Consortium blockchain in Shipping: Impacts on industry and social welfare

Abstract

This paper investigates the effects of consortium blockchain on the shipping industry. We model a market with two competing shipping lines and a port. We compare three scenarios: no blockchain (NB), partial blockchain consisting of only the two shipping lines (PB), and full blockchain consisting of both the shipping lines and the port (FB). Using game theory, we analyze how the consortium blockchain affects the shipping market and social welfare. We find that adding more players (especially the port) to the consortium blockchain does not always benefit everyone. The port gains from joining the consortium blockchain if its adoption cost is low. But compared with PB, FB generally decreases the profit of the shipping line with information advantage. PB enhances social welfare regardless of the blockchain adoption cost, while FB does so only under fierce competition between the shipping lines. Moreover, both PB and FB increase the volatility of the shipping freight rates, although they do not affect the volatility of shipping outputs or the port charges. Our analysis reveals that policy interventions are essential to ensure that the benefits of consortium blockchain adoption are equitably distributed among all shipping industry participants. Additionally, regulatory measures may be necessary to mitigate the heightened volatility in freight rates introduced by blockchain, ensuring a stable and predictable shipping industry landscape.