DeFi at the crossroads of the transportation industry to ensure efficient payments

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DeFi at the crossroads of the transportation industry to ensure efficient payments

Furthermore, it was revealed that millions of commercial driver's license holders are employed by trucking companies within the United States, a market that is responsible for delivering 70% of all freight. Given these statistics, it should come as no surprise that technology has become a critical component in ensuring the trucking industry's progress.

However, while GPS tracking, autonomous driving and other mainstream technologies are evident, several organizations intend to bring decentralized finance (DeFI) to the trucking sector to improve their payment systems.

Faster, fairer payments for shipping 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 a million trucking and third-party logistics companies in the United States that rely on banking entities to be paid.

Schlump, who is also a former truck driver, explained that this became the case because of the way the payment system works in the full truck equipment industry. He explained: “For example, when a truck picks up a full load of potatoes, a bill of lading is generated.

This is essentially proof that the trucker and trucker are responsible for the potatoes during the shipping period. Once the potatoes are delivered, the bill of lading becomes a claim, but it often takes a net 30 to 180 days for shipping companies to receive payments”.

Although Schlump noted that smaller companies with full trucks tend to have better payment terms, 45 days is the average time it takes in the United States for truck drivers to get paid. As a result, trucking companies have become dependent on factoring companies to help truckers receive faster payments, as these entities ensure that payments are made within 10 to 14 days.

Still, Schlump noted that this alternative eats into drivers' wages. “Factoring companies typically charge 3% gross on each invoice, so 20 to 25% interest is compounded annually over the period. These banking entities collect up to 90% of net revenue on each load simply because most carriers cannot wait the industry standard 30 to 180 days to be paid directly by shippers," he noted.

Schlump believes that cryptocurrency, combined with DeFi concepts, can potentially solve this problem. For example, Schlump explained that TCS is replacing the company's factoring with a token-based settlement service that allows transportation companies to get 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 shipping companies to purchase the bill of lading using the tokens.

He said: "We exchange the bill of lading for tokens. We are now able to pay shipping companies at face value for their bill of lading, and they in turn get instant liquidity by selling TCS tokens”. Schlump added that while the shipping companies get liquidity faster, TCS is granted the commercial rights associated with the bill of lading.

However, Schlump mentioned that these claims are usually cheap to handle, noting that once the money is collected from this process, TCS will buy back TCS tokens from the carrier companies. “Over time, we ended up being the biggest buyer of our token.

We have a fixed number of tokens. In this case, truckers act as token miners. They don't invest in crypto, because TCS has built a tokenomic model around it," Schlump pointed out. Although this process may sound complex, Schlump believes such a model could result in an increase in income of $20,000 to $60,000 for truck drivers.

"We are currently beta testing this model and working with transport companies to ensure this works," he said. TCS is not the only company using cryptocurrency and DeFi concepts to improve truck 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 extremely beneficial for truck drivers.

Like Schlump, Manuirirangi is a former truck driver. Through this experience, Manuirirangi became aware of the fact that there is a worldwide shortage of truck drivers. "I started researching why this was so and came to the conclusion that there is a shortage of truck drivers due to inadequate compensation."

To put that into perspective, a FreightWaves article published in 2018 noted that a truck driver in 1980 earned an average of $38,618. Almost 40 years later, in 2018, they earned about $41,000.

The lack of drivers is not a problem

"The lack of drivers is not a problem, but a symptom of a much bigger problem that Truckonomics wants to solve with a token-based model," Manuirirangi said.

He explained that Truckonimics has created a digital token known as "GDPC" for trucking and shipping companies that use it as a payment method. In addition, GDPC will be connected to all activities that take place during the shipping process, using blockchain technology to ensure transparency and a single source of truth between shipping companies, merchants and consumers.

“We are building this model on the Avalanche blockchain. We will then build our own blockchain platform to facilitate trade and transactions using GDPC tokens”. By linking GDPC to freight shipments, Manuirirangi believes it will add intrinsic value to the Truckonomica token.

"The more carriers that use GDPC, the more it will affect the price." In return, truck drivers will be able to receive payments faster at much higher rates — as long as the token is used and deployed on a crypto exchange.

At the same time, Manuirirangi thinks the blockchain component will help advance the infrastructure of the transportation industry. “The trucking industry has needed blockchain for some time, but no one has found a way to properly implement this technology.

Having a GDPC token linked to Truckonomics can modernize the industry by helping to pay for the high costs associated with blockchain implementation while bringing transparency to freight shipments,” he said.