Blockchain and smart contracts do work. They really do work. Take one trading firm (Brighann Cotton), toss in a U.S. bank and stir in an Australian bank to prove that smart contracts make international trade a breeze. Its actually pretty cool and this cotton transaction is only the beginning. Innovation rocks.
When the Marie Schulte rounds the breakwater off the Chinese port of Qingdao in early November, bankers on two continents will be watching anxiously.
In particular, they’ll be focused on 88 bales of cotton worth approximately $35,000 that the container vessel is carrying — not because of the value of the goods, but because of the technology attached to the shipment.
Unloading the goods at the end of their 7,000-mile journey from Houston will mark the final stage of an experiment by Commonwealth Bank of Australia, Wells Fargo & Co. and the trading firm Brighann Cotton to prove for the first time that the combination of much-hyped technologies — blockchain and smart contracts — can deliver real-world benefits.
As port staff scan the bales, an update to an electronic contract will be triggered, transferring ownership of the goods and authorizing the release of payment. The deceptively-simple sounding process is only possible because digital-ledger technology encrypts and stores the parameters of the contract, ensuring all parties are working off the same synchronized version, which cannot be unilaterally altered or tampered with.