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Blockchain for Trade Finance

Blockchain for Trade Finance | ICC, TFG and WTO Guide

Trade Finance Global / Blockchain for Trade Finance

Blockchain for Trade Finance

Welcome to our blockchain hub, a comprehensive guide by Trade Finance Global on the use of distributed ledger technologies (DLT) and blockchain within international trade, trade finance, and shipping. Consortia, networks and technologies have emerged in attempts to digitize trade, yet to date, their applications have been relatively unsuccessful and disjointed. We investigate some of the key opportunities and challenges the in the current ecosystem, as well as an in depth look at what needs to happen for the industry to evolve. Just as TCP/IP, HTML, and HTTP provide shared and open standards and protocols that enabled the Internet to become what it is, so too can blockchain and related technologies create a flatter, smarter, more connected, and overall better world for global trade and commerce.

Featured Insights

Morning has broken – New signals, standards, and semantics The only way to make Trade Finance standardisation and harmonisation opportunity to realise is to make the needed standards coordination and development resources openly available for the business process and systems developers.
BREAKING [PODCAST]: Banks predict up to 30% decline in trade flows, latest ICC Global Survey on Trade Finance shows The ICC’s Survey on Trade Finance reveals the industry-wide challenges and disruption as a result of the COVID-19 pandemic push trade and trade finance into a state of global uncertainty.
VIDEO: Synthetic Securitizations TFG heard from Alan Ball of Texel Group about how synthetic securitization is done when working with the insurance industry.

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Videos – Blockchain & DLT for Trade

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Research – Blockchain for Trade Finance

Blockchain, Cryptocurrencies & DLT – Frequently Asked Questions

What is Blockchain?

A blockchain is essentially a decentralised, distributed ledger that permanently records transactions. ‘Decentralised’ means that no single individual or group has excess control over the exchanges. ‘Distributed’ means that the ledger is sent out to many computers. In other words, it’s made public and thus is completely transparent. Whilst everyone can view the blockchain, nobody can amend it.

The term ‘blockchain’ is derived from the way the technology works. Each ‘block’ contains encoded data of groups of valid transactions. These transactions are linked to previous blocks to form a ‘chain’, hence we get the name ‘blockchain’.

It’s not necessary to understand the complexities of how the technology works to understand what it does. Blockchain technology provides a way to transact directly via a peer-to-peer network securely. This means that you can use the blockchain to transact without any middlemen.

What is blockchain?

A blockchain is essentially a decentralised, distributed ledger that permanently records transactions. ‘Decentralised’ means that no single individual or group has excess control over the exchanges. ‘Distributed’ means that the ledger is sent out to many computers. In other words, it’s made public and thus is completely transparent. Whilst everyone can view the blockchain, nobody can amend it.

The term ‘blockchain’ is derived from the way the technology works. Each ‘block’ contains encoded data of groups of valid transactions. These transactions are linked to previous blocks to form a ‘chain’, hence we get the name ‘blockchain’.

It’s not necessary to understand the complexities of how the technology works to understand what it does. Blockchain technology provides a way to transact directly via a peer-to-peer network securely. This means that you can use the blockchain to transact without any middlemen.

How does blockchain work?

Transactions are recorded to a blockchain through 5 important steps:

Step 1: Two parties initiate a transaction by agreeing to exchange something of value. In most cases, this will be a cryptocurrency token or other asset.

Step 2: This pending transaction joins others and creates a ‘block’ which is then sent out to ‘miners’. Miners are computers on the blockchain network that evaluate transactions to earn a reward. This reward is usually new cryptocurrency tokens or a part of the transaction fee. They validate the transaction by solving complex mathematical problems using computer power.

Step 3: If miners reach consensus to validate the transaction, it’s verified and added to the blockchain.

Step 4: A timestamp is added to this transaction block using a cryptographic receipt. As each block has a reference to the hash of the previous block, there is an unalterable chain of records.

Step 5: The transaction is complete and the unit of value is transferred to the receiving party.

Infographic: How does Blockchain work?

Source: By Shivratan rajvi [CC BY-SA 4.0  (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons

What is blockchain used for?

Blockchain technology was originally designed as the foundation upon which cryptocurrencies could be built. Since then, and it’s use cases have expanded hugely as the technology has evolved. The invention of Ethereum’s Smart Contracts made it easier for developers to build applications for many different industries, including:

  • Cybersecurity
  • Travel
  • Banking
  • Trade finance
  • Cloud storage
  • Legal
  • Insurance
  • Healthcare

The reason that blockchain has so many use cases is that it provides a reliable, secure and transparent network. This makes it useful for any business that could benefit from a way to transfer data securely, quickly and transparently.

Are cryptocurrencies and blockchain the same thing?

