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This year Hong Kong has seen several implementations of DLT (distributed ledger technology) projects, moving from the proof-of-concept phase to the actual live transactions.
DLT, commonly known as blockchain, is the technology behind cryptocurrencies like bitcoin. Companies in various sectors are attracted to this by its ability to promote transparency and its promise of immutability that ensures that data stored in "blocks" can not be tampered with.
In September, Chow Tai Fook Jewelery Group launched a diamond blockchain for diamonds in four stores in Hong Kong. Working with the Gemological Institute of America (GIA), the group of jewelers is the first in the city to use blockchain to provide digital diamond grading reports, which reduces the need to preserve traditional paper reports by providing security, traceability and accessibility to customers .
When buying a diamond, a customer can receive the diamond classification report and other details on his cell phone via the Chow Tai Fook app. More than 3,000 diamond grading reports have already been on blockchain during the launch.
Chow Tai Fook plans to extend the pilot project to over 10 stores and 10,000 diamond reports by the end of the 2019 fiscal year, as well as its stores in China.
The GIA hopes that this blockchain collaboration with Chow Tai Fook will be the first of many.
"It's our plan to do [this] available to other jewelers and industry, "said Thomas Moses, executive vice president and head of laboratory and research at the GIA, during the launch of the pilot blockchain.
The first attempt at industrial level blockchain in Hong Kong
At the end of October, the commercial blockchain finance platform of the city called eTradeConnect was finally launched around 19 months after the government-led multi-bank projects plan was presented in March 2017.
Led by the Hong Kong Monetary Authority (HKMA) and 12 participating banks, the blockchain platform aims to digitize commercial documents, which for decades have been based on manual and paper-based processing.
eTradeConnect is the first industry-wide blockchain initiative in the city and the first full-fledged platform for commercial use.
The platform allows banks and their corporate clients to send and record purchase orders, invoices and commercial financing requests.
Blockchain technology increases efficiency and reduces financial costs for businesses by reducing paper, making transactions easier to process. It also reduces the risk of fraud and identity in letters of credit and other transactions used in the theft of commercial finance.
Already, eTradeConnect is reducing approval times for commercial loan applications to four hours, compared to the usual days and a half, according to a statement released by HSBC during the launch of the platform.
As a next milestone, HKMA wants to connect eTradeConnect to other commercial platforms abroad to further facilitate cross-border transactions. In particular, the governmental authority stated in a statement that the platform will collaborate with the European digital trading platform We.Trade, which counts Deutsche Bank, UBS and HSBC as its participants and uses similar technologies.
In the maritime transport sector, nine major maritime operators and terminal operators (including OOCL and Hutchison Ports based in Hong Kong) launched a blockchain consortium in November to develop the Global Shipping Business Network (GSBN).
Launched by the CargoSmart shipping technology provider, the GSBN is designed to establish a digital baseline for global shipping, connecting all stakeholders in the industry, including carriers, terminal operators, customs agencies, shippers and suppliers. of logistics services.
The first item on the agenda is the definition of standards to simplify the sharing of documents and data at all stages of the shipping life cycle. The GSBN will provide the foundation for new applications that can transform the flow of documentation for the management of shipments, including documents of dangerous goods, invoices and release of goods.
"We recognize the potential of blockchain technology as the major breakthrough with far-reaching impact on global supply chains," said Ivor Chow, director of business finance development at Hutchison Ports.
"It will bring immense benefits to all aspects of operations and end-to-end visibility into the entire supply chain," said Chow. "The open digital platform will offer efficiency gains and reduce transaction costs".
The first planned application will allow shippers to digitize and organize their dangerous goods documents and automatically connect with interested parties to simplify the approval process. The application is ready for implementation in December 2018.
The authorized blockchain networks are the future
Looking ahead, the future lies in the authorized blockchain networks, according to Joshua Kroeker, senior manager of growth and innovation, Global Commercial Banking, HSBC.
"We're looking at multiple private and licensed records where everyone has an identity on the platform, we're using limited replicas, so you're still in sync with your peers and you have immutability of transactions. The reliability of what I see is what you see, but this does not apply to all users of the network, only those involved in the transaction, "Kroeker said at his presentation at the 2018 International Conference of Computers in Hong Kong held in November .
The authorized blockchains mitigate the confidentiality and security challenges of public blockchain data by limiting participation in the blockchain to approved parties. To join the computer network that can validate transactions on an authorized blockchain, it is necessary to have approval from other network members.
Such blockchains are also popular among companies and companies of an industrial level, for which security, identity and definition of roles are important.
"The future will be similar to that in which the networks are not based on a big party and therefore link all to them," said Kroeker. "This is the gift that blockchain will give us: more than immutability and clever contracts, the true value of blockchain is in allowing me to collaborate in order to solve the common pain points with my colleagues, with my clients and with my nearest competitors ".
Kroeker stressed that while the technology around the blockchain is still nascent, he hopes to see the emergence of some important blockchain networks in the coming years – those that have industry-wide participation.
"Blockchain is a team sport," he said. "If you want to make blockchain by yourself, you're probably wrong: a company that does it is less exciting than if it's a sector that joins to solve a common problem."
