HSBC has just conducted what it claims is the world’s first blockchain trade-finance transaction, which is a major step forward for mainstream adoption of the technology.
Although blockchain has most commonly been associated with person-to-person transactions using cryptocurrencies like Bitcoin, there’s been a huge amount of interest from businesses both big and small in adopting the technology for a wide variety of other purposes.
This particular use case, as reported in the Financial Times, has been developed on Corda’s R3 platform, a piece of tech developed by a global group of financial institutions banks. It replaces the complicated letter of credit (LC) system, which still typically relies on transferring paper documents in order to underpin large financial transactions.
This means that huge trades − in this case the purchase of a shipment of soybeans − can be conducted in a single day rather than over the course of one to two weeks.
The boring, sensible future of blockchain?
This is just the first step in what will likely be a long road towards wider blockchain adoption. It’s a road that’s been likened to the adoption of standardised shipping containers worldwide, which over the course of several decades meant that a ship could arrive in any port in the world and its containers would be compatible with all the loading equipment available.
Similarly, it will take some time for every finance institution to settle on a single blockchain standard to conduct these transactions.
It’s a lot less exciting than some of the other blockchain technologies we’ve been promised, which have ranged from decentralised currencies like Bitcoin to literal diamond exchanges, but it’s probably the most sensible indication yet of the future direction of the technology.
After all, banks and financial institutions are the ones who have the most to gain from the security offered by the technology, and have the largest pockets to enable them to adopt it. It makes sense that they’d be among the first to do so.
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