The future change of international trade by Blockchain Technology

The future change of international trade by Blockchain Technology

Table of contents

How Blockchain Technology can revolutionise international trade
Blockchain technology has proven to be transparent and can make international trade more transparent and secure.
Since time immemorial, technological innovation has shaped the structure of trade and commerce. The discovery of electricity spurred mass production and the advent of steam engines ushered in the era of mechanized production.
From information to communication, technology is used everywhere to make life easier. Because of this, blockchain technology is being embraced by many as the next big thing, given its use cases across many industry verticals.
Primarily used to store records of transactions, blockchain technology is a type of distributed ledger technology.
Blockchain can make a difference
According to Statista, blockchain makes storing data records easier, more transparent and more secure. Due to most of its resistance to change, blockchain offers time-based information about transactions, whether between individuals, business entities, supply networks, or even an international supply chain.
It is also a common thought that blockchain is only a technology for Bitcoin (BTC). However, this assumption could not be more wrong. While the technology emerged alongside Bitcoin in 2008, today its use cases have evolved beyond cryptocurrencies. From finance to e-commerce, food safety, voice exercises and supply chain management, its applications intersect in almost every sector of the global economy, including areas directly or indirectly involved in international trade.
The value chain involved in international trade is very complex. While its transactions involve many actors, other aspects of it such as trade finance, customs administration, transport and logistics benefit from the adoption of blockchain technology.
According to Statista, cross-border payments and settlements are the biggest use case for blockchain technology, mainly because there have been many attempts to digitize business transactions in the past.
The potential of blockchain to improve the efficiency of business processes is currently being explored. For example, the Open Food Chain blockchain project is working to improve food safety through the Komodo Smart Chain.
Kadan Stadelmann, CTO of Komodo – a technology provider & open source workshop – told Cointelegraph:

“Blockchain’s biggest advantage is immutability, meaning data can’t be deleted or edited after it’s on the ledger. For international trade, this provides an opportunity for more transparency across several major industries.”

Stadelmann explained that the technology ensures that food can be traced from its origin (ie, a farm in another country) to the consumer’s local supermarket. He said it would help improve food safety around the world by tackling problems such as food contamination outbreaks, as 600 million – nearly 1 in 10 people worldwide – fall ill after eating contaminated food and 420,000 die each year, according to WHO.
Blockchain can streamline the complex documentation processes found in international trade. Zen Young, CEO of non-custodial web authentication infrastructure Web3Auth, told Cointelegraph:

“Digitizing documents for traditional clearance processes, and transactions in international trade can take up to 120 days to complete, but with bills of lading tracked through blockchain, the need for such processes and potential for double spending is eliminated.”

He said:

“Transfer payments and transactions are also quicker and cheaper than currently possible through the SWIFT network, blockchain commissions are lower and without maximum limits, which is especially advantageous for exporting goods”


Additionally, Zen added, these factors help reduce fraud through digitally verified and legally enforced paperless documentation.

In another use case, IBM and Maersk are working on a blockchain-based solution to streamline the global shipping industry. The project, called TradeLens, is designed to digitize the entire shipping process on the blockchain.

The ultimate goal is to create a more efficient and transparent supply chain that accelerates delivery times while reducing costs. To date, 150 organizations have successfully engaged in the project, including major port operators, shipping lines and logistics providers.

According to IBM, TradeLens has processed more than 150 million shipping events and saved users about 20% of documentation costs. In addition, the platform reduces the time required to ship goods by 40%.

Blockchain is still gaining ground in various industries, but it is only a matter of time before its potential is fully realized in the world of international trade. With its ability to streamline processes and reduce costs, blockchain has the potential to change the way goods are traded around the world.

However, despite its promises, there are some weaknesses in the application of blockchain technology in international trade.

Disadvantages of blockchain

The main disadvantage of using blockchain is the fact that it is often associated with high transaction costs. For example, when it comes to cross-border payments, blockchain technology is known to be quite expensive.

This is because blockchain transactions often involve multiple intermediaries, which can increase costs. Additionally, the time required to resolve a blockchain transaction can be very long, which can also increase the overall cost.

Another disadvantage of blockchain is the lack of scalability. Since every block in a block must be verified by all nodes in the network, the system can often become bogged down when processing many transactions.

This can lead to delays in processing transactions, which can be a significant problem in the world of international trade.

Finally, according to Deloitte, blockchain technology is still in its early stages of development, which means it is subject to many risks and uncertainties. For example, there can always be a risk that a critical scalability and privacy flaw could be discovered that could cause a problem on the financial end of the operation.

In addition, there is also the risk that bad actors could exploit the vulnerabilities for fraud or theft. These risks should be carefully considered by those who intend to use blockchain technology in the world of international trade.

Despite these drawbacks, it is important to note that blockchain technology is still in the early stages of development. As the technology matures, it is likely that many of these issues will be addressed and resolved.

As more organizations begin to adopt blockchain technology, the overall cost of using the system is likely to decrease. This makes blockchain a more viable option for those looking to streamline their international business operations.

Ultimately, blockchain technology has the potential to change the way goods are traded around the world. With its ability to streamline processes and reduce costs, blockchain has the potential to make international trade more efficient and transparent.

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