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Corda and Skuchain target trade finance interoperability

Skuchain has released the DLPC CorDapp, a key component of its Inventory Control & Finance (ICF) product, promoting interoperability in trade finance blockchain applications.

Interoperability between blockchains is a goal of every platform. Yet for such a new technology, platforms are rightly focused on hardening their own features rather than building bridges between each other. This leaves a gap in the market that many startups are seeking to address. The Bankers Association for Trade and Finance (BAFT) recognised that interoperability would require a neutral working group to establish some standards.

The framework for a digital ledger payment commitment (DLPC) was the result. A DLPC is a fundamental piece of a trade transaction. Everyone needs to commit to a payment. But in today’s world of segregated systems, each entity tracks their role in the payment separately. DLPC changes that.

The DLPC envisions that trade finance needs to work not only between digital systems, but also between blockchains. This is the application that Skuchain has introduced. In short, it brokers a connection between Hyperledger Fabric, the base protocol for Skuchain’s EC3 platform, and Corda Network.

Developing the DLPC

In 2018, the BAFT DLPC working group, co-chaired by Skuchain, began with 18 banks and companies. In April 2019, it published the business and technical best practices for the DLPC. This will be updated in April 2020 to reflect industry feedback and implementation experience.

The objective of this framework is to allow banks to create a legally binding promise to pay and represents monetary value based on a negotiable instrument. It can be assigned and distributed to third parties and is sufficient to trigger payment. In today’s world a payment is only trackable by each entity separately. The DLPC will allow all parties to a trade transaction to know where the payment is.

Skuchain saw the opportunity to expand its ICF product with this framework. In order for large buyers to have visibility, agility and control to satisfy rapidly changing consumer demand and mitigate supply disruptions, they need to collaborate with their suppliers to share data. By offering new forms of financing to suppliers through ICF and using blockchain cryptography for secure data sharing with field-level encryption, Skuchain incentivises this collaboration.

The DLPC is the blockchain-based asset at the heart of ICF that enables buyers to use alternatives to a Letter of Credit, pay suppliers later, reduce cost of goods sold, gain greater visibility and agility in their supply chain and insulate themselves from supplier bankruptcy and nonperformance. Suppliers, in turn, recognise revenue sooner and replace their current supply chain finance arrangements with much lower financing terms. These benefits multiply as the network grows.

“We collaborated with many different industry stakeholders to create and refine the DLPC, and we are very excited to see it all come to fruition in an actual transaction,” said Samantha Pelosi, SVP for Payments and Innovation at BAFT. “BAFT took the lead in developing technical and business best practices to standardise the payment commitment. Skuchain and R3 have taken this and opened the freeway that allows Hyperledger Fabric and Corda Network to communicate with each other for individual trade transactions. This development is truly a breakthrough moment for the international trade and finance industries seeking to harness the benefits of distributed ledger technology.”

The Fabric to Corda interoperability is enabled by a Skuchain EC3 agent node on Corda Network. This gives suppliers and banks an easy on-ramp to Corda Network to publish their DLPCs. Rather than require these parties to set up individual nodes, their EC3 agent node will act on their behalf. If organizations want to get their own nodes on Corda Network at a later time, they can perform a seamless upgrade.

The DLPC CorDapps have been architected to work on networks that run core Corda technology and provide API interfaces for application developers to integrate the functionality within existing applications.

 

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This item appears in the following sections:
Connectivity
Trade & FSC Management
Financial Supply Chain Platforms
Trade Finance
Paying Suppliers
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