How Can Blockchain Restore Trust in Trade?
Safe, quick, and traceable transactions
Trade is an incredibly eclectic term. It refers to buying, selling and exchanging essentially everything, laying the foundations for society before it was even a recognised concept. Trade is vital to all businesses, and every single step in the process adds time and money. Unfortunately for traders and their clients, politics is complicating the procedure. Terrorist attacks and the ongoing refugee crisis has led to tighter border controls with extensive security checks. By complicating an already complex system, regulatory agencies and national security teams are making it harder for companies and their clients to carry out seamless operations without incurring very high costs.
How can organisations and businesses restore trust in trade, and overcome the masses of red tape? Blockchain – characterised by honestly and openness, could provide an answer.
Blockchain and trade
Blockchain stores transactions like building blocks, putting together an extensive financial history that can’t be replicated or faked. Its power lies in its ability to restore trust – after the banking scandals of the past, blockchain-based currency Bitcoin has been hailed as a new way of carrying out open, honest transactions in the financial sector. Now, disruption in trade has necessitated a similar response. In September 2016, Barclays Bank carried out the first trade-finance deal using blockchain. Irish agricultural food company Ornua was able to exchange a shipment of cheese and butter to the value of $100,000 with the Seychelles Trading Company. Usually, trade deals can take well over a week to be approved. However, because the exchange was facilitated by blockchain, approval was granted within a matter of hours. Laying out all of the relevant information in a protected, traceable ledger removed the need to carry out lengthy background checks. Banks aren’t the only businesses benefitting from blockchain – logistics and transportation firm Maersk is using a blockchain initiative developed by the University of Copenhagen to keep track of its ships’ cargo. The cost of handling cargo can be higher than the cost of transporting, so it’s useful to have a detailed inventory.
How disruptive is blockchain for trade?
Blockchain could bring positive disruption to trade at a challenging time, helping traders to navigate changing regulations and avoid suspicious security checks. By simplifying the supply chain, suppliers and recipients avoid costly logistics. As well as saving companies money, blockchain solutions could also save them time. The exchange between Ornua and the Seychelles Trading Company took under four hours, which is a massive improvement on traditional processing periods. As well as this, using blockchain in trade will encourage companies to adopt the technology in general. At the moment, developers are still trying to formulate a blockchain-based currency that can cope with mass usership, but increased demand will hopefully lead to further investment and research. This is obviously a huge opportunity for businesses in the financial sector, from young FinTechs to forward-looking banks. However, as shown by Maersk, companies outside of finance can use blockchain to positively disrupt their industries.
Could blockchain solve all trading issues? Not entirely, but by making important product-related data openly available, it will make it far easier for traders and clients to prove the legitimacy of their transactions. Improving visibility for all parties will help to re-establish trust, and whilst security measures may remain extensive, it will be easier for regulators and traders to co-operate.
Has your business used, or could it use, blockchain technology to simplify trading processes? Will blockchain answer the current problems faced by traders and their clients? Could blockchain technology become a requirement for trading standards? Comment below with your thoughts and opinions.