Oscar Williams-Grut, Business Insider
IBM has been selected to build a new blockchain-based international trading system for a consortium of global banks, a major win for the tech giant in the race to sell blockchain to Wall Street.
Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit announced in January that they were banding together to build a "Digital Trade Chain (DTC)," a blockchain-based trade finance platform.
International trade is currently a convoluted process where most involved can't see the whole process, instead only dealing with one other party in a complex supply chain.
DTC will use the same technology that underpins digital currency bitcoin to connects all parties involved in international trade — buyers, sellers, transporters, banks financing the deals, and so on. The hope is that this leads to more financing for people lower down the chain as banks can be confident seeing the end buyer is good for the money.
IBM announced on Tuesday that it has been selected by the consortium to build DTC, following what it calls "a global competitive bidding process."
Marie Wieck, IBM Blockchain's general manager, says in a release: "In working with hundreds of clients around the world on a diverse range of blockchain projects, trade finance has emerged as one of the strongest use cases for the technology."
The contract is a significant win for IBM as it means DTC will be built on IBM's blockchain platform of choice, Hyperledger Fabric. That likely means lucrative servicing contracts for IBM and may make banking execs more likely to commission more Hyperledger-based products and services once they're familiar with the system.
Hyperledger is an open-source blockchain project set up by the Linux Foundation. IBM is one of more than a hundred companies who back the project and contribute code to it.
Rudi Peeters, CIO at KBC, says in a release announcing the deal: "Their blockchain and banking industry expertise will help us create a new platform for small and medium businesses in Europe that can enable them for faster, easier and cheaper trade transactions."
Hyperledger Fabric is one of three main blockchain-based systems vying to become the next-generation "operating system" for financial services. R3, a startup set up by Wall Street veteran David Rutter, has developed blockchain-inspired platform Corda.
Finance executives are also exploring the possibility of using open source blockchain Ethereum as a platform for products. JPMorgan, UBS, and Credit Suisse were all founding members of the Ethereum Enterprise Alliance (EEA), a group looking to develop best practice standards for building on Ethereum.
Blockchain, also known as distributed ledger technology, is a form of shared database that is policed using complex cryptography to ensure that it can only be edited when the majority of participants on the network have approved. The technology was first developed to underpin digital currency bitcoin as it removes the need for a central bank or authority to police the currency.
Banks around the world have been talking about the potential of blockchain to transform finance for several years. The inbuilt security and trust checks allow banks to potentially cut out middlemen in processes like settlement and clearing, deal directly with each other rather than working through third parties. This would cuts costs. Santander estimated in a 2015 report that the technology could collectively save banks as much as $20 billion per year.
This article originally appeared on Business Insider.