Today supply chain startup Eximchain launched its main blockchain network. The company avoided the ICO process and in March privately raised $20 million from Asian investors. But the platform is nonetheless token driven. Eximchain’s roots are in Boston at MIT’s Media Lab where CEO Hope Liu completed her MBA. However, its legal base is in Singapore.
A portion of tokens was airdropped to early contributors. Along with the rest of the market, the capitalisation has declined significantly and is currently below $9 million.
When Eximchain was first announced, its whitepaper focused on supply chain finance for SMEs. The International Finance Corporation (IFC) estimates that SMEs in developing countries face a $2 trillion financing gap. However, the platform has two other targets: sourcing suppliers and logistics/inventory management.
Co-founder Can Kisagun, who is now involved full-time with startup Enigma, described Eximchain as a kind of identity system particularly focused on credit scores for SMEs.
“The lack of transparency, connectivity and agility is a huge problem in the global supply chain industry. With global trade increasing at a tremendous rate, and boosted by e-commerce in Asia Pacific, supply chain players around the world are looking at technology to help them reduce costs and be more efficient in their processes,” said Hope Liu, CEO of Eximchain. “By connecting these businesses with our unique blockchain platform, Eximchain is well positioned to help drive the global supply chain industry forward with technology.”
Supply chain finance
Two high profile blockchain projects are targeting financing the SME sector. We.trade is the consortium of 12 banks where the initial focus is on European SMEs. And unicorn Tradeshift is getting ready to launch their SME blockchain platform. The latter already has 1.5m businesses ready to go from their primary platform which they plan to integrate seamlessly.
Additionally, startup Centrifuge raised $3.8m in March for a blockchain project targeting the same sector. The founding team was behind financial supply chain company Taulia.
It’s early days yet, but so far Eximchain has a limited number of partnerships. There’s a relationship with YOOsourcing, an app with 35,000 business users that helps companies to source suppliers. This is a key partner for Eximchain’s supply chain sourcing project.
Both companies will benefit from quality inspection data. Quality inspectors can digitally sign their inspections and store them on the blockchain. Hence future buyers and financiers can assess suppliers using the inspection data.
Additionally, an un-named Fortune 500 technology company with a global supply chain is planning to run a proof of concept on Eximchain to increase data sharing and help build trust.
There is a chicken and egg challenge. To attract financiers for supply chain funding, they need a volume of SMEs on the platform. And to attract the SMEs, they need to have funders in place. Hence startups that target this sector such as Tradeshift and Taulia focus on the enterprise buyers which provides access to their SME suppliers. And that’s perhaps why Eximchain has expanded its focus beyond finance, to get more businesses onto the platform. By targeting networks of companies or enterprises, they can attract the numbers of SMEs they need.
But while the partnership process has some way to go, on the technology side, Eximchain features several innovations.
First off this is a public permissioned blockchain. It’s a little like Hedera Hashgraph in that way. Eximchain uses the Quorum variant of Ethereum developed by JP Morgan. The bank developed Quorum to get around the privacy issues with public blockchains because businesses don’t want everyone to be able to see their details such as invoices.
In a permissionless public blockchain, anyone can set up a node and start participating. In contrast, for Eximchain, every node has to register to participate.
But Quorum itself has been tweaked when it comes to governance. Eximchain uses Quadratic Voting which avoids the downsides of a simple majority. To vote, tokens need to be staked. If someone feels strongly about an issue, they could vote multiple times. But every additional vote requires a stake that’s exponentially more. It’s squared. So if the first vote costs two, the second vote would be two squared and so on. After the vote, the tokens are equally distributed to the voters.
Even Ethereum’s Vitalik Buterin is a fan of Quadratic voting. And the innovation doesn’t stop there.
Eximchain partnered with fellow MIT-founded company enigma to incorporate secure smart contracts. So if there’s a smart contract for financiers to assess the creditworthiness of a supplier – either based on a credit score or Eximchain invoicing history – then the supplier doesn’t have to reveal all the sensitive details.
Enigma uses secure multi-party computation which splits data between different nodes which perform calculations in unison without any single node having all the data. Hence, the supplier’s invoices can be kept secret.
The startup plans to build its community by finding Innovation Partners and Ambassadors. It plans to continue to develop the network. Plus next year Eximchain aims to launch a Software Development Kit to enable companies to build applications on top of the network.