Changing the Face of Trade Finance [with the Blockchain]

There are a few markers for human advancement that signify our growth concisely. One of the most interesting among them is the current trajectory of technological advancement. Computational power paints a picture similar to recent stock charts: up and to the right.

What’s particularly interesting about the evolution of of microchips and software systems is their ability to double every 18 months. This observation is commonly referred to as Moore’s Law, and it was first documented in 1965 by the co-founder of Intel, Gordon Moore.

Moore’s prediction proved to be accurate over the course of the decades that followed, and proof of it’s accuracy can be seen in adjusted microprocessor prices, memory capacity, and even in the resolution of cameras.

A plot of CPU transistor counts introduced between 1970–2016

The rapid evolution of processing power continues to directly influence the global population, and in relatively speaking, it’s only just begun. As internet infrastructure transforms from a luxury to a utility, and computers continue to get smaller and more powerful every 18 months, we can expect an explosion of commonly used products to be integrated into the Internet-of-Things(IoT). This could lead to a future where all of our electronic devices are smart, connected, and economically independent. There’s a popular phrase that summarizes the IoT in a concise and comical way: “Internet of Things is when your toaster mines Bitcoins to pay off its gambling debts to the fridge”.

It’s hard to say if we’ll be able to delegate our gambling vice to our refrigerator, however, the complexity of an interconnected digital system is currently underway, and it’s making itself known in some of the most influential industries we have today.

Blockchain Technology Disrupts Industries

It’s increasingly difficult to find a business model that doesn’t utilize the benefits of internet technology in some way, and the amount of people heavily relying on the internet for their career continues to climb.

Seeing as the internet is essentially brand new, we can expect to see fundamental shifts in it’s structure now more than ever, and one of those shifts is happening with the widespread use of blockchain technology. We can witness the evolution of major industries like healthcare, finance, technology, and pharmaceuticals firsthand.

Although cryptographics are proving to be a developmental boon, and the idea of decentralization redistributing power is popular, the major reason almost 80% of Americans have heard of Bitcoin stems from the opportunity to make significant returns by investing in a new and volatile market.

Financial Institution Evolution

Cryptocurrencies are exploding onto the global scene, and bringing blockchain to the forefront of finance. The fintech industry stands to see the most innovation with the uprising of distributed public ledger, since blockchain technology at its core is the next step for financial technology.

Taking a brief step back, it’s safe to say that the general purpose of technology is to make human life easier. We invented agriculture and built cities to ease the burdens of hunting and gathering. We invented airplanes to make traveling faster, safer, and cheaper. As technology advances, less manpower is required for society to function.

We see the same thing happening today in trade finance. Offices filled with business attire and paperwork are being automated by entirely new software solutions. Instead of paying for a dedicated, competent team, business owners are finding ways to outsource entire departments to the cloud.

The image above shows the basics of how trade finance currently operates. The system is mostly compartmentalized, meaning each actor has little to no knowledge of how another actor operates. At the top of your average financial institution’s to-do list is increasing the visibility and transparency it’s system to lower the costs of running it. Put in simpler terms, banks want to streamline their process. Less “drag”, more profit.

*This article was originally published on LiqEase blog.