International trade could be made even more transparent and secure because to the transparency provided by blockchain technology.
Technological advances have had a long-lasting impact on the way businesses and trade are organized. Industrialization began with the development of steam engines and electricity.
Every aspect of our lives has been made easier by technology, from information to communication. Because of this, many people see blockchain technology as the next big thing, as its applications span a wide range of industries.
For the most part, blockchain technology is utilized to keep track of transactions.
Blockchain makes a difference
In the words of Statista, “blockchain makes data recordkeeping more efficient, transparent, and safe.” It doesn’t matter if the transaction is between a private individual or an international supply chain or a business entity, blockchain delivers transaction information that is time-stamped.
It’s also a common misconception that blockchain is merely a tool used by the cryptocurrency (BTC). Although this may be the case, it is far from the truth. Aside than cryptocurrencies, the technology’s uses have evolved much beyond its initial development in 2008. From finance to e-commerce to food safety to voting and supply-chain management, its applications cover nearly every sector of the global economy, including those directly or indirectly linked to international trade.
When it comes to international trading, things get very complicated. Despite the fact that its transactions involve a large number of parties, the use of blockchain technology benefits all of its other components, including as trade financing, customs administration, transportation, and logistics.
Since there have been several attempts to digitize international trade transactions in the past, cross-border payments and settlements are by far the most common use cases for blockchain technology, according to Statista.
Commercial transactions have already begun to explore the potential of blockchain technology. In an effort to enhance food safety, the Open Food Chain blockchain initiative is utilizing the Komodo Smart Chain.
Kadan Stadelmann, chief technical officer of Komodo, an open source workshop and technology supplier, told Cointelegraph: “Immutability is a key feature of blockchain, as data entered onto the ledger cannot be changed once it has been verified. This gives an opportunity for greater international trade transparency.”
Stadelmann pointed out that food may now be tracked from its source (such as a farm in another country) all the way to a consumer’s local supermarket. The WHO estimates that each year, 600 million people — or roughly one in every ten — become ill and 420,000 people die as a result of eating poisoned food. He said that by tackling issues like food contamination outbreaks, this might help improve food security around the world.
International trade is plagued by lengthy documentation processes that can be made simpler with the use of blockchain technology. According to Zen Young, the CEO of noncustodial web authentication infrastructure Web3Auth: “Digitizing documents for traditional clearance processes and international trade transactions can take up to 120 days, but with bills of lading tracked through blockchain, the need for such processes and the possibility of double spending are eliminated.”
According to him, the SWIFT network’s costs are prohibitively high, making it difficult for exporters to take advantage of the reduced and unlimited commissions offered by the blockchain.
The properties of non-paper paperwork that are digitally verifiable and legally enforceable, according to Zen, will help eliminate fraud.
This is a different use case where IBM and Maersk are building a blockchain-based solution for the global shipping sector. The goal of the TradeLens project is to use blockchain technology to digitize the whole shipping process.
As a long-term goal, we want to create a supply chain that is more cost-effective and faster to deliver. Major port and shipping companies as well as logistics service providers have already signed on to the initiative.
Customers have saved roughly 20% in documentation expenses because to the use of TradeLens, according to IBM, which has processed more than 150 million shipping events. As a result, shipping time has been slashed by 40 percent.
In the near future, blockchain’s full potential in international trade will be realized as it gains traction in a wide range of industries. Because of its ability to speed up transactions and reduce costs, blockchain technology has the potential to transform the global trade of goods.
Blockchain technology’s international trade applications have some drawbacks despite its potential.
The biggest disadvantage of blockchain technology is the high transaction fees that are typically associated with it. For example, blockchain technology is notoriously expensive when it comes to cross-border payments.
Blockchain transactions necessitate a large number of intermediaries, which raises the overall cost. As an additional cost, the time it takes to complete a blockchain transaction can be quite long.
In addition, the lack of scalability is another issue with blockchain technology. Because each block in a blockchain must be validated by all network nodes, the system may become sluggish when dealing with large quantities of transactions..
As a result of this, international trading may face considerable delays in the processing of transactions.
Considering that blockchain technology is still in its infancy, Deloitte believes it’s vulnerable to a wide range of potential dangers and pitfalls. If, for example, a major flaw in the scalability and privacy structure is discovered, this could have serious ramifications for the company’s financial health.
Malicious criminals may also be able to take advantage of weaknesses in the systems. Those wishing to use blockchain technology in international trade must take these issues into account when planning an implementation.
However, it is important to keep in mind that blockchain technology is still in its infancy and has a long way to go. Many of these issues are likely to be addressed and resolved as technology advances.
The overall cost of the system is expected to decrease as more businesses use blockchain technology. As a result, organizations looking to streamline international trade operations may find that blockchain is a more viable option.
The worldwide trade of goods could be transformed by utilizing blockchain technology, to sum it up. The ability of Blockchain to streamline processes and reduce costs has the potential to improve international commerce efficiency and transparency.