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IBM is using the technology behind bitcoin to help farmers and other small businesses in underdeveloped countries participate in global trade.
IBM announced the project on Monday, in partnership with fintech startups Stellar.org and KlickEx Group.
The companies will use IBM’s blockchain technology to process financial transactions across borders and currencies – a process which is often prohibitively slow and costly for small business owners, especially when they are in developing regions with smaller banking infrastructures.
The project is focused on what Stellar calls “underdeveloped payment corridors” – countries like Samoa and Fiji, where monetary policies, currencies, and economic instability make it difficult for businesses to move money internationally.
IBM will essentially bring scale and bank partnerships to Stellar’s existing work on global blockchain transactions, as well as the efforts of KlickEx Groups, a liquidity provider, to get bigger international banks to work with these marginalized regions.
The announcement is the latest of several projects IBM is working on that use blockchain technology. Earlier this year, IBM announced a collaboration with food distributors like Walmart and Nestlé, that aims to mitigate the spread of food-borne illnesses through more thorough tracking of the supply chain, from the farm to the store.
One of the great promises of blockchain is its ability to quickly and securely exchange money across borders without having a middleman.
The technology first grew in popularity around the 2008 financial crisis, when an anonymous creator known as Satoshi Nakamoto came up with the cryptocurrency bitcoin as a way to exchange money outside of the control of big banks and governments.
While bitcoin is just one use of blockchain, the technology behind it is essentially the same: it’s a decentralized digital ledger. This means that every transaction that happens on the blockchain is recorded across multiple computer servers. It’s considered to be extremely transparent and nearly fraud-proof.
From the businesses’ perspective, the new blockchain product can be used to manage both the legal and financial credibility of a transaction – from establishing the terms of a contract, to managing documentation, putting up collateral, obtaining letters of credit, and finalizing terms with immediate payment, according to IBM.
“For example, in the future, the new IBM network could make it possible for a farmer in Samoa to enter into a trade contract with a buyer in Indonesia,” IBM said in a press release.
The payment system is already at work in 12 different regions across the Pacific Islands, Australia, New Zealand, and the UK.