dexFreight CEO: blockchain startups where the action is for transport and logistics

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Incumbents IBM and Microsoft get a lot of press, but startups are where the action is for blockchain

IBM and Maersk’s recently unveiled blockchain platform TradeLens has received a flood of attention from industry media. From what we can tell, the conversation around TradeLens has been encouraged not so much by any breakthrough that TradeLens represents—after all, it’s essentially a bespoke, customized version of HyperLedger Fabric—but rather by IBM’s massive public relations machine. 

A critical look at the information that has been published about TradeLens so far generates some interesting questions. The first question has to do with the apparent reluctance the maritime transportation and logistics community has to adopt the technology. The now-famous IBM-Maersk joint study that tracked a refrigerated container of flowers from Kenya to Rotterdam and evaluated how much documentation and changes-of-hand were required was conducted way back in 2014, a lifetime ago in blockchain-years. That Maersk and IBM were developing a blockchain solution together was announced in the spring of 2017. Although this project has now been under development for years, few major players in maritime have joined on. IBM’s press release trumpets the participation of Hamburg Süd, for instance, which happens to be a container line owned by Maersk. The majority of the other participants are terminal operators or customs authorities.

The second question has to do with the details of the technology, which, to be frank, have not been particularly forthcoming. One thing we do know, from the TradeLens website, is that “the platform is delivered by the IBM Cloud to members around the world.” TradeLens insists, however, that “Blockchain is the core technology that powers TradeLens, ensuring that the data remain secured, permissioned, and distributed.” 

Anyone with a passing familiarity with blockchain would immediately wonder how TradeLens’ data can possibly be described as ‘distributed’ if in fact the blockchain resides on the IBM Cloud. If TradeLens lives on IBM’s servers, then IBM can alter the blockchain, withhold data, censor transactions, mine information, etc. Therefore, some of the key advantages of blockchain—simultaneously enhancing security and removing costs by using decentralization eliminating trusted intermediaries—can never be realized by TradeLens.

We actually think that some of the most interesting work in the blockchain/transport and logistics space is being performed not by incumbents like IBM and Microsoft, but by a diverse group of startups. Companies like dexFreight, Fr8 Network, Block Array, Slync, and ShipChain—all members of the Blockchain in Transport Alliance—are experimenting with a range of technology tradeoffs, business problems, and go-to-market strategies. In the interplay between these startups, industry observers and tech enthusiasts can evaluate the choices being made and the reasons behind them, and watch the industry evolve much faster than it does inside of a decades-old corporation.

Slync, for instance, has a team of developers from Salesforce’s Einstein AI project, and focuses on reducing costs by automating workflows. Blockchain is only 5-10% of what Slync does, according to CEO Chris Kirchner, but the company is actively piloting permissioned blockchain solutions that tend to have a small number of nodes enabling a group of five or six companies to collaborate. Block Array, on the other hand, built its technology on top of the public, permissionless Ethereum network, and has already released a product called Freight Trust that replaces paper bills of lading with smart contracts. Another company, Block Shipping, has a similar scope in that it’s building a project with a particular niche. The Danish startup wants to create a global container ID and they’re claiming that each container will have a globally unique ID and that will be helpful in tokenizing those containers as assets.

There is also a range of funding models for startups working in the space. Slync raised money from venture capitalists and large investors just like a traditional tech startup, while ShipChain did a token pre-sale, bringing in $30M in exchange for SHIP tokens. dexFreight completed a friends and family-led angel round to get started, and hopes to do an STO (‘security token offering’) in the next few months, once the Securities Exchange Commission finds an STO model they like and approves it. A security token represents common stock, or equity in a company, and would be separate from the utility token that powers the network, settles payments, and incentivizes participation. STOs could be the best of both worlds, allowing a startup to raise capital in an efficient way unburdened by the compliance costs of IPOs, while still protecting the utility token running the network from the volatility that comes from being traded on secondary markets. 

FreightWaves spoke to Rajat Rajbhandari, CEO and cofounder of dexFreight, by phone. Rajbhandri explained that one of the basic differentiators between blockchain startups are the enterprise blockchain companies that want to help transport and logistics incumbents create efficiencies in their existing business models, and the companies who want actually decentralize logistics.

“Companies like Blockshipping, Fr8, Block Array, and dexFreight are not so much in the enterprise blockchain world but in decentralized logistics, creating their own ecosystem. I don’t see a competition between those spaces, at least not yet,” said Rajbhandari. The dexFreight CEO said that while those companies shared commonalities, dexFreight wants to change the way the entire industry works. Rajbhandari said his co-founder Hector Hernandez is a Miami-based freight broker, and dexFreight tends to approach transport and logistics from a broker’s perspective.

“The end goal for ShipChain, Fr8 and us is very similar: bring down cost through high automation with blockchain. How the three companies execute it is slightly different, though. We come from more of the broker perspective—we look more at workflow, because if the tech is going to drive middlemen away it needs to be able to do everything a typical broker does,” said Rajbhandari. “What we ultimately want to do is have companies transact directly without the platform at all: they’ll be running their own nodes in a truly decentralized way.”

“We’re building a platform so we can open it up to third party developers like insurance providers, telematics companies… we just need to build the core interaction between shippers and carriers and then open up the platform for third parties to come in and provide the services, which can be paid for by token, fiat, crypto, credit card, whatever,” Rajbhandari explained.

dexFreight is still weighing its options for financing (the SEC has yet to approve any security token offering applications), but already has several partner agreements in place.

“We have a couple letters of intent. We’re working with a company called CoinFabric, a smart contract development company out of Argentina. We’re partnered with Rootstock, who’s building a side chain called RSK on top of Bitcoin that can run decentralized applications. We have a memorandum of understanding with the FedEx Institute of Technology and an MOU with a Canadian company, and we’re exploring other tech providers, like MakerDAO, which is building a stable token,” said Rajbhandari. 

dexFreight will deliver its minimum viable product in September or October, Rajbhandari said, and then work with developers on applications that will run on its platform. 

John Paul Hampstead

John Paul conducts research on multimodal freight markets and holds a Ph.D. in English literature from the University of Michigan. Prior to building a research team at FreightWaves, JP spent two years on the editorial side covering trucking markets, freight brokerage, and M&A.