The “Fabric Of Our Lives” found itself softly in the hands of blockchain this week.
Eighty-eight bales of cotton became part of, arguably, one of the biggest breakthroughs in blockchain this month, all through the first global trade shipment and transaction between independent banks depending on blockchain as a ledger. The Commonwealth Bank of Australia and Wells Fargo used blockchain for that trade shipment from Texas to Qingdao in China. It involved an open account transaction similar to a traditional bank letter of credit — from seller Brighann Cotton of the U.S. to buyer Brighann Cotton Marketing Australia — and blockchain to prove that the goods were shipped, which all ultimately elevated transparency, security measures and tracking.
This is clearly a real-world implementation of a smart contract for the shipping of goods. Goods are received, codes are scanned, data is inputted, transfer of title occurs and ultimately payment is released.
“A key result of this application is in the reduction of paperwork and delays in processing and, therefore, the ability to reduce fraud. A common problem with the shipping of goods, similar to that faced by cryptocurrencies, is the ‘double spend,’” said Ira Schaefer of Hogan Lovells. “The smart contract and blockchain technologies will prevent the use of the same shipment of goods to satisfy more than one contract.”
Indeed, smart contracts are more efficient and, well, smart.
“Smart contracts are the most commonly talked about opportunities for blockchain at the moment, because the business case for automating what can be an extremely manual business is clear,” said Andy Schmidt, principal executive advisor at CEB. “This experiment with the Commonwealth Bank of Australia and Wells Fargo will be a test case for what types of improvements can be made in the trade finance market, which is long overdue for improvement.”
Blockchain experts say that improvement especially includes intervening against the cost of fraud, which ultimately adds to the price of goods. As a result, this could trickle down to help the pocketbooks of manufacturers and consumers.
And that’s at the international level.
At the state level, Illinois’ government has shown interest in delving into incorporating blockchain into how it does business.
Governor Bruce Rauner — who came into the office nearly 20 months ago from the private sector — has established a working group focused on developing the strategy to integrate blockchain. Bringing together the state’s Department of Innovation and Technology, Department of Financial and Professional Regulation and Department of Insurance, the goal is to find ways that blockchain can make government services more efficient.
The state’s Department of Insurance, specifically, has said that the office has eyes on being among the first agencies of its kind in the country to utilize the technology.
“The state of Illinois is taking an important step forward by directly recognizing the many ways in which blockchain and distributed ledger technologies can improve the workings of a variety of state- and county-level governmental functions,” said Lewis Cohen at Hogan Lovells. “By signaling a willingness to explore these technologies, Illinois opens the door for partnering with the broad range of private-sector companies pioneering innovative solutions in this area.”
Schmidt at CEB agreed: “Moving to a distributed ledger approach for the use and sharing of information can reduce costs for Illinois, while making the state easier to do business with — a win-win for all involved.”
Cohen, who also represents the International Blockchain Real Estate Association (IBREA), said Cook County (IL) has already been leading with its pilot program to explore ways in which blockchain technology can improve the process of recording and transferring title to real property.
The political benefits of supporting innovation through the use of blockchain and distributed ledger technologies could be stemming from projects like IBREA and the Illinois government. Nationally, Congress recently formed the bipartisan Congressional Blockchain Alliance, proving the level of interest and support in pursuing these technologies at the federal level.
“With such a high degree of dissension at the federal level, it makes great sense for states like Illinois to align with initiatives that share support on both sides of the political landscape,” said Cohen. “These technologies will also empower the government to deliver services much more efficiently, freeing up scarce budget for other important programs and generating positive support from voters and local businesses alike.”
But whether it’s international trade, state government data or just a slew of industries hopping on the blockchain train, experts agree blockchain is certainly going to change our world, possibly faster than we can anticipate.
The adoption may be the key in turning on the engine.
“On the one hand, blockchain has a lot of potential, but real adoption and wide-stream live applications will still take a number of years before they become a reality,” said Bart Cant, principal and blockchain practice lead at Capgemini. “Wide-stream adoption of blockchain will take place at the earliest in 2019–2020, as we have still a lot to experiment, build and test.”
Schaefer agreed with this and likened the adoption of blockchain to similar aspects of the digital world.
“I think of the idea of the blockchain/distributed ledger technology in the same way as the iPhone, which came out at around the same time as bitcoin,” said Schaefer. “At first, many people did not realize the potential of the iPhone because it was programmable and there were no ‘killer’ apps. However, once developers started coming out with apps that showed the real potential of the iPhone, it was realized that the iPhone would change the world.”
The same may indeed be true for blockchain technology. Perhaps we’ll be as dependent on blockchain as we are on our smartphones. Perhaps.