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Blockchain and Trade Finance – Your TFG Guide

Hailed as the future for trade finance; blockchain, cryptocurencies and distributed ledgers have gone from geeks to the boardroom in just 2 years! But what exactly are they, and how are they being used? Whether you’re after a 101 Blockchain and Trade Finance Guide for dummies, or are a seasoned ICO expert wanting to keep up to date on the latest on Blockchain and Trade Finance trends, look no further – we’ve got you covered!

Popular Cryptocurrencies

Bitcoin – The inaugral cryptocurrency, bitcoin has a $100bn market cap, and by far the most commonly used crypto.

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Ethereum – A public blockchain with smart contract functionality, the EVM is a simple and viable mechanism for trade finance.

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Monero – The anonymous crypto. With privacy being it’s USP, Monero is one of the most confidential cryptos in the market.

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Dash – The younger sibling of Bitcoin, Dash is an improved crypto with Masternodes, privateSend and InstandSend.

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Ripple – Comprised of XRP and RipppleNet, we see the future of payments being Ripple. It doesn’t use blockchain for concensus and cannot be mined.

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Litecoin – A near replica of Bitcoin, Litecoin has a faster processing speed and coin limit. The 6th largest by market cap, it’s one to watch.

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Get in touch with our Blockchain experts

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An A to Z of Blockchain, Cryptocurrencies and Trade Finance

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Video: The Blockchain Trade Finance Revolution

 

Blockchain – Useful Guides

Can Blockchain be used for Invoice Finance?

We spoke to Dror Shapir, CEO of INVioU about disrupting the invoice and receivables space through blockchain.

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How can commodity finance benefit from a distributed ledger?

The “bitcoin mania” – referring to the tulip mania of the seventeenth century – has lost its momentum. However, what should really be looked at is the technology behind the cryptocurrency. Mercuria was the first, Trafigura the second, now every major commodity trading house tries or considers on somehow implement the so-called Blockchain technology in its supply chain.

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A Macro View: Cryptocurrency, blockchain and corporations

There are several ways cryptocurrencies can impact trading businesses. We looked at some of the ways cryptocurrencies, in particular blockchain and ethereum, can disrupt business in the next few years.

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Cryptocurrency Review: Is Ethereum a Competitor to Bitcoin?

Every day we hear everywhere that the value of Bitcoin is rising, falling, and potentially has a future in the world of cryptocurrencies. The word ‘Bitcoin’ is essentially everywhere, however, there is another very powerful cryptocurrency Ethereum which is a big competitor to Bitcoin.

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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.

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

Is it Still Worth Investing in Cryptocurrencies?

Many investors believe that the cryptocurrency market is in the midst of a speculative bubble that is destined to pop. This may be at least partially correct as there can be little doubt that cryptocurrency prices have been extremely volatile.

The last spike in price came in 2017 when prices rose exponentially. Since then, the market has been in decline. However, there may be a further price spike in the future as the technology moves forward. Many banks are beginning to adopt blockchain technology and more and more retailers are beginning to accept cryptocurrency payments. These facts bode well for the future of cryptocurrencies.

Ultimately, this is a hotly debated topic and whether it’s still worth investing is a matter of opinion. The future of the cryptocurrency market remains uncertain.

References:

https://walletinvestor.com/page/cryptocurrency-faq

https://blockchain.wtf/what-the-faq/what-is-blockchain/

https://www.quora.com/Is-the-cryptocurrency-market-dead

https://coinmarketcap.com/coins/

https://www.quora.com/What-is-the-difference-between-bitcoin-and-blockchain

https://en.wikipedia.org/wiki/Blockchain#Blocks

Get in touch with our finance experts. Enquire now.

First Name*

Last Name*

Your Organisation*

How much trade finance are you seeking?*

Your Email*

Telephone Number*

Briefly, what type of stock or trade are you looking to finance?

(Marketing Terms can be found here)

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