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. A day later the second Euro transaction went through via a domestic transfer.
Both transfers were initiated and settled automatically using ‘smart contract’ technology in three steps.
This flow is illustrated in the diagram below:
Three steps to smart invoice settlement
Our pilot is groundbreaking for three reasons.
First, Europe is the first major market to digitize money on blockchain. Real Euro, recognised as such by regulators, change hands in cross-border B2B transactions via smart contracts on a permissionless blockchain. Instead of volatile cryptocurrency or complex stablecoins, the parties use a proven form of digital cash licensed under the European e-money directive. Europe thus is the first major market where an authorized form of digital money can be used on blockchain.
Second, money stays on the blockchain in a micro supply chain and the smart contract settlement costs are kept low. In this case, the two Euro transactions between the three entities had a flat fee on-chain settlement cost of $0.17 and $0.16 for settling first €1024 and then €512 respectively. For reference, using Automated Clearing House (ACH) in the United States typically costs somewhere between $0.20 and $1.50 in fixed fee or 0.5% to 1.5% in variable fee.
Third, smart contract settlement of tokenized invoices opens up new business models. Tradeshift Frontiers and Monerium identify three interesting opportunity areas:
Tradeshift Frontiers and Monerium are demonstrating how smart contracts can be used for something as common as settling invoices. In turn, this can lead to new business models and increased efficiencies of supply-chain ecosystems as outlined.
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.