Blockchain ‘Don’t Trust, Verify’ approach can improve traditional trade market

In a world where new technologies are progressing more and more as the use of 3D printing, Internet of Things (IoT) and Artificial Intelligence (AI) are on the agenda, commercial dynamics are designed to be changed to allow a product sector remodelling.

It’s clear that the current trade regime is obsolete and unsuitable to deal with the imminent changes.

In this scenario where it’s essential to use a new dynamic and fluid system for the values’ exchange, Blockchain comes into the scene, allowing untrusted parties to negotiate by relying on a digital truth.

The application of the Don’t Trust, Verify approach, which summarises Blockchain’s intention, would make cross-border relations more efficient and reduce the commercial friction between companies by increasing their profits.

At the end of 2016, a select group in Hong Kong started working to find the best strategies to make a completely digital trade among 65 countries involved in the Chinese Belt and Road initiative.

The “Belt and Road” Consortium realized that supply chains need Blockchain features, namely: transparency, immutability and responsibility.

For its efficiency, currently also large companies like IBM, Walmart and Maersk are looking for ways to apply this technology to their distribution chains.

In addition, startups like Provenance and Skuchain are also creating Blockchain-based tools that can be used by companies.

Although Blockchain is the most suitable technology for the realization of a fully digitalized commercial architecture, the Consortium recognized the presence of two fundamental problems related to its global diffusion: the first obstacle concerned the independent verifiability that is currently represented by QR (Quick Response) codes; the second concerned the liability and validity of data written on Blockchain that once inserted become immutable, in case of error they are called Fake Data.

Considering traditional information security concepts, the Blockchain address verification is similar to the resolution of cross-border responsibility problems with Internet Domain Names which identified a need for a Blockchain Naming Service (BNS), with common business identity standards to interface with the registers of sovereign companies.

According to this model it’s possible to verify that it is a given company to manage a wallet and none other than it.

On the other hand, about validity problem, it’s useful to have a look at KYC know-your-customer concept. This is what the intersection between IoT and Blockchain defined as KYM know-your-machine.

The ideal place for the Blockchain-based government system creation is represented by Hong Kong as it offers free access to the Internet, is inherited from the common law and the ‘public government / private affairs’ creed.

Last year Global Smart Container Alliance was created in Shenzhen, which deals with smart shipments monitoring and ‘E-locks’.

Through E-locks use, we tend to reduce trading complexity and costs. The success of this technology has been demonstrated by its use for commercial exchanges made in March 2016 between the authorities in Hong Kong and Shenzhen, considered Silicon Valley on the territory of China.

One of the most exciting perspectives of Blockchain’s global use in the commerce sector is the market demand growth. This means that production will be organized in response to the customer’s demand and not in advance, allowing to achieve good liquidity and the discovery of the market.

Environmental protection represents another of the Blockchain potential benefits as it would allow the reuse or return of products and materials, thus generating an economy that we can define circular because there would be no waste.
Through the incentive to recycle raw materials, significant results would be obtained to safeguard the environment.
This is the goal that for some years the whole Europe has been trying to achieve by fighting against the so-called “planned obsolescence” that characterizes our consumption.

This battle takes place through purchases, especially in the production of reusable products.
Blockchain and tokens dedicated to incentive the use, could be of further help in this tough fight against consumption.
Cryptocurrency exchanges currently operate market mechanisms that determine intangible property (IP).

This approach can also be extended to industry 4.0 manufacturing and technologies.
Finally, Blockchain can act as a market itself because monetization takes a long time after production.

As for the immediate future, there is certainly the risk of a trade war between the United States and China, with Hong Kong, but it is hoped in an agreement between these two powers to establish new trade rules using a global Blockhain-based commercial architecture.

CREDITS

This article was originally written in Italian by Mattia Franzoni and translated in English by Stefania Stimolo for NovaMining.