As blockchain fever is taking hold of prominent financial
industry firms around the globe, two men from Kentucky believe to
have found the key to rewire international supply chain
Fluent cofounders Lamar Wilson (CEO and developer) and Lafe
Taylor (CDO) recently unveiled the
, a blockchain-based financial operating network to streamline
supply chain finance. And they've got $2.5 million in seed funding
to back their efforts.
From Pheeva Wallet to Blockchain Startup
Wilson and Taylor, who previously founded the
Bitcoin wallet for iOS, are not your typical Stanford-dropout
Far removed from both the old money in the incumbent financial
sector, as well as the new money in Silicon Valley, Wilson and
Taylor met at their high school in Lexington, Kentucky. Having
first discovered Bitcoin back in 2011, the two founded the Pheeva
wallet in 2014, the only iOS-compatible Bitcoin wallet throughout
Apple's anti-Bitcoin era.
In that same year, 2014, Wilson and Taylor also increasingly
shifted their focus to Bitcoin's underlying technology, the
blockchain. And - like many others - they became convinced that the
innovative distributed ledger technology could fuel a parallel
revolution to Bitcoin's: a revolution specifically geared toward
removing friction from the existing financial infrastructure.
Building on this vision, Wilson and Taylor founded their second
venture, Fluent. And, after months of research, they pinpointed a
niche they believed could be significantly improved by blockchain
technology: supply chain finance. Mirroring logistical supply
chains, often composed of dozens or even hundreds of production
steps, supply chain finance consists of a long series of ledgers
and processes maintained by individual operators.
This is an inefficient infrastructure, ripe for disruption,
according to Taylor:
"Most financial supply chains right now consist of very siloed
and opaque systems, which is tremendously inefficient. And, to
make it worse, large companies at the head of these supply chains
typically push out payment terms as far as possible to increase
their cash flow. This puts a lot of pressure on suppliers in
particular; they need the cash as fast as they can in order to
pay their employers, buy raw materials, and other expenses."
The solution, Wilson and Taylor believe, is blockchain
In particular, the Fluent Network benefits from the introduction
of tokenized invoices. Tracking and approving invoices on a
blockchain prevents them from being refinanced ("double-spent"),
but perhaps more important: significant stages of the payment
process can be automated and harmonized.
"Buyers, for instance, approve of invoices on the Fluent
Network once they consider goods delivered to be satisfactory.
The buyer of a good on the due date can automatically pay the
invoice directly to whomever owns the invoice even if it has been
partially financed by multiple parties or subsequently purchased
by other finance providers. A single platform with
cryptographically verified invoices, instant settlement and low
operating costs benefits all parties on the system. It's a
win-win-win for the buyer, supplier and financier."
A Blockchain on Top of Banking
The Fluent Network's blockchain is largely based on Bitcoin's
architecture, but purpose-built for global supply chains with
specific focus on invoicing and payments. It is perhaps best
described as a blockchain layer on top of the existing banking
infrastructure. The actual funds - typically U.S. dollars - remain
in custody of banks at all times, though they are tokenized and
represented on the blockchain, too. The network is to be rolled out
among financial institutions, as well as global enterprises that
take part in the supply chain.
Unique to the Fluent Network, the custom-built private
blockchain is comprised of a hybrid consensus model, with both a
federated system as well as proof-of-work security. The
proof-of-work security - SHA-256 - works similar to the way it does
in Bitcoin, but with one great difference: mining is not an open
process anyone can participate in, but a closed circuit where
participants are permissioned by Fluent.
"Participants of a supply chain, including financial
institutions, can sign up to become a node and miner on the Fluent
Network," Taylor explained. "As a federated system, participants do
require permission to mine; we know who the miners are, as does the
rest of the network. But within this permissioned infrastructure,
we solidify the core with a proof-of-work system. Think of
giving permission to your neighbors to come to an open
house but locking up the good China for extra security. Also,
because we know who the miners are, we don't need nearly as much
hashing power as you would on a permissionless blockchain."
And while miners on the network - the financial institutions and
other companies - can't earn a native token by mining, the Fluent
team believes securing the network should be incentive enough.
According to Wilson, "This could prove to be an important step
in opening up and connecting to trustless value chains in an
industry 4.0 economy. Blockchains, at the end of the day, are
fantastic tools with a specific purpose. We plan on using the best
tool for the job."
Wilson and Taylor are not the only ones to think so. Fluent
closed a pre-seed financing round last year, raising a total of
$875,000, followed by $1.65 million in seed funding in 2016, with
participation from institutional investors including Tim Draper's
Draper Associates, Thomson Reuters, 500 Startups, UMB Bank and
SixThirty. The platform is now being tested, with participants
including a top-ten bank on Forbes' 2015
America's Best Bank list
. Fluent will be presenting a demo of the Fluent Network at next
conference in St. Louis hosted by BTC Media,
's parent company.