For the past few years, the buzz around blockchain has grown to apogee. With a long standing as a technological novelty, blockchain is quickly evolving and may soon become a viable financial tool on a global scale. The most interesting areas that blockchain is seeking to address are Trade Finance and Global Trade. So, what is blockchain? Most simply, it’s a technology that is essentially an unimpeachable digital ledger of transactions- not just monetary transactions, but any transaction of value in a system.
Before investing time and money in this technological tool, it is good to know basics of it. So, scroll down to read more!
Trade Finance?
Trade financing comprises credit facilities provided by financial institutions to guarantee the exchange of goods. It includes lending, issuing letters of credit, factoring, export credit and insurance for both- domestic and international trade. One of the difficulties involved with trade finance is the large volume of paperwork. Blockchain technology seeks to reduce costs and enhance efficiency by superseding the flow of paper for trade finance with the digital data flow.
Blockchain: Endless Applications
It’s a promise of blockchain to streamline the trade finance process. The blockchain is a data structure that creates a digital ledger of transactions. With the help of cryptography, these transactions can be distributed amongst a digital network. This way, it allows each participant on the network to amend the ledger without the need for a central authority. So, if implemented, it will omit the role of middleman in financial transactions.
Blockchain removes the need of multiple copies of the same document including numerous entities as it undertakes quick updates made by each participant and reflects the most recent transactions. Among the best of blockchain’s advantages are the speeding up of transaction settlement time that currently takes a few days, increasing transparency among the investors, and unlocking capital that would otherwise be tied up waiting to be transferred between parties involved in the transaction. The blockchain is creating new ways for people to make transactions. It is used for maintaining records of transactions, verifying identity and establishing contracts.
The Society For Worldwide Interbank Financial Telecommunication (SWIFT) is exploring the use of blockchain in trade finance. It is worth keeping an eye on the rapid developments occurring in the space of blockchain technology. It is poised to effect positive change in trade finance, and if it does, it could affect every industry involved in cross-border business or trade.
Sources:
- https://www.americanexpress.com/us/content/foreign-exchange/articles/blockchain-technology-to-streamline-trade-finance/
- https://blogs.adb.org/blog/how-blockchain-can-revolutionize-access-finance
- https://www2.deloitte.com/content/dam/Deloitte/global/Documents/grid/trade-finance-placemat.pdf
thanks for sharing about Blockchain: Endless Applications and its just quite interesting and i found some more interesting elements like Cryptocurrency trader also.
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