I talk about blockchain a lot. I see how it can be used in every database we have, and replace most accounting and audits.
Most people I talk to say “What’s blockchain”… those that recognize the word mostly assuming I’m talking about cryptocurrency like Bitcoin. That’s a interesting story. Blockchain has roots in currency, but today is so much a separate topic that I’m careful not to explain blockchain with the coin example. It’s a great example but people getting the two confused end up with assumptions that blockchain is for speculators, drug traders and evil. (not true, but not my goal to argue the point).
I mostly use a shipping example. Now the World Economic Forum reports on a real life deal in international commerce. This will soon not be news, but it is today.
International trade is under pressure. Fears fuelled by the global refugee situation and terrorist threats have led to tighter border controls -and these come at a cost. Every inspection of goods, every stop along the supply chain, eats up time and drives up prices. It harms businesses and consumers alike. Those involved in international trade -whether manufacturers, trading houses, transportation companies or banks -are seeking ways to ease the situation and cut time and costs.
Blockchain technology can help. The cloud-based ledger ensures that records can’t be duplicated, manipulated or faked, and increased visibility in parts of the supply chain promotes an unprecedented level of trust. It means governments can better protect citizens, while business partners can be certain trading documents are real. Consumers can check the quality and provenance of products, and banks can reduce processing time. And it’s all paperless.
Thanks to blockchain, all kind of legal, financial and product-related information can be made available. This allows even the least trusting parties to comfortably conduct business. With further investment and experimentation, blockchain could potentially hide confidential information to protect the interests of trading parties -pricing information, for example.
Does it work in the real world? Barclays reported the first blockchain-based trade-finance deal in September 2016. The transaction guaranteed the trade of almost $100,000 worth of cheese and butter between Irish agricultural food co-operative Ornua and the Seychelles Trading Company. The process -from issuing to approval of the letter of credit, which usually takes between seven and 10 days -could be reduced to less than four hours. Other banks are also exploring ways blockchain technology can improve processes along the supply chain. In August 2016, banking consortium R3CEV reported that 15 of its members had joined a trade finance trial to test its distributed ledger protocol, named Corda. Also in August, Bank of America, HSBC and the Infocomm Development Authority of Singapore (IDA) revealed that they had built a blockchain application to improve the letter of credit (LC) transaction process between banks, exporters and importers.