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.
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Following the launch of TFG / WTO / ICC’s publication “Blockchain & DLT in trade: A reality check” in November 2019 at the WTO Global Blockchain Forum, this updated research study provides an overview and updated periodic table.
The study outlines the main projects, categories into Supply Chain Finance, Trade Finance, Know Your Customer (KYC), Insurance, DLT Digitiisayion of Trade Documents, Shipping & Logistics / Supply Chain, Other Initiatives and Marketplaces. The authors also mapped out 19 standardization initiatives, split by sector or process, general trade, private sector-led and regional / national initiatives, as well as the international standards bodies.
Video – WTO & TFG Launches ‘Blockchain & DLT for Trade: Where do we stand?’
Research – Blockchain for Trade Finance
Videos – Blockchain & DLT for Trade
Blockchain for Trade Podcasts
Featured Insights
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Blockchain, Cryptocurrencies & DLT – Frequently Asked Questions
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.
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.
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
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.
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.
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.
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:
Strategic Partners
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Contents
1 | Introduction to Blockchain
2 | Bitcoin
3 | Ethereum
4 | Monero
5 | Dash
6 | Ripple
7 | Litecoin
8 | Periodic Table – Blockchain for Trade
9 | Guide – Blockchain for Trade Finance
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