Blockchain Gets Real With Amazon, HSBC & IBM


By: R. Scott Raynovich

It's spring in New York. Cherry blossoms, bikes sailing through Central Park -- and Blockchain Week. The gathering is expected to draw thousands to a variety of blockchain-linked events, drawing luminaries such as Snoop Dog and the President of the St. Louis Fed.

So far the news about Blockchain Week itself has been more focused on the hype around the events, the biggest of which is the pricey Consensus event, which is demanding $2-$3K in attendance fees. Many news articles covered the size of revenue generated by Consensus, recently pegged at $17 million.

But what about the real news? Like, the technology being deployed. Despite the many reasons to be skeptical of the blockhain hype -- challenges in scaling, complexity, and a massive embrace by the business media -- recent real-world developments indicate that large enterprises, particularly in the financial markets, are serious about implementing blockchain technology.

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Blockchains, also known as distributed ledgers, have unique security properties that can securely and transparently track transactions in a tamper-proof network, eliminating the need to trust an institution. This need for "community" trust arose out of the ashes of the 2008 financial crisis, and is clearly gaining momentum.

So are things moving along? Let's start with some of the news just this week in the fertile blockchain arena:

The steady flow of news announcing increased use of blockchain and cryptoassets indicates that the technology is entering its next phase of development -- out of the lab and into real-world applications.

Monday's example of HSBC reportedly making the world's first trade finance transaction is a good jumping off point. HSBC says it’s made the world's "first trade finance transaction using blockchain" by issuing a letter of credit for U.S. food and agriculture firm Cargill. The transaction used the Corda platform from a company called R3.

First, set aside the PR value -- even though HSBC claims this as a "first," it's probably not true. Daimler AG and Landesbank Baden-Württemberg (LBBW) last year said they used blockchain technology to execute a financial transaction. The companies used a blockchain origination, distribution, allocation, and execution of the Schuldschein loan agreement to the confirmation of repayment and of interest payments. And there are many other examples, setting aside the more nefarious transactions using Bitcoin.

But this week the HSBC deal got a lot of coverage. HSBC's move is important because it is a real-world financial transaction with two big names, using blockchain.

The point is not to haggle over who is "first" in the blockchain PR wars. These examples show that blockchain is gaining real-world acceptance in the finance markets, one of its most promising vertical markets. It's these vertical markets that will determine the success of blockchain.