The technology behind blockchain is rapidly developing as it promises new economic, business, social and technological models that can pervasively impact the manners in which business and social interactions are conducted. Blockchain, initially known for its tremendous impact in the formation and application of the well-known crypto-currencies, such as Bitcoin, has blossomed into other technological applications in the financial services sector. Major financial institutions such as JP Morgan are testing blockchain and are posited to replace existing technology over the medium-run. Blockchain is particularly appealing to financial institutions because it tackles the problem of tracing asset ownership over a long chain of changing buyers in global financial transaction services since it is still not always possible to identify the correct present owner of an asset. In the same manner, recent developments indicate that blockchain can be applied to a wide range of industries to help identify different varieties of physical goods. The core algorithm behind the technology uses a digital ledger to efficiently share and track information related to contracts and transactions and prohibiting any manipulation of the data while ensuring that the data cannot be erased. This distribution ledger system offers many benefits but has yet to be deployed widely for commercial use, in spite of the fact that many large corporations are currently testing it. There has been increasing traction in interest among the healthcare, supply-chain management and shipping industries. The rise of blockchain technology in recent years may have an interesting implication for trade with the potential to revolutionize the way trade is conducted.
This increasingly complex web of supply chain currently present in the trade industry makes it tremendously difficult to identify the origin of products that consumers purchase. Therefore, the expectation is that blockchain can provide legitimate proof of product due to its immutable nature. Intermediation is the current solution for verifying ownership of assets and transaction processing. It is up to intermediaries, such as agents, wholesalers, distributors, and retailers, to perform meticulous checking along the supply chain to ensure delivery of the products to the consumers. This process is time consuming and costly as well as possessing inherent risk if an intermediary fails to deliver. In addition, this process relies on trusting people since it involves human intervention. Blockchain technology provides a system to overcome these challenges. If blockchain was visible by a Customs entity, goods could be cleared without the need for any additional intermediaries.
Blockchain offers several key characteristics required to ensure accuracy, transparency, and traceability of conducting trade while lowering costs both for governments and businesses. These characteristics include data integrity, simplification, increased security and confidentiality of data. Already, the private sector has begun to test the impact of using blockchain on trade logistics. For example, IBM has teamed up with the shipping giant Maersk to complete a pilot program using blockchain to facilitate a shipment from Kenya to Rotterdam with other programs along the way. On the public side, Dubai is the first city to back the technology on a government level. Dubai aims to integrate blockchain technology to all aspects of government services and transactions by the year 2020.
