Is Blockchain Capable of Revolutionizing Trade

Dec 6, 2021
3 min read

Due to bitcoin publicity, blockchain has recently drawn more attention. These technologies are new, but their potential is also beginning to be considered in projects that go beyond digital currencies. The World Bank Group has already started to study the impact of blockchain technology on development by launching a blockchain laboratory and exploring projects that will help achieve good governance and positive social outcomes in developing countries, including pilot projects in Southeast Asia.

Blockchain can have interesting effects on trade. For ethical or quality reasons, consumers are increasingly concerned about the source of their products (whether it is food, clothing, or other necessary items). Ideally, blockchain can provide proof of product integrity in a complex supply chain. SMEs or small producers can use these pieces of evidence to find buyers or obtain market value for their products.

Key Statistics for Blockchain

According to reports, by 2022, global spending on blockchain solutions will reach $ 11.7 billion.
The global blockchain technology market will be worth $ 20 billion by 2024.
The number of blockchain funds registered in the second half of 2021 was over 70 million.
Blockchain can reduce 30% of banking infrastructure costs.
Financial companies can save up to $ 12 billion a year by investing in blockchain technologies.
The amount spent on integrating the blockchain into health care will increase to $ 5.61 billion by2025.

The ability of the blockchain to provide "automatic contracts" (automatically start buying when all conditions are met) is also considered beneficial to these small business owners because it will eliminate the risk of non-payment and reduce the legal and procedural costs of completing the contract.

According to the World Economic Forum, blockchain can eliminate trade barriers, bringing more than $1 trillion in new trade in the next ten years. Let's take a look at some applications of blockchain in international trade.

Paperless Trade

Blockchain with smart contracts can control all border transaction processes. With the help of the National Single Windows-enabled blockchain technology, participants will be able to complete custom processes efficiently and safely.

This will also enrich data related to trade. But there are also challenges like government versus government operability. The blockchain community is actively working to solve this problem and must establish a regulatory framework to support seamless global trade.

Insurance

By using smart contracts, insurance policies can automatically improve claims management and international insurance contracts. Many exploratory projects are undergoing the same evaluation, especially in maritime insurance.

Blockchain can reduce the time and cost of supporting trade-based third-party insurance. This type of trade accounts for 80% of total global trade, making the proposal highly profitable.

Supply Chain

Blockchain can improve the clarity of the supply chain to provide powerful tracking functions. It gives a new way to track a product's journey and helps combat fraud. Many organizations are already developing blockchain applications to help track product sources, prove authenticity, quality,etc. Just as Volkswagen is piloting supply chain solutions on the blockchain to help purchase battery lead, Starbucks uses blockchain to track coffee beans' journey from farm to cup. It is estimated that this year's global expenditure on blockchain technology will reach nearly 2.9 billion US dollars, but global adoption seems to be far away. Gartner predicts that by 2023, 90% of blockchain-based supply chain plans will suffer from a problem called "blockchain fatigue". The reason is that there are no use cases for large-scale applications of blockchain, and it also faces many challenges:

Interoperability: At the technical and linguistic level, it isn't easy to streamline which information is transmitted across countries through which data elements.

Data privacy: The blockchain principle and the right to be forgotten principle (implemented in the EU) are essentially incompatible, which in itself is a legal challenge.

Many companies are struggling to overcome the challenges of blockchain implementation. One of them is legal codification, which makes all laws easily read and interpreted by machines. The other is the global identification number of all companies, making trading operations easier. For example, Lipscomb University's School of Pharmacy and Health Sciences is working on blockchain applications in the supply chain of medical devices because countries such as North America and the European Union have primarily coordinated the requirements for these devices.

End Note

Technologies like blockchain can only fully benefit when all aspects of international trade finance, customs logistics, language, etc., are digitized. Blockchain is still in its nascent stages. On the premise of compliance with the law, it will mature after time, acceptance, experimentation and innovation.

For those new to this technology, the blockchain is a decentralized and distributed transaction record, and each transaction is stored in an unalterable way. The blockchain is based on a distributed control mechanism of a peer-to-peer network. Economists refer to the blockchain as a "trust machine" because identity verification is achieved through cryptography and mathematical consensus.