HSBC & ING Banks Complete First Decentralized-Network Financial Transaction

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On 13 May, 2018, it was reported that HSBC and ING Banks completed the world’s first blockchain transaction. What does this mean for the future of finance?

On 13 May, 2018, the Financial Times reported that HSBC Bank (of London) and ING Bank (of Amsterdam), completed the world’s first blockchain trade deal involving a shipment of soybeans for global food producer Cargill. The deal was completed last week after the soybeans had been transported from Argentina to Malaysia, and utilized the Corda open source business-focused blockchain infrastructure.

This news is potentially groundbreaking as this appears to be the world’s first blockchain transaction of such a large scale and involving such well-established firms. In the past years, it would have seemed strange to hear of a major trade deal succeeding utilizing a blockchain network, but recently the opinion of the public and that of the giants of the financial and commodity trading industries have sweetened toward the idea. It was only a month or so ago that Basis raised $133 million from well known investors like Google Ventures, Bain Capital, and others. Clearly the public and business opinion on cryptoassets and blockchain systems is turning, but not many could have predicted this dramatic of a shift so suddenly.

The general idea behind blockchain systems assures that the information (unless fraudulently input into the system) remains unalterable and transparent. This is the main reason the financial industry has so suddenly elevated blockchain from something to be scoffed at or threatened by (in the case of centralized currency providers, e.g. governments), to something that deserves praise and should be integrated into business operations as quickly as possible. The speed of the transaction clearing is as good, if not quicker than current transaction times, and carries a lower cost per transaction than the industry average costs. Additionally, the risk of fraud and the losses accrued due to shrinkage during shipment would be completely mitigated; if the shipment didn’t make it somewhere, it is very simple to find out where this loss happened.

Blockchains operate utilizing a distributed ledger which is spread across a network of computers, which all record a transaction simultaneously when a transaction occurs. In the case of this trade of soybeans, Reuters reported that “The blockchain application used in the Cargill transaction is supported by 12 banks, which could help bring the technology to the market more broadly.” This statement is an indication that the more future-focused, innovative, firms are already trying their best to integrate blockchain into their businesses, and this is great news. The future approaches more rapidly if we’re all working toward it together, and the transparency and efficiency of blockchain will hopefully bring a future with less financial corruption.