Tokenization at the crossroads of the trucking industry to ensure efficient payments
The trucking industry is one of the largest industries in the world. According to recent statistics, the global freight trucking market was worth more than $2.7 trillion in 2021. Additionally, it has been found that millions of commercial driver’s license holders are employed by trucking companies in the States United States, a market which is responsible for delivering 70% of all freight.
Given these statistics, it should come as no surprise that technology has become a vital part of driving the trucking industry forward. Yet, while GPS tracking, autonomous driving, and other mainstream technologies may be apparent, a few organizations aim to bring tokenization and decentralized finance (DeFI) to the trucking industry to advance its payment systems.
Faster and fairer payments for trucking companies
Philip Schlump, chief commercial officer and lead developer of TruckCoinSwap (TCS) – a Wyoming-based fintech and freight company – told Cointelegraph that there are more than one million trucking companies and shipping companies. third-party logistics in the United States that rely on banking entities to get paid. Schlump, who is also a former truck driver, explained that this became the case because of how the truckload industry’s payment system works. He explained:
“When a truck picks up a full load of potatoes, for example, a bill of lading is generated. This is basically proof that the trucker and the trucking company are responsible for the potatoes during the shipping period. Once the potatoes are delivered, the bill of lading becomes an accounts receivable, but it often takes trucking companies 30 to 180 net days to receive payments.
While Schlump pointed out that smaller truckload companies tend to have better payment terms, 45 days is the average time it takes truckers in the United States to get paid. As a result, trucking companies have become dependent on factoring companies to help truckers receive faster payments, as these entities guarantee that payments are made within 10 to 14 days.
Still, Schlump noted that this alternative eats away at driver salaries. “Factoring companies typically charge 3% gross on each invoice, so an interest rate of 20-25% is annualized over the term. These banking entities collect up to 90% of the net revenue on each shipment simply because most carriers cannot wait the industry standard of 30-180 days to be paid directly by shippers,” he said. he points out.
Schlump thinks tokenization can potentially solve this problem. For example, Schlump explained that TCS is replacing factoring companies with a token-based settlement service that allows trucking companies to be paid at face value within days. To ensure this, Schlump explained that TCS launched its “TCS Token” on the CrossTower crypto exchange in September this year. TCS will then work directly with trucking companies to purchase a bill of lading using the tokens. He said:
“We exchange the bill of lading for tokens. We are now able to pay trucking companies the face value of their bill of lading, and they get instant cash in return by selling TCS tokens. »
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Although this process may seem complex, Schlump believes that such a model could result in a $20,000 to $60,000 increase in income for truckers. “We are currently beta testing this model and working with trucking companies to make sure it works,” he said.
TCS isn’t the only company using tokenization to advance trucking payment systems. Myron Manuirirangi, founder of Truckonomics – an organization focused on fair wages for long-haul truck drivers – told Cointelegraph that he also believes cryptocurrency, combined with blockchain technology, can be hugely beneficial for drivers. road.
Like Schlump, Manuirirangi is a former truck driver. Through this experience, Manuirirangi became aware of the fact that there is a shortage of truck drivers across the world. “I started researching why this was the case and came to the conclusion that there was a shortage of truckers due to inadequate compensation.”
To put that into perspective, a FrieghtWaves article published in 2018 noted that a trucker in 1980 earned an average of $38,618. Almost 40 years later, in 2018, they were earning around $41,000.
“The shortage of drivers is not a problem, but rather a symptom of a much larger problem that Truckonomics aims to solve with a token-based model,” Manuirirangi said.
He explained that Truckonimics has created a digital token known as “GDPC” for trucking and transportation companies to use as a payment method. Additionally, GDPC will be linked to all activities occurring during the shipping process, using blockchain technology to ensure transparency and a single source of truth between shipping companies, retailers and consumers. “We are building this model on the Avalanche blockchain. We will then build our own blockchain platform to facilitate exchanges and transactions using the GDPC token.
By connecting GDPC to freight shipments, Manuirirangi believes it will add intrinsic value to the Truckonomic token. “The more trucking companies use GDPC, the more the price will be impacted.” In turn, truckers will be able to receive payments faster at much higher rates – as long as the token is used and implemented on a crypto exchange. At the same time, Manuirirangi believes the blockchain component will help advance the infrastructure of the trucking industry.
“The trucking industry has needed blockchain for a while, but no one has found a way to properly implement this technology. Combining the GDPC token with Truckonomics can modernize the industry by helping to pay the high costs associated with implementing blockchain, while bringing transparency to freight shipments,” he said.
Is the trucking industry ready for DeFi?
Although tokenization and DeFi concepts have the potential to revolutionize payments in the trucking industry, a number of challenges remain.
First, involving trucking companies and drivers in such business models could be difficult as cryptocurrency remains misunderstood by many people. Schlump is optimistic, however, noting that 21% of Americans are familiar with using cryptocurrency. He added that TCS conducted internal surveys and found that 17% of truck drivers are willing to receive crypto payments. He said:
“It becomes less difficult when there are a million trucking companies and you only need to work with about 500 to be successful. In terms of value, this can add thousands of dollars a year to trucker salaries, which also generates positive attention.
From a regulatory perspective, Schlump further mentioned that TCS Token is not an investment, as it functions as a commodity with a fixed supply. Additionally, he mentioned that TCS is a Wyoming-based company, a factor that has helped TCS gain regulatory clarity due to the state’s pro-crypto stance.
Manuirirangi also pointed out that Truckonomic’s GDPC token has been subjected to the Howey test to prove that it is not an investment vehicle. “It is a decentralized native token with smart contract functionality,” he said.
While these points are notable, some industry experts believe that adoption of DeFi by businesses and institutions will be slow, given that the industry is still developing. For example, Mike Belshe previously told Cointelegraph that while he thinks DeFi will overtake traditional financial institutions, it will take at least another two to three years before real progress is made.
Still, real-world use cases for tokenization can help accelerate adoption. “We have a real-world use case, unlike many crypto-based projects. TCS is targeting a $500 billion a year market, with significant added value when trucking companies make payments through our settlement service Schlump pointed out.
Meanwhile, trucking companies have successfully implemented blockchain without cryptocurrencies. For example, Xavier Fernandez, CTO and technical lead of Smart EIR – a blockchain-based container management system – told Cointelegraph that Smart EIR uses the Antelope blockchain network (formerly EOSIO) to document history. containers.
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“We are focusing on the Equipment Exchange Receipt, which is a form generated each time a container is moved from one exchange point to another.” According to Fernandez, the photographic data for these containers is stored on a private IPFS network, while the metadata is stored on the Antelope blockchain network.
Although Fernandez mentioned that this use case is useful for dispute resolution, there is no cryptocurrency element involved: “Crypto volatility and regulatory concerns have created too much controversy. We simply use the blockchain as a ledger and a single source of truth to create trust within an ecosystem.