Contrary to popular belief, blockchain and cryptocurrencies aren’t one in the same. Many people think that this is the case as the two terms come up in the same sentence quite often – they’re closely linked.

Cryptocurrencies are digital currencies – they’re units of value that take the form of tokens. The blockchain is the digital ledger that stores a record of all cryptocurrency transactions. Blockchain is also used in other applications outside of cryptocurrencies.

What are cryptocurrencies used for?

There are several use cases for cryptocurrencies, including:

Cross-border payments:

Sending fiat currencies internationally often comes with excessive fees for international transfers. It’s also a lengthy and time-consuming process to complete through regular banks. Cryptocurrencies allow you to send money across international borders directly. The exchange is completed almost instantly and with minimal fees.

Anonymous transactions:

Cryptocurrencies offer higher levels of anonymity than fiat currencies. This makes them ideal as a medium of exchange for transactions where a high level of anonymity is preferred.

As an investment vehicle:

The cryptocurrency market is hugely volatile, but it has seen massive growth over the last decade. It’s an accessible market for beginner investors who are willing to invest in high-risk, high-reward assets.

What are the most common cryptocurrencies?

Bitcoin is the most popular cryptocurrency. As it was the inaugural cryptocurrency, it benefited from a first-mover advantage which has allowed it to remain the leading cryptocurrency by market capitalisation.

According to CoinMarketCap, the top 5 cryptocurrencies by market capitalisation as of July 2018 are:

  1. Bitcoin
  2. Ethereum
  3. XRP
  4. Bitcoin Cash
  5. EOS

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Contents

Access trade, receivables and supply chain finance

We assist companies to access trade and receivables finance through our relationships with 270+ banks, funds and alternative finance houses.
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Latest News

05Aug

Bolero International comes onboard the Marco Polo Network

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Bolero is now part of the Marco Polo Network to advance digital trade settlement leveraging electronic Bill of Ladings and… Read More →

04Aug

PODCAST: Separating cat pics from invoice scans – The role of AI in trade (S1 E47)

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TFG heard from Arnaud Doly, CEO & Founder, Nabu, on how blockchain and AI can play a key role in… Read More →

30Jul

Morning has broken – New signals, standards, and semantics

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The only way to make Trade Finance standardisation and harmonisation opportunity to realise is to make the needed standards coordination… Read More →

29Jul

Post-pandemic production relocation: an opportunity for CEE countries? – Coface study

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A favourable context Foreign trade and inclusion in supply chains had already increased for Central & Eastern European (CEE) in… Read More →

28Jul

Conpend TRADE AI app goes live on Finastra’s FusionFabric.cloud

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London, UK – July 28 2020 Finastra today announced a new app available on its FusionFabric.cloud open development platform, Conpend TRADE AI. The app… Read More →

27Jul

ING partners with genesis to streamline Credit and Political Risk Insurance in expanding global market

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London – 27 July, 2020 – ING is pleased to announce its partnership with genesis, the Low Code Application Platform for… Read More →

27Jul

SMBC accelerates trade finance digitalisation using blockchain technology

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TOKYO July 21 2020 — Sumitomo Mitsui Banking Corporation (“SMBC”, President and CEO: Makoto Takashima) signed a (1) Letter of… Read More →

21Jul

BREAKING [PODCAST]: Banks predict up to 30% decline in trade flows, latest ICC Global Survey on Trade Finance shows

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The ICC’s Survey on Trade Finance reveals the industry-wide challenges and disruption as a result of the COVID-19 pandemic push… Read More →

21Jul

Imperial and Citi launch new centre to help create next generation of responsible business leaders

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Imperial College Business School will help businesses redefine their approach to leadership through the work of a new research centre,… Read More →

15Jul

BAFT industry update: How is trade financed during a pandemic? – An update from Tod Burwell, President and CEO

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TFG heard from BAFT’s President & Chief Executive Officer, Tod Burwell, on some of the latest updates from the association… Read More →

13Jul

Is ‘video’ the next big thing in trade finance?

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Many new fintechs are fielding trade transaction cloud platforms that combine video technology with non-bank trade finance that is going… Read More →

10Jul

How to Prevent Double Invoice Fraud

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EIPP in combination with blockchain can help banks avoid duplicate Invoice Financing and perform dedupe effectively…. Read More →

06Jul

How should Colombia transform its oil-dependency for an eventual post COVID-19 global economic rebound?

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With competitive digital economy, Colombia will be able to plan for post-pandemic recovery and strengthen regional economies to adopt smart… Read More →

03Jul

VIDEO: Synthetic Securitizations

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TFG heard from Alan Ball of Texel Group about how synthetic securitization is done when working with the insurance industry…. Read More →

01Jul

Saving the Finance World with Decentralized Finance (DeFi)

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DeFi has unleashed a wave of innovation, offering exciting opportunities and the potential to create a truly open, transparent, and… Read More →

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