Can Block Chain Revolutionize International Trade?
Since the advent of Bitcoin, millions of people all over the world have come to embrace crypto-currencies such as Bitcoin. Many people associate block-chain with Bitcoin. However, block-chain is much more than that. People still do not comprehend the meaning of blockchain technology or the underlying technology behind block-chain.
Block-chain can be defined as a tamper-proof, decentralized and distributed digital ledger of transactions. Block-chain is based on trust and it is said to be highly resilient.
In the block-chain transactions are stored in a permanent almost immutable manner. Block-chain relies on cryptography. Block-chains rely on a peer-to-peer network unlike traditional databases which are controlled from a central point. Transactions are authenticated using a mathematical ‘consensus protocol’. This determines rules by which the ledger is updated. There is no third party involved hence transactions are transparent. Users in a block-chain can access and check the ledger at any time.
Blockchain technology utilizes smart contracts. Smart contracts are pieces of code that self-execute when some conditions are met. Smart contracts reduce costs through automation. Block chains are more resilient to attacks when compared to traditional databases.
Can Block chain Revolutionize international trade?
Governments and individuals have show immense interest in block-chain technology. This is due to the decentralized, transparent and immutable characteristics of block chain technology. Pilot projects are being conducted virtually on all the areas of international trade.
Does block-chain have the potential to revolutionize international trade? This paper explores the role of block-chain for cross-border trade transactions. It studies how block-chain technology can affect the steps involved in international trade in goods, ranging from trade finance to customs procedures, certification, and transportation and logistics, and help move toward greater digitization of trade.
Numerous international trade transactions involve numerous people and they rely almost exclusively on paper.Several documents are submitted during the course of international trade. These documents fall under four main categories
• documents related to the commercial transaction itself. These include the sales contract, commercial invoices and a packing list submitted by the exporter prior to exportation.
• documents related to trade financing, such as letters of credit.
• transport documents, including bills of lading.
• documents for border procedures, including: – certificates of origin – delivered by chambers of commerce, but other bodies such as ministries or customs authorities may also have this privilege in some countries.
Trade finance is critical for trading activities. Around eighty percent of is financed through some kind of financing. Trade finance is usually associated with high costs and cumbersome procedures, due to a paper-heavy process and the challenges of coordinating the multiple players involved in a trade transaction
Numerous proofs of concepts have been developed over of the last few years to streamline and automate letters of credit processes, and block-chain applications in this field are now moving towards commercial application.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.