History was made this Monday when HSBC India and ING Bank Brussels carried out the first trade finance deal ever made over the blockchain.
The deal was carried out between Tricon Energy USA - a petrochemicals broker - and Indian conglomerate Reliance Industries, with HSBC acting as advising bank to the latter and ING as the issuing bank to the former.
Two key components of the deal were carried out over the Blockchain
Blockchain
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Read this Term and, even taking into account all of the ballyhoo surrounding the technology, their shift to the blockchain could genuinely change the way importers and exporters do business with one another.
Firstly, in such transactions, the importing company has to provide the exporter with a letter of credit (LC), from its issuing bank, before a deal can go ahead.
Leaving aside the time needed for an importer to get that LC, it can take two weeks for the bank issuing it to send it to exporter’s advising bank and have that advising bank approve it.
The reason for this is that, in order to ensure the veracity of such documents, they are usually sent via post or courier. Moreover, copies are not just sent to the exporter but have to be shipped to each party involved.
Monday’s transaction removed the need for that time-consuming process. Everything is done digitally - no need for moped-riding couriers - and all parties can see the documents.
Moving the Bill of Lading to the Blockchain
The second component of the trade was its bill of lading. For those unfamiliar with the term, think of it as being akin to a receipt that you sign when you order something from Amazon.
A courier brings you your goods, and you have to sign a receipt, that lists those goods, to confirm that you have indeed received them.
For companies shipping gasoline, the process is similar but on a much grander scale.
A ship’s captain will take a bill of lading, that details what his cargo is and its quantity, and get the importer to sign it to confirm that the cargo has been delivered.
The transaction that was carried out on Monday moved that process on to the blockchain for the first time.
All of this should enable exporters and importers who adopt the technology to speed up their business interactions.
History was made this Monday when HSBC India and ING Bank Brussels carried out the first trade finance deal ever made over the blockchain.
The deal was carried out between Tricon Energy USA - a petrochemicals broker - and Indian conglomerate Reliance Industries, with HSBC acting as advising bank to the latter and ING as the issuing bank to the former.
Two key components of the deal were carried out over the Blockchain
Blockchain
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Read this Term and, even taking into account all of the ballyhoo surrounding the technology, their shift to the blockchain could genuinely change the way importers and exporters do business with one another.
Firstly, in such transactions, the importing company has to provide the exporter with a letter of credit (LC), from its issuing bank, before a deal can go ahead.
Leaving aside the time needed for an importer to get that LC, it can take two weeks for the bank issuing it to send it to exporter’s advising bank and have that advising bank approve it.
The reason for this is that, in order to ensure the veracity of such documents, they are usually sent via post or courier. Moreover, copies are not just sent to the exporter but have to be shipped to each party involved.
Monday’s transaction removed the need for that time-consuming process. Everything is done digitally - no need for moped-riding couriers - and all parties can see the documents.
Moving the Bill of Lading to the Blockchain
The second component of the trade was its bill of lading. For those unfamiliar with the term, think of it as being akin to a receipt that you sign when you order something from Amazon.
A courier brings you your goods, and you have to sign a receipt, that lists those goods, to confirm that you have indeed received them.
For companies shipping gasoline, the process is similar but on a much grander scale.
A ship’s captain will take a bill of lading, that details what his cargo is and its quantity, and get the importer to sign it to confirm that the cargo has been delivered.
The transaction that was carried out on Monday moved that process on to the blockchain for the first time.
All of this should enable exporters and importers who adopt the technology to speed up their business interactions.
