By Pete Harris, Co-Founder and Research Principal
Welcome to the March issue of Chain Business Insights’ Blockchain/Supply Chain Management Vendor Focus.
This month, we have news and analysis for you regarding R3 and TradeIX, DNV GL and VeChain and Ambrosus. In addition, the “worth noting” section mentions CargoX, FR8, Open Port and Zemit. Of course, we’ll give our own insight into specific developments as well as the broader market dynamics. This is actionable intelligence, so let’s get stuck in.
R3 and TradeIX (and Friends)
A collaboration involving trade finance specialist TradeIX, distributed ledger platform vendor R3, and several banks has taken a significant step forward. The group announced it has successfully completed a proof-of-concept (PoC) and is now progressing to a pilot implementation.
Launched last September, and now dubbed Marco Polo, the initiative includes “numerous” financial institutions. BNP Paribas, Commerzbank and ING were recently dubbed as “core” banking participants, probably because of their involvement in the PoC. Microsoft is providing its cloud platform to deliver the service, and the International Trade and Forfaiting Association (which represents more than 170 supply chain finance members) is involved as an observer.
Other blockchain-oriented trade finance initiatives are mostly focused on digitizing Letters of Credit. In contrast, Marco Polo is developing a solution for open account trade financing, drawing on TradeIX’s TIX trade finance platform, which is interfaced to R3’s Corda distributed ledger. (Technically, it’s not a blockchain design, but it provides the same kind of shared, immutable data store).
In terms of functionality, the initial goal is to focus on risk mitigation (by provision of payment commitments related to matched trade documents), payables finance and receivables finance.
From a business perspective, the early focus of the initiative is to recruit additional bank members looking to offer trade finance solutions to their large corporate and SMB clients. Later this year, further participants will be recruited, including credit insurers, B2B networks, logistics and service providers as well as payment networks to create a “fully interoperable open-sourced trade finance network.”
Our take: Any progress with such projects is good. But out of the initial dozen or so banks involved in designing the service, just three were involved in the PoC, which points to the tardiness of banks when it comes to adopting new technology. We applaud the leadership and speed shown by BNP, Commerzbank and ING, and we hope more of their peers will be engaged in the pilot phases.
R3’s contribution goes beyond its software platform, as it can also potentially bring more banks from its consulting consortium into the initiative. That said, bringing on the banks’ customers to trial the offering in real-life scenarios will be an important aspect of the next pilots. In our view, that will likely be required to expand the service to a wide group of service providers.
DNV GL and VeChain
Who. And who? Founded in Norway in 1864, DNV GL operates in more than 100 countries, providing independent quality assurance, certification and risk management services. The company specializes in the maritime, oil & gas, power and renewables industries. It has partnered with VeChain, a blockchain platform startup, to develop a service to initially track goods, such as food, beverages, fashion and retail items. Automobiles and aerospace are also on its list for later.
VeChain was formed in 2015 as a unit of Shanghai, China-based blockchain cloud provider BitSE before becoming independently established in 2017 as a non-profit foundation located in Singapore.
The company’s mission is to build a decentralized business ecosystem. Among its focuses, VeChain has engaged in several supply chain track and trace projects in areas including luxury goods, wine, agriculture, automobiles, transportation and pharmaceuticals.
VeChain has developed its own public blockchain, which is a version of Ethereum, dubbed VeChainThor. This service supports smart contracts and integration with several IoT technologies, including data sensors and RFID tags built to its own specifications. These IoT devices can help to instrument supply chains, a pre-requisite to implementing track and trace functionality.
Applications make use of VeChain services by “spending” VEN tokens in a pay-per-use model. In addition to the immutable VeChainThor blockchain, VeChain has also developed CHAOS, a decentralized storage service. Data streamed from IoT devices would be stored in CHAOS, with hashes anchored to Thor to provide an immutable fingerprint of the raw data.
Working together, the DNV GL and VeChain partnership is focused on the use of blockchain to improve the transparency of product and supplier information across supply chains. DNV GL is looking to work with companies to encourage them to adopt blockchain to improve traceability of products from manufacture to consumer. For example, DNV GL might work with a food producer to ensure it has processes in place to properly manage food safety in all steps of the supply chain, or help an automobile manufacturer ensure the functional safety of its vehicle.
Our take: We have nothing against VeChain, but we wonder why a conservative, global company like DNV GL has partnered with a startup that is still relatively unknown (at least in the Western world). We presume that DNV GL is impressed by VeChain’s technology smarts (and its supply chain expertise), and wants to tap into some best of breed solutions.
