Fluent announces blockchain-based financial operations network to simplify supply chain finance

As blockchain fever captures the attention of the world’s top financial firms, two Kentucky men believe they have found the key to connecting the world’s supply chain infrastructure.

Fluent co-founders Lamar Wilson (CEO and developer) and Lafe Taylor (CDO, director of development) recently unveiled their Fluent Network, a blockchain-based financial operations network that can simplify supply chain finance. They have received $2.5 million in seed funding to implement this project.

From Pheeva Wallet to Blockchain Startup

Wilson and Taylor, who previously built a bitcoin wallet for iOS called Pheeva, aren’t your typical Stanford dropouts who founded fintech companies.

Wilson and Taylor met at Lexington High School in Kentucky. They were very far away from traditional financial funds and Silicon Valley investment funds. They discovered Bitcoin in 2011. The two developed Pheeva, a Bitcoin wallet for iOS in 2014. This wallet was the only Bitcoin wallet compatible with iOS during the period when Apple banned Bitcoin.

Also in 2014, Wilson and Taylor slowly turned their attention to the technology behind Bitcoin, the blockchain. Like others, they became increasingly convinced that the innovative distributed ledger technology would be as revolutionary as Bitcoin: removing friction from the existing financial system.

Driven by this vision, Wilson and Taylor started their second adventure, Fluent. After several months of research, they found an area that could be significantly improved using blockchain technology: supply chain finance. In terms of logistics supply chain, it often includes a large or even hundreds of production processes. Supply chain finance consists of a series of books and procedures maintained by different individuals.

This is an inefficient system and it’s time to phase it out, as Taylor puts it:

"Most supply chain finances today are opaque and inflexible systems that are highly inefficient. Large companies at the top of the supply chain often set payment terms to maximize their cash flow, which puts a lot of pressure on suppliers because they need cash as soon as possible to pay employees, purchase raw materials and cover other expenses."

Wilson and Taylor believe blockchain technology is the solution to these problems.

Specifically, the advantage of Fluent Network comes from tokenizing bills, which can be tracked and approved on the blockchain, which can prevent them from being used to withdraw money (double spending), and most importantly: the payment processing process can be automatically coordinated. Wilson said:

“For example, once buyers feel that the goods have been delivered to their satisfaction, they can approve the bill on the Flunet Network. The buyer of a product can automatically pay the bill on the payment date, and it can also be paid by part of multiple participants or by subsequent fund providers. Such a complete platform combines the characteristics of cryptographically verified bills, instant delivery, and low operating costs, so that all participants in the system benefit. It is a win-win situation for buyers, suppliers, and investors.”

Blockchain for banking

Fluent Network's blockchain is based on the Bitcoin architecture, but it is designed specifically for global supply chains, focusing on bills and payments. It is more appropriate to describe it as a blockchain layer on the existing banking architecture. Real funds, such as US dollars, are still stored in banks from beginning to end, they are just tokenized on the blockchain. This network can be rolled out between financial organizations, just like global enterprises participate in supply chains.

Fluent Network is unique in that it is a customized private blockchain, consisting of a hybrid consensus model, and it is also a federated system, just as secure as the proof-of-work mechanism (PoW). It is similar to Bitcoin's proof-of-work mechanism using SHA-256 for security, but there is a big difference: mining is not a public process that not everyone can participate in, it is closed and participants are approved by Fluent.

Taylor explained:

“Supply chain participants, including financial institutions, can register as nodes or miners on the Flent Network, just like a federated system, where participants mine for required permissions. We know who the miners are and who is completing tasks in the network. In this private structure, we use the PoW system to reinforce the core. Imagine a scenario where you give your neighbor a permission to come to a family gathering, and for extra security, you put a lock on your fine china. Also, because we know who the miners are, we don’t need the computing power of the public chain to ensure security.”

Miners in the network ensure that financial institutions and other companies cannot earn native tokens through mining, and the Fluet team believes that there is enough incentive to ensure the security of the network. Willson said:

“Connecting to trustless value chains and making them public is an important step in the Industry 4.0 economy, and blockchain will provide a fantastic tool for this purpose in the future. We plan to use this best tool for the job.”

Wilson and Taylor are not the only ones who have such an idea. Fluent raised $875,000 in seed funding last year and another $1.65 million in start-up funding in 2016 from investors including DFJ, Thomson Reuters, 500 Startups, UMB Bank and SixThirty. The platform is currently being tested with participants including the top 10 banks in the 2015 Forbes list and the banks on the list of the best banks in the United States. Fluent will attend the Distributed Trade Conference held by BTC Media in St. Louis next week, where Fluent will present the Fluent Network. BTC Media is the parent company of Bitcoin Magazine.