How interoperability establishes blockchain’s utility and effectiveness for trade finance

  • The coronavirus crisis has shown the need for blockchains to share and access information across networks.
  • Making interoperability a first-class citizen of blockchains going forward will be key to maximizing efficiencies.

COVID-19 has highlighted the need for supply chain infrastructures to communicate with one another. Given this fact, interoperability will be essential to blockchains going forward.

While blockchain was conceived as a decentralized technology, individual blockchain networks are not inherently open. In the supply chain context, there has thus far been little incentive to change due to concerns about security and consensus and lack of customer urgency. However, blockchain’s characteristics allow disconnected supply chain management systems to interoperate securely with a reasonable financial investment. Because of the pressing need for supply chain transformation, leveraging these characteristics ensures that blockchain can be useful and effective in the real world.

Recently, the blockchain industry has arrived at the following truths:

  • Unlike other battles between technology standards, there will not be consolidation around dominant blockchain protocols that have the primary burden to become interoperable. It is true that Hyperledger Fabric and Corda are the most widely adopted protocols in the enterprise blockchain space. The public blockchain space for digital currency is far more fragmented, but Bitcoin and Ethereum are considered the reference cryptocurrencies. Due to the dynamic nature of open source projects for decentralized systems and fast iteration in early stage technology, these protocols all have strong peers and proprietary competitors. More importantly, convergence around a protocol is absolutely no guarantee that the blockchain networks that use that protocol can readily communicate with one another.
  • As a business matter, the market will consolidate around industry consortia,…

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