For sure, companies and organizations operating in the certification space are becoming increasingly interested in the promise of blockchain, as the technology provides a mechanism for them to increase their relevance in digitally transformed worlds. For consumers, the stamp of approval from a reputable certification agency is often a key factor in any buying decision, and knowing that such approvals are indeed authentic adds to levels of trust.
Ambrosus was founded in Switzerland in 2017, and it already has a successful ICO behind it. The company has an ambition to “improve global supply chains by creating a trusted ecosystem where we can reliably record the entire history of products and execute commercial transactions.” Initially, it has a focus on the food and pharma industries.
The solution that Ambrosus is developing involves a blockchain platform based on Ethereum, dubbed AMB-NET. It also has a set of tools that allow developers to create applications to run on it, and for IoT sensors to provide data to the network.
February was a significant month for the company, as it stood up an alpha version of its network and released a first set of tools, namely its Developer Portal and its Gateway API. The Developer Portal is positioned as a central hub for developer resources, and initially tools to build mobile apps for Android and IoS will be available. The Gateway API allows developers to connect to central services, initially allowing the creation of assets and events that will be used to model supply chains.
Ambrosus also articulated a roadmap for its future development, and gave some information on its network architecture. AMB-NET will initially comprise a number of so-called Masternodes, which typically will be operated by customers and partners – essentially supply chain participants. These Masternodes will manage storage of management of data that is streamed from IoT sensors.
In terms of the future, 2018 will be a big year, with the release of a marketplace service where the provenance of goods can be determined, and a 1.0 release of its service, along with 24/7 support services.
Our take: If it works, it will be great! The rollout timeframe is aggressive, which means we won’t have long to wait to see whether it does indeed work. But it’s important to understand that the 1.0 release will be a platform, not an application, so it will take a while for the value of the Ambrosus approach to be understood in the marketplace.
Having a stable network, easy to use (and documented) APIs and quality support will help to attract the developer community and supply chain participants that will hopefully prove the system in earnest in 2019.
In our minds, Ambrosus represents a toolkit approach to supply chain track and trace, as opposed to the more tailored product-oriented route adopted by the UK’s Provenance. There’s probably room for both models to exist, and for collaboration between them in the future.
Also worth noting:
CargoX – Founded in mid 2017 and headquartered in Slovenia, CargoX is focusing on securing “Bill of Lading” documents using blockchain technology. Importers and exporters will be able to exchange those documents digitally, securely and without counterfeit in an open environment. With $7 million in the bank from an ICO, the mission now is to turn its whitepaper into reality, and it expects first customers this year. More at https://cargox.io.
FR8 Network – Headquartered in New York City, this startup brings together freight and blockchain talent with a mission to “connect the freight industry’s fractured value chain by transparently connecting key stakeholders, removing high-cost arbitrage, and redistributing revenue.” It will use its blockchain platform for “the digitization of record-keeping related to the trade of assets, even in scenarios where intermediaries and brokers are incentivized to resist change.” The initial focus looks to be the $700 billion domestic freight industry. The next big milestone for the company is to raise funding via an ICO, hopefully to be followed by the launch of a marketplace with 100 shippers and 300 carriers. .
OpenPort – Founded in Hong Kong in 2015, OpenPort is focused on improving cash flows for supply chain participants through the automation of Proof of Delivery (POD) records, which are traditionally paper based. It’s already active in this market in Asia with its cloud-delivered ePOD service. It is now looking at rolling out a blockchain-based offering (based on a private Ethereum network), onboarding first customers across Asia and executing a token generation event (aka an ICO) in Q2 of this year..
Zemit – Founded in 2017 in Austin, TX, Zemit is looking to re-invent trade finance and bypass traditional Letters of Credit by creating a blockchain-linked marketplace that brings together importers that require short-term financing with individual or institutional investors. Keeping the marketplace honest is smart contract functionality that provides exporters with confidence that funds will be made available, subject to a contract of sale. More at https://zemit.io.
Our take: There is no shortage of new blockchain startups looking to disrupt supply chain, logistics and trade finance. Despite some bearishness and general upheaval in the ICO marketplace (regulators are getting interested, scams are being uncovered and reality is setting in), supply chain vendors are still looking to raise initial capital via them. Ethereum continues to be the blockchain platform of choice for most new initiatives, which is probably a good thing when considering “safety in numbers,” but it does make differentiation more difficult. It’s early days – and will be for the rest of the year.
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