Chinese companies claim blockchain SCF first
Two Chinese companies have launched Chained Finance, which they claim is the first blockchain platform for supply chain finance.
Chained Finance will provide upstream finance to companies in China and has been developed by Dianrong, an online marketplace lender, and, FnConn, a subsidiary of electronics manufacturer Foxconn.
The solution has already completed a successful pilot and proof of concept, through which US$6.5mn in loans were originated for SME suppliers to Foxconn. The target markets are electronics, automotive and garment manufacturers.
Few details have been released about the specifics of the blockchain technology at play, nor have any details of the potential supplier companies that could be involved.
However, Dianrong has confirmed to GTR that the platform is built on Hyperledger technology. Furthermore, the company confirms that Chained Finance is “fully operational”. However, experts speculate that widespread take-up might be months away.
“From all the press releases it’s difficult to know if this is just announcing a successful PoC with lots of vague details , for example no companies are named. Until the platform is used by more than just a handful of companies it’s probably just more PR from corporates showing off that they have a blockchain project due to FOMO (fear of missing out),” Thomas Glucksmann, a director at Gatecoin, a Hong Kong-based trading platform for bitcoin and blockchain assets, tells GTR in an email exchange.
In December 2016, however, Dianrong became the first Chinese P2P lender to sign up for the Hyperledger Platform, giving some indication as to the tech that will be involved.
This came months after CEO Soul Htite announced that his company, one of the most talked about online lenders in China, announced that it would invest up to US$40mn into investigating how blockchain can be used for online lending.
Speaking to GTR on the launch of Chained Finance, Htite says that the platform will open up a whole raft of potential new lending opportunities to Dianrong’s 3.7 million investors. He also says that the company is “geographically agnostic”, and that while it will initially focus on China, “where 85% of SMEs have no effective access to funding, the potential for the platform goes far beyond China’s borders”.
But the very fact that Hyperledger is the platform at work leaves experts to believe that a fully operating system may be up to 18 months away. Dianrong refuses to confirm which version of Hyperledger is being used, or any further details on the technology, saying that because it “is proprietary, we are not disclosing specific details at this time”.
“Pretty much everybody will tell you that Hyperledger 0.6 is an absolute dog. 1.0, if it delivers half of what it promises will be okay, but it’s not really available yet,” Simon Taylor, the co-founder and blockchain director at 11:FS and former vice-president of blockchain R&D at Barclays, tells GTR.
Most in the market are waiting to see how Hyperledger 1.0 will be delivered and if Hyperledger is indeed involved in active financial projects, it is probably sat at the centre of a much larger, more traditional system.
“Companies are in this waiting phase at the moment. You can try and make Hyperledger more robust or do a whole bunch of other things around Hyperledger which look like classic big IT projects. That is what a lot of people are doing, with Hyperledger sitting in the middle of it. It’s kind of like having a two-year-old sitting in the middle of a nuclear reactor. They are nervous about it and want it to grow up a bit. With these big industrial projects, that’s kind of where they’re at,” Taylor says.
Even in the case of Barclays, which conducted the first live blockchain transaction last year, things have been “canned” so that they can trial through testing scenarios on transactions in lab conditions. The general consensus is that any fully rolled-out blockchain solution is one year to 18 months away.
However, the application of blockchain technology to a supplier financing solution is something which makes sense. From a macro sense, we are likely to see more large companies financing their suppliers in manufacturing hubs such as China – particularly those with the scale and supply chains of Foxconn.
Adding the layer of anonymity provided by a combination of P2P lending and blockchain technology could unlock huge sums of money.
“I totally buy the business case and this being China, they’ll probably throw loads of money at it and win all the business and think about the engineering later. If Hyperledger is sitting in the middle of this and falls over a few times, we’ll never hear about it and to the outside world it will look like a fantastic business. It will look like a mini-AliPay of the supply chain world,” Taylor says.take me back