Moving further from the “disruptive” impact of blockchain in the finance sector, UNCTAD and the UNECE’s UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT) expect the impact of blockchain technology to be just as profound in the areas of trade and transport.
As explained, a blockchain allows the creation of electronic records that are “originals” and cannot be copied (a bitcoin is just such an electronic record). And the ownership of this electronic “original” can be passed from a sender to a receiver without the receiver of the electronic record having to worry about it being a counterfeit.
Trade processes often require the use of intermediaries. Some of these intermediaries physically handle, process and transport goods. Others, such as banks, inspection companies, and many government agencies often act as guarantors of: the authenticity of documents or information, the truthfulness of information and the trustworthy behaviour of parties.
The last could be called “guarantor activities” and blockchain technology is set to make many of these activities disappear, explains Virginia Cram-Martos from UNCTAD.
In the world of trade, blockchain technology can be used to create electronically “notarized” original electronic documents or agreements such as contracts, certificates and licenses, with a time stamp and a “guarantee” that no changes have been made since the time of issuance, underlines Ms. Cram-Martos.
In addition, unalterable programmes (called smart contracts) can be recorded on blockchains. These would allow, for example, a bank to sign an agreement with an exporter which says, when a sales contract is recorded on the blockchain with the purchaser’s electronic signature, the bank will provide 50% trade financing for the contracted sum. The work of the bank’s staff will then be finished because the blockchain “smart contract” will make the payment when the sales contract is recorded on the blockchain – without them having to verify anything because this is done by the blockchain. In addition, the exporter will receive their financing within minutes, or hours, of the sales contract being recorded.
Combined with other technologies, such as Radio Frequency ID tags and sensors connected to the Internet, blockchain technology will create opportunities for unprecedented transparency in international supply chains, she notes:
Today, you can know which country your coffee was grown in, tomorrow you will be able to know the name of the farmer…Today, you may never know if food or pharmaceuticals in a container were exposed to unacceptable temperatures. Tomorrow, your insurance company may reimburse you before the goods arrive at destination because of information sent from a sensor to a blockchain…These are just some of the applications of blockchain technology already being developed today.
Expected challenges include:
- Companies and entire industries may have to re-invent themselves or risk disappearing.
- Additional expertise in new information technologies (such as cryptography and smart contract programming) will be needed.
- Those who implement first (or best) may gain important competitive advantages (either as companies or even as countries).
- Because of the potential impact of this technology on trade and trade facilitation, both UNCTAD and the UNECE’s United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) are following these developments closely and working to help governments understand and use their potential.
In response, UN/CEFACT is developing two white papers, one on technical applications of Blockchain and another on opportunities for trade facilitation and e-commerce and it will be available for comment this autumn.
