overview of the city's logistics blockchain work describes the Digital Hub Logistics in the Speicherstadt as the place that oversaw it.

Four freight forwarders and two universities in one project tells you what kind of problem this is. The forwarders had to agree that the same record governs the handover between them, which is a commercial negotiation about liability dressed as a technical standard.

Robob took the narrower and more concrete question: the release of sea freight imports. It mapped that release onto a ledger with smart contracts, started in August 2018 with a volume of around 1.3 million euros, and was coordinated by Dakosy Datenkommunikationssystem AG together with the Technical University of Hamburg.

Dakosy matters here more than the technology. It operates the port's data communication system, which means the project was not a startup proposing to replace an incumbent but the incumbent testing whether its own process could run differently. For anyone judging whether a logistics blockchain project will outlive its funding, that is the signal to look for: the party that already holds the data is the party whose participation makes a standard real.

Hapag-Lloyd took the other route available at the time and joined Tradelens, the platform IBM and Maersk built for supply chain partners to exchange information digitally, in July 2019. Tradelens has since been discontinued, and the reason is instructive: a platform run by one carrier and one technology firm asked competitors to put their shipment data into a competitor's system. The consortium structure Hamburg's publicly funded projects used was addressing exactly that problem.

The Blockchain Research Lab is a Hamburg non-profit, organized as Blockchain Research Lab gGmbH, which describes its aim as furthering the general understanding of blockchain technology and studying its implications for society, to identify potentials, obstacles and recommendations for action. It positions itself as independent science and research on a subject whose economic and societal implications academia had not sufficiently addressed.

Its research funding comes from German federal ministries, which is worth noting for a reader trying to judge the quality of what they read on this topic. A publication list funded by ministries and produced by a non-profit answers to a different incentive than a market report published by a firm selling the technology, and on a subject this crowded with vendor material, that distinction is the useful one.

Trade finance is where a port city's blockchain work turns into a banking subject. A letter of credit is a bank's promise to pay against documents, and checking those documents is manual work with a well-known discrepancy rate: a first presentation is frequently rejected for an inconsistency between papers, which delays payment and ties up working capital on both sides.

A ledger-based document set addresses that by making the documents one record instead of several copies that can disagree. The German research on the financing side has run partly through Commerzbank's cooperation with the Fraunhofer Institute for Material Flow and Logistics on future supply chains, which approaches it from the goods and not from the payment. Finance Loop covers the instrument side at trade finance in Germany and the corporate angle at corporate treasury.

Hamburg is a marine insurance center as well as a port, and the two are the same business seen from different sides. Marine cargo insurance prices a risk against a voyage and a cargo whose details come from the same documents the financing uses, so an insurer gains from the same record for the same reason: fewer sources of truth about what is on the ship.

The parametric case is the one insurers in Hamburg have looked at: a policy that pays automatically when an agreed data source reports an agreed event, with no claim to file. For a delayed vessel or a temperature excursion in a reefer container, the data already exists in the carrier's systems. What a parametric policy needs is an agreed source that both parties trust, which is the oracle problem in an insurance suit. Finance Loop covers the sector at insurtech in Germany.

On the securities side Hamburg is a smaller story than the port. The city has a long exchange tradition, and the trading and digital asset infrastructure that matters in Germany sits in Frankfurt and Stuttgart. Finance Loop covers those at digital assets in Germany and blockchain in Stuttgart.

Supervision for a Hamburg firm runs through BaFin in Bonn and Frankfurt like anywhere else in Germany, so there is no local regime to learn. What Hamburg offers a digital asset business is not a regulatory advantage, it is proximity to the industry whose documents and cargo the technology is actually being applied to.

Because a freight document is a document of title, and a ledger is the only digital record that behaves like an original and not like a copy. Whoever holds a bill of lading can claim the goods, so the document cannot simply be emailed. Hamburg's projects, Hansebloc for freight documents across land, sea and air and Robob for the release of sea freight imports, were built to test whether that record can be electronic and still be accepted by every party in the chain.

A research project on the secure electronic exchange of freight documents, run from April 2018 to September 2020 by ten northern German partners from the Logistik-Initiative Hamburg network, with a total volume of around 3.1 million euros and roughly 1.9 million from the Federal Ministry of Education and Research. The consortium included four logistics companies, four IT service providers and two universities, HAW Hamburg and the Kühne Logistics University, and the Digital Hub Logistics in the Speicherstadt oversaw it.

Not in the sense that Berlin or Frankfurt has one. Hamburg's blockchain activity sits in logistics, trade finance and insurance, driven by the port and the companies around it, and the research there is academic, not commercial. A firm looking for crypto trading, custody or issuance counterparties in Germany finds them in Frankfurt and Stuttgart. A firm applying a ledger to a supply chain finds the relevant experience in Hamburg.

It is a Hamburg non-profit, Blockchain Research Lab gGmbH, conducting independent research on blockchain technology and its implications for society, with the stated aim of identifying potentials, obstacles and recommendations for action. Its funding comes from German federal ministries, which distinguishes its publications from vendor-funded market research on the same subject.