International trade is an important aspect of business. Exchanging goods on a global scale allows states to produce and export goods that they are more efficient in and import the ones that they are not. As a result, countries reduce the cost of production, price of commodities, and expand their markets. Even so, international trade is a complex process that is facilitated by different financial, socio-political, and technological factors. Blockchain technology has revolutionized international trade and has the potential to continue doing so as this smart technology is still in its infancy.
What is Global Trade?
Global Trade, also known as International Trade, refers to the exchange of goods (products) and services between countries. Global Trade is made up of the total exports and imports of each participating country. In other words, Global Trade is governed by supply and demand. It allows countries to expand their market. Due to Global Trade, the market is more competitive worldwide, which means that we have more competitive pricing and brings us a large variety of products.
International trade involves the exchange of goods and services across borders.
Underlying global trade is the concept of comparative advantage. This means that one country can produce some products or services cheaper than another, at a lower opportunity cost. So, an opportunity cost is the benefit of giving up when making a financial choice.
This is how the global economy is trade - shaped between nations.
How blockchain can reshape global trade?
Blockchain enables data to be recorded in a secure digital format by providing real-time information on transactions between different parties, be they corporations, supplier networks, investment pools, or an international supply chain. It provides all parties with a record that is secure, encrypted, transparent, easy to access, and impossible to tamper with.
Blockchain has various benefits depending on global trade, the most important is that with this technology trusted data can be shared across interconnected networks in digital marketplaces with transparency. So, industries and governments can optimize the movement of goods, services, data, information and currencies across the global supply chains in the best possible way. Blockchain technology has the potential to reduce cost, save time and mitigate risks. Blockchain brings trust both among participants and in data shared (cross-border payments, or contracts for a product or service, etc.).
It is important to mention that trusted data must be shared and exchanged for value both inside and outside the blockchain. This means that the data is important to be shared also in interconnected networks on digital markets. This technology can help companies to create greater flexibility and resilience in operating chain and supply chain management - both key features in times of crisis.
One of the main and most important challenges is the data transfer across the marketplaces. What do we mean? Interconnected networks require validation of the data exchanged (such as digital contracts and signatures that need legal validation, etc.). For this reason, if the parties want to achieve safe data transfers, it is necessary to navigate a more stringent regulatory environment related to digital commerce, with factors such as the GDPR to consider. By implementing the above, blockchain has the ability to maintain the integrity of data sources while protecting data privacy.
The blockchain has the ability to remove various commercial barriers that can be implemented without it to date. The decentralized registration facilitated by the blockchain allows the permanent and almost unchanged storage of transactions, while at the same time can improve the management of copyright.
This technology guarantees a secure and standardized trade regardless of the distance between the commercial parties.
Therefore with the integration of this technology there will be reduced bureaucracy, instant file updates, increased resilience to cyber-attacks and fast-track cross-border settlement arrangements, among other advantages.
Blockchain’s automation and digitization increase efficiency and create time to engage with others.
The blockchain is expected to generate over $3 trillion in new transactions by the year 2030.
Reduced counterparty risk
Decentralized contract execution
Proof of ownership
Automated Settlement and reduced Transaction fees
Blockchain Use Cases Related to Global Trade
Global Payments - Finance Trade
insurance Claims & Processing
Commerce and Supply Chain
Everything shows that blockchain technology is here to stay. It is important for businesses operating across borders to find ways to leverage technology for improving their operations. As it is understood from all the above, Blockchain increases efficiency and minimises the bureaucracy. Organizations from different geographical locations interact easily due to the trust that is created from this technology.
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