Sixty years ago, the humble shipping container started a boom in global trade. Now enthusiasts think blockchain could have a similar effect. On Monday HSBC trumpeted the world’s first commercially viable trade finance transaction using the technology. This could boost trade by hundreds of billions of dollars by slashing costs, thinks HSBC.
Such breathless talk invites scepticism. Crypto-phobes note that several blockchain projects adopted by big financial institutions have already been shelved. They can also point to reputational risks. Blockchains are pieces of software originally built to handle transactions of controversial virtual currencies like bitcoin.
The reality is both more prosaic and more promising. The distributed ledger technology used in the HSBC transaction was not, strictly speaking, blockchain. True, it uses independent computers to record, share and synchronise transactions. But there are some important differences. It uses less computer power and can be more easily scaled up than blockchain. It is not truly open. Users are required to authenticate themselves.