According to Consensys, international trade is a $16 trillion market that accounts for capital, goods, and services exchanged across international borders or territories. It is roughly divided into two categories: 75% of goods shipped via shipping containers or ground transportation and 25% of commodities. Given its size and complexity, it is a difficult domain.
However, luckily, blockchain technology offers a solution.
Decoding Blockchain
Blockchain is a digital transaction record that distributes and decentralizes transactions by sharing, verifying, and validating their authenticity. This is done in a high-security environment using cryptographic computer programs and systems that are intertwined to secure the transaction path. The fact that blockchain is secure provides a fantastic opportunity for businesses to accelerate the digitalization of trade and streamline trade processes.
In a special report, Emmanuelle Ganne, Senior Analyst, World Trade Organization, mentioned, “blockchain allows participants with no particular trust in each other to collaborate on an equal basis in real-time with the guarantee that the information on the blockchain is not tampered with.”
Emmanuelle added, “the promise of greater efficiency and higher security is leading an increasing number of financial institutions to explore how the technology could better facilitate trade finance processes…trade finance is the backbone of international trade, but such processes in a particular letter of credit remain labor and paper-intensive.”
The Future
Blockchain is revolutionary. The potential of blockchain in reducing trade costs and enhancing supply chain transparency, as well as the opportunities it provides for small-scale producers and businesses, all combine to make it an important tool for international business in today's highly volatile world.
However, according to Emmanuelle, “blockchain is only a tool. It will only succeed in facilitating and digitalizing international trade if e-transactions are recognized and other legal issues are clarified. However, blockchain could have a truly transformative impact on international trade and become the new infrastructure.”
Understanding the practical and legal implications of blockchain on international trade and striving to develop collective solutions is therefore the only way forward.
Learn More with EXIMA
At EXIMA, we believe in making international trade easy and ensuring you have all the tools you need to trade confidently. That includes helping our users learn everything they need to know about global trade. Join the export/import association today!