Tradeshift Says It's Slashed Cross-Border Transaction Costs Using Ethereum

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Supply chain fintech startup Tradeshift, which boasts two million firms on its platform, says it's slashed the cost of cross-border transactions between buyers and suppliers using the public ethereum blockchain.

Tradeshift Frontiers, the innovation division of the Goldman Sachs-backed unicorn, represents invoice values as tokenized IOUs between buyers and sellers and then settles them in a novel form of on-chain fiat currency.

Tradeshift, which partnered with Consensys-backed e-money license holder Monerium, completed a domestic transaction earlier this year.

This involved retailer Nordic Store and IKEA Iceland, which were issued an e-invoice through Tradeshift; a day later, the transaction was settled through a smart contract.

Tradeshift and Monerium settled first €1024 and then €512, at a fixed fee cost of 17 cents and 16 cents, respectively, the companies said.

Tradeshift said its preliminary research of the payments space shows that fees vary wildly.

To settle a cross-border transaction in the €1000 range can cost between €0 when, for example, using the SEPA payment system in Europe, to €30 or more for doing regional transfers between continents.

"We issue e-money on ethereum to an ERC-20 compliant smart contract that works as a programmable passbook. Subject to KYC/AML, we issue the e-money as a balance to a person's public key into our ERC-20 contract. They are then at liberty to use that e-money as they would if it were issued in some other digital format," he said.

As for cross-border payments, Gert Sylvest, co-founder of Tradeshift and GM of Tradeshift Frontiers, said, "We have taken an accepted invoice and tokenized it on ethereum. On the due day, a smart contract automatically swaps the tokenized invoice for the e-money that is on-chain."

There are also implications when it comes to trade finance, since Tradeshift opens financing options beyond banks to a wide range of potential investors on the platform, which can reach right across the supply chain.