Lesson 8: Tokenizing goods, blockchain to make the supply chain more reliable

The global transport of goods is a complex realm in which agents deliver items to other agents and where flows of materials travel the world, supported by flows of money in the opposite direction, and with everything propped up by bureaucracy. Could the tokenization of goods be an alternative to the current system of trust in global transport?

The process of tokenization consists in digitally representing certain rights over a physical asset, ranging from a product or good to a building. A token is the digital representation of physical goods or rights over those goods.

When someone acquires tokens that represent a good, the item is recorded using Distributed Ledger Technology (DLT), which is a large, decentralized database that not only acts as a ledger but also uses blockchain technology to operate.

When we talk about the tokenization of goods we are referring to assigning a token to a certain unit of merchandise. Given that blockchain technology facilitates identification, traceability and transparency, it is perfect for the logistics sector.

In practice, this DLT technology applied to logistics does not completely change the classic rules of the game, rather it adds more reliability to current record books and technology based on paper or digital records, even though they are disconnected. Rather than being disruptive, blockchain technology is a continuation that improves storage management and the shipping of goods in the supply chain.

Using tokens in logistics allows the risk of errors in information management to be reduced. It is estimated that every year approximately 779 containers are lost, as well as nearly 25 million pieces of luggage at airports. In addition, 51% of online shoppers have failed to receive at least one of their orders placed within the last six months. Blockchain could help.

Furthermore, DLT technology makes it possible to redefine traditional paper documents so that it is possible to reduce processing times. International trade logistics are bureaucratically complex, but blockchain technology represents an alternative by contributing trust to customs stamps and documents. However, it has to be regulated.

The tokenization of goods means building a secure network of mutual trust between all agents of the supply chain, which is probably its greatest advantage over conventional and isolated technology. One logistical problem that blockchain technology is sure to resolve is that of global trust between parties who do not know each other.