Blockchain technology has moved one step closer to production phase in trade finance, with the launch of Hyperledger Fabric 1.0.
Fabric 1.0 is Hyperledger’s first production-ready blockchain platform, and can be used by banks to bring the pilots and proof of concepts they’ve been trailing for months, to the operational stage.
While other platforms, such as R3’s Corda, are vying to become the primary blockchain platform for trade finance, Hyperledger believes that this release – which is backed by Linux open source technology – is ready to be used in important transactional operations.
Speaking to GTR from Washington DC, where he had been addressing the “blockchain caucus” on Capitol Hill, Hyperledger’s executive director Brian Behlendorf says: “I think we’re seeing first production use this year. My hope is that these are systems which can be turned on to production grade. Whether they can handle tens of thousands of transactions, that’s another question. There’ll be a ramp up over the next couple of years, but there are plenty of transaction networks today that are transactions per second, that are more modest in scale but are high value and will be in production this year.”
The challenge will be creating critical mass, which could be hundreds of users in complex supply chains. That in mind, expect to see production first in smaller, niche areas of trade and supply chain, or private network transactions on blockchain for trade finance.
Move to real case uses
A beta version of the software has been available for some months, and developers have been working on business uses for trade finance, some of which are developing quickly. These are some of the initiatives that are expected to move into production phase quickly.
At the end of June, a consortium of seven banks announced they had chosen IBM to develop Digital Trade Chain, a blockchain trade finance platform for SMEs. When faced with a choice between Fabric and Corda, R3’s shared ledger technology, the developers plumped for Fabric 1.0.
Speaking to GTR at the time, Keith Bear, vice-president of financial markets at IBM, said: “A key element of it is around the ability that Hyperledger Fabric 1.0 has to create channels. So if KBC are doing a transaction with Rabobank, for example, then other banks in the consortium don’t have access to that. You get the advantages of blockchain in terms of trust and transparency, but unlike the bitcoin environment you don’t have everything exposed.”
Swift has also been working on a proof of concept (PoC) with the beta version of 1.0, for its nostro account reconciliation tool, within its global payments innovation (gpi) initiative.
Because most banks have been working on small-scale solutions as part of their pilots or PoCs, there won’t be a huge amount of updating required in order to implement Fabric 1.0, Behlendorf says.
“There are enough API changes and language changes to merit a cautious process of upgrading. There is a guide on the websites, regarding upgrades, that folks should follow. Unless you’ve been writing tens of thousands of lines of chain code, which people probably haven’t, probably more like a couple of hundred, you might have to modify some of those hundreds. But your application logic shouldn’t change. If you started with 0.6 six months ago, it could be that you’ve evolved your thinking about your use case anyway, and it’s time for a refresh,” he says.
It’s fair to say that a certain end of the trade finance has been awaiting this release. Simon Taylor, co-founder and blockchain director at consultancy 11:FS – who previously managed Barclays’ blockchain development, tells GTR: “I have to say they’ve done well and delivered everything they said they would,” adding that he would like some more time to work with the solution in order to get a fully-formed view.
Meanwhile, director of innovation at Santander, John Whelan, took to Twitter to express his pleasure at its arrival:
Fabric 1.0 is finally here: https://t.co/v9wAQ7BYXv
— John Whelan (@_JohnWhelan) July 11, 2017