Could blockchain make global commerce cheaper, faster and more efficient?
Over the last few weeks, two ordinary-looking ships have sailed around the world. The first carrying hydraulic couplings from Germany to China, and the other moving pumps within Germany.
What’s special about these deliveries isn’t so much the items being moved, but how they were financed.
The transactions between tech firm Voith and pump and valve manufacturer KSB SE were the first of their kind to be mapped using blockchain.
All the details of the order and delivery were agreed using the Marco Polo blockchain network, and even the payment was triggered by the two parties’ banks entering delivery details on the distributed network.
None of that might sound particularly revolutionary if you’ve ever shopped on Amazon, however, in the world of trade finance, it is undoubtedly a revolution.
Trade finance is the rather archaic system of payments for goods which are being shipped, that typically involves phone calls, paperwork and lots of waiting. The core problem being that someone (typically a bank) has to deal with the ‘risk’ while goods are in transit, say if they get lost or don’t arrive as expected, when neither party really wants to deal with it.
Marco Polo’s solution was to offload this process to a blockchain, built on R3’s Corda platform, to automate these transactions between banks.
In the case of Voith and KSB SE, the two banks were Commerzbank and Landesbank Baden-Württemberg, both founding members of Marco Polo's London-based consortium.
“It will make transactions faster, easier and more secure,” said Landesbank board member Dr. Christian Ricken. “Not only are we breaking new ground in terms of technology, but also in the cooperation between banks and businesses.”
Marco Polo currently has 17 banks on board with its network, which it’s aiming to grow to 25 by mid-year, with tighter integration into each bank's systems being developed.
Currently, the consortium’s biggest rival is We.Trade who are building a similar blockchain and are slightly ahead, albeit with a narrower European focus.
If these projects are ultimately successful it’s unlikely anyone outside the world of trade finance will notice, however, the cost efficiencies and speed improvements will make global commerce cheaper and faster.