Blockchain and Trade: How Do the Two Harmonize and What to Expect
Do you want to know what role blockchain plays in the international trade industry and how much impact it has? Come take a look at our article and find out.
World trade is a $16 trillion sector in which capital, products, and services are exchanged across frontiers or regions. It is roughly divided into two groups: 25% commodities and 75% products that are delivered through shipping containers or land or air transportation.
If examined from the standpoint of transportation, the trade and financing business is principally hampered by a lack of integration and commitment between exporters and importers across markets. Furthermore, due to the complexity of standard operating procedures in the global trade of products and commodities, the sector maintains a number of operational bottlenecks.
The Problem with Transportation
Transportation and commerce, for example, continue to rely mostly on resources and are hampered by manual and paper-based operations that are expensive, sluggish, and fallible.
Over the last 10-15 years, numerous start-ups and tech businesses have attempted to produce goods with varying degrees of success. This was before the introduction of blockchain technology, which quickly became recognized as the primary use case for global trade. Many businesses and corporations have updated their outdated technology in response to the potential impact of blockchain technology.
The Changes
What the innovative technology of blockchain has done to international trade is beyond just ushering in the digital age. This financial technology permits the encoding of current papers, lines of credit, and other assets to help trade scale up in the digital world. The widespread global adoption of blockchain is expected to have much bigger implications for cross-border communication, trade settlement, and standards in the coming times.
The Implications
In trade, one of the major areas touched by blockchain includes trade financing. As per a white paper titled “How Blockchain Can Revitalize Trade Finance” by Cognizant, “the trade finance industry has emerged as a key focus area for realizing the efficiencies of blockchain technology. Blockchain has the potential to disrupt the trade landscape by making it easier to reduce disputes and fraud to provide delivery and payment certainty, enable transparency of trade asset movement, and facilitate the flow of trade receivables. The result: increased collaboration, automation, and oversight in trade transactions.”
The paper further emphasizes that as a new digital paradigm for securing the transfer of value, blockchain technology is capable of changing business processes by “redefining value chain interactions, reducing operational complexity, and reducing transaction costs.”
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