December 18, 2019
This post is written in collaboration with Monerium.
On Tuesday, December 10th 2019, the world’s first cross-border Euro transaction took place on the permissionless blockchain Ethereum. Twenty-four hours later a second Euro transaction went through via a domestic transfer.
Both transfers were initiated and settled automatically using smart contract technology. In this post we describe the informational business workflow executed on Tradeshift and the corresponding financial settlement workflow executed on the blockchain Ethereum.
If you haven’t already, we recommend reading our first post before diving in.
Connecting the informational business workflow with financial settlement workflow through smart contracts
The illustration below details the end-to-end workflow of our most recent pilot. It includes the issuance and redemption of e-money on and off Ethereum. Actors in the pilot’s mini-supply chain are Tradeshift Frontiers, Shop Icelandic and Nordic Store.
The following explains the flow in detail. First we go over the full information workflow on Tradeshift. Then the financial workflow on blockchain.
|Diagram one: information and monetary flow in our most recent pilot|
Winter is here and for that, you need sweaters and scarves. Tradeshift Frontiers, therefore, made a purchase order of one Icelandic sweater and 10 scarves to Shop Icelandic, the subsidiary of Icelandic retailer Nordic Store.
The informational flow of trade in transaction 1, between Tradeshift Frontiers and Shop Icleandic, went as follows:
The informational flow of trade in transaction 2, between Shop Icelandic and Nordic Store, was similar but without a PR:
Financial settlement workflow on Ethereum
The informational business workflow is matched by a corresponding financial settlement workflow on Ethereum.
The accepted invoices were used to generate and issue FlowTokens on Ethereum to Nordic Store and Shop Icelandic. This was done via an integration layer between the Tradeshift platform and Ethereum built by Frontiers.
Minted FlowTokens are, however, worthless until they have been committed to on-chain. This means that Gert and a representative of Shop Icelandic as buyers had to commit to paying. That allows the ‘smart invoice’ execute settlement on the due date on December 10th and 11th respectively.
Meanwhile, and separately from above, Euro licensed under the e-money directive was issued onto Ethereum via an integration layer built by Monerium. Here, after having successfully completed Monerium on-boarding process, Tradeshift sent €1040 to Monerium in an IBAN transaction that cost €5. Monerium subsequently issued €1035 into Tradeshift’s wallet, as that is what Monerium has a license to do. We here would like to emphasize: The €1035 issued to Tradeshift as ERC-20 tokens, which is a common Ethereum token standard, are not stablecoins, but Euro licensed as such under the European e-money directive.
Monerium is required to perform KYC and AML checks on all of its customers. e-money can not be issued until this check has been passed. Nordic Store, Shop Icelandic, and Tradeshift have thus all gone through Monerium’s KYC/AML check.
Next, magic happened and transactions settled. That meant:
With the above flow, we have thus demonstrated that:
In 2020, we will continue to explore opportunities and maturing solutions with customers, partners and regulators. If you would like to take part in that either as a beta user, partner or regulator, please let us know here.