For those who do not belong to the financial field. The simplest form of trade finance can be seen as domestic and international trade finance transactions between buyers and sellers facilitated by intermediaries such as banks and financial institutions. These trade finance transactions generally include loans, letters of credit issuance, factoring, export credit, and insurance. Today 80-90% of trade between countries is based on trade finance, so these transactions make up a large part of world trade.
Whenever there is a cross-border import and export of goods, it is trade financing. It involves many activities and faces many difficulties. One of the main issues associated with trade finance transactions is the handling of large volumes of paper documents. Processing these documents creates a more complex business network.
The main advantage of blockchain technology in trade finance is that it can reduce processing time, eliminate paper use, and save money while ensuring transparency, security, and trust. Even for your own security you can choose to have Cardano DEX feature for the security alert. Eliminating middlemen from the process can eliminate the risk of manipulation by process participants.
The following are some key points that demonstrate the advantages of blockchain in trade finance:
Efficiency:
Blockchain technology enables the trade financing process by directly completing transactions between related parties without intermediaries and digitizing information. Using the blockchain, all parties can operate smart contracts and automatically trigger transactions. This greatly simplifies the trade financing process, thereby reducing costs and increasing transaction speed.
Security:
Each transaction on the business network is independently verified by password verification. There is Cardano DEX technology just for the safety of accounts and transaction. Encrypted and password-protected keys transfer data securely between different financial institutions, thereby privatizing data.
Traceability:
With the help of blockchain technology, importers and exporters can track goods and assets and their current location. In addition, information related to old assets can be received and passed to the new owner for possible operations. This provides new financing opportunities and can increase interest in commodity trading. This is considered to be one of the main benefits of blockchain in trade finance.
Transparency:
As a distributed ledger technology, the blockchain can record multiple transaction details in accordance with trade agreements and can distribute data to further enhance trust. This reduces the risk of falsification of records and provides more options for trade finance.
Auditability:
Utilizing blockchain technology can benefit trade finance transactions that can be recorded continuously and indefinitely. This provides a durable audit trail throughout the entire transaction asset lifecycle and reduces the cost of compliance while better verifying the authenticity of the asset.
