Ordering goods online is now such an integral part of the way we shop that it can be easy to take for granted. Amazon and other online retailers have made it so straightforward to buy whatever we need with only a few mouse clicks.
Online shopping, however, is a luxury that is still confined mainly to the developed world. In developing countries, there is a burgeoning middle class that, armed with their smartphones and shopping apps, have money to spend on consumer goods.
The world’s middle class is growing such that its numbers are expected to form a majority of the world’s population imminently. However, a lack of adequate infrastructure for getting goods delivered means that many online retailers still struggle to access these markets in developing countries.
Innovations in Delivery Infrastructure
The WSJ has previously reported that some companies are developing innovative ways around this problem. One way is by creating strategic partnerships to help build better infrastructure in the parts of the world that need it. Such infrastructure helps to connect e-commerce retailers to consumers in developing countries.
Today, blockchain could provide a more accessible and complete solution for consumers and e-commerce retailers alike. Blockchain-based platforms that enable global delivery infrastructure will soon be a reality. Decentralization of the parcel delivery network will open up new markets for online retailing, by enabling the shipment of parcels between any two points in the world.
One example of a decentralized parcel delivery system is being developed by a blockchain startup called PAKET. At its simplest level, the network seeks to establish a direct connection between the three parties involved with a parcel delivery transaction. These are the sender, the courier, and the recipient. The sender agrees on a payment fee in the native system tokens, called BUL, with the courier. Using smart contracts, the fee is held in escrow until the recipient confirms receipt of the package.
However, in reality, the parcel delivery network is far more complicated than this—and the system is being designed to handle this complexity. For example, the sender can demand that the courier stake a particular value of their own BUL tokens as a collateral payment to serve as insurance in case the courier doesn’t deliver the parcel by a specific trigger date.
If the trigger date passes without the recipient confirming receipt of the parcel, then the sender has their fee refunded and also receives the collateral payment staked by the courier. A sender can request a higher value collateral payment if their package contents are high-value, but conversely, the courier may require a higher fee if they think that carrying a high-value package brings them an additional risk for the transport.
The “Last Mile” Problem
The most challenging part of deliveries is often “the last mile.” This is an industry term for the final leg of a parcel’s journey—getting it from a central depot to the consumer’s door.
Therefore, particularly when shipping parcels across international borders, there is frequently more than one party involved in the shipment. A major shipment firm like UPS has reach across the developed world but cannot fulfill “the last mile” in many developing countries.
Therein lies the opportunity of decentralizing the delivery network. A decentralized, integrated system can handle a parcel shipment by multiple agents. These could be big shipping firms, or smaller local courier firms, or even individual providers. The fee agreed upon by the sender can be divided up among the shipping agents handling the delivery.
If a collateral payment is involved, then an agent taking custody of the delivery must be able to cover the collateral payment for the duration that the parcel is in their charge. The collateral is then refunded to them by the next agent in the chain, ultimately being refunded to the final agent once the package is delivered on time.
The “last mile” becomes less problematic when literally anyone can offer to carry the package to its final destination. In areas not covered by the big delivery providers, this last trip could be undertaken by a single individual on a bicycle, or a smaller local courier firm.
This also creates efficiencies, as individuals who are already making a journey could act as a parcel carrier on that journey. For example, someone planning a drive to visit family in a neighboring state could take a parcel with them along the way and earn side income for doing so.
Open-source, Multi-Layer Protocol
PAKET is an open-source platform that offers the opportunity for developers to get involved in shaping the ecosystem. The platform itself will be comprised of multiple layers, with each layer providing purpose to the layers above. The foundation layer will be based on the Stellar platform, allowing the exchange of the native BUL tokens and configuration of smart contracts—both of which will drive the system.
There will be a routing layer, which will be able to figure out the fastest and cheapest way of getting the parcel from sender to recipient. This layer will allow updating in real time if it becomes apparent that there are opportunities to decrease costs or increase speed once the package is in transit. There will also be an application layer, which will serve as the user interface, and an organization layer which connects parties on the platform.
The parcel delivery industry, like so many others, is ripe for the blockchain revolution. The question is: which firms will be the ones that make it through to “the last mile”?
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