Blockchain is a distributed ledger of transactions grouped in blocks. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data.
The blockchain is decentralized, meaning no central administrator or third party executes or verifies transactions. Instead, all nodes on the network participate in maintaining the ledger and verifying transactions.
The interconnected nature of the technology makes it nearly impossible for one entity to take over control of the blockchain network and potentially manipulate its data. In addition to being decentralized, blockchain is also secure by design, using cryptography to secure its contents.
As a technology, blockchain began as an application primarily for digital currencies like Bitcoin. However, major sectors of the business world now utilize blockchain technology to their advantage, especially in their efforts for globalization.
After a tumultuous past couple of years due to the COVID-19 pandemic, globalization processes are again underway—with information, capital, and trade flows stabilizing. With the world slowly restoring its sense of normality, corporations are actively positioning themselves to expand globally via blockchain technology and digital currencies.
If you’re interested in learning about blockchain and digital currency, this article will discuss how using these advancements can benefit your company’s global expansion efforts.
6 Benefits of Blockchain on International Trade
1. Transparency
Blockchain technology provides transparency on many levels. First, it is a decentralized computer network with a copy of the entire ledger for its users. As such, no one person or company owns the data; it is on all computers simultaneously.
Second, because blockchain records transactions in real time, it is near impossible to manipulate data or falsify information. Third, the digital footprint on each transaction allows anyone to trace it back to its source with little effort.
2. Security
Those who value Bitcoin economics and network security may consider incorporating blockchain technology into their processes. Blockchain creates a virtually unbreakable chain of trust between all parties involved in an exchange. When buying from an overseas supplier, there may be concerns about timely, hassle-free payment or delivery.
However, blockchain technology records and verifies every transaction for both parties before the money changes hands, making fraud unattractive for both sides of the deal.
3. Efficiency
Companies often use the blockchain ledger as a single source of truth for all information related to exchange from beginning to end. The added security measure eliminates double data entry and reduces communication errors between parties.
The blockchain’s efficiency in these processes is possible due to the lack of involvement among intermediaries in exchanging assets via blockchain technology.
4. Reduced costs
Since blockchain relies on a peer-to-peer network, no intermediaries are necessary for processing transactions. Without a mediator, payments using blockchain reduce transaction fees and eliminate the need for third parties such as banks or clearinghouses.
5. Low risk of fraud
The decentralized nature of blockchain makes it difficult for hackers to compromise transactions because there is no centralized server for them to attack. These safeguards reduce the risk of financial loss from fraudulent activity such as identity theft, credit card fraud, and other kinds of online fraud.
6. Improved efficiency in supply chain management
Blockchain can help companies manage their supply chains by providing greater visibility into their inventory levels, shipping schedules, and other information related to their supply chain management processes. This increased visibility helps companies avoid out-of-stock situations.
Additionally, blockchain usage can reduce the amount of money spent on excess inventory sitting on shelves due to a lack of customer demand or failure to meet retailers’ quality standards.
5 Ways Digital Currency Positively Affects Global Trade
1. Easier transactions between countries with different currencies
Suppose you live in Canada and want to purchase a product from Japan. You usually must exchange your Canadian dollars for Japanese yen before completing your transaction.
This process can be time-consuming and may involve high fees paid to third parties like banks or credit card companies. However, you can simplify this process using digital currency like Bitcoin instead of fiat currency, otherwise known as government-backed currency.
Since digital currency presents no borders or restrictions, the exchange from country to country is generally instantaneous.
2. Alternative payment method
Anyone with access to the internet can use digital currencies, allowing them to transfer money and make payments in real time.
This technology has made it possible for people across borders to send money home, pay bills, and buy goods at a fraction of the cost they would incur if they were using traditional payment methods such as cash or checks.
3. Ability to monitor your products
For retailers that often deal with deliveries, blockchain effectively monitors your goods’ movement. Using blockchain technology, you can track goods through the entire supply chain process, including where they come from and where they go.
Blockchain technology allows you to keep track of your inventory more efficiently while providing more transparency. Real-time monitoring through blockchain can help reduce costs associated with product recalls and increase customer trust in your product offerings.
4. Financial inclusion
In developing countries, many people do not access traditional banking services or credit due to a lack of documentation. Digital currencies allow these individuals to receive funds without additional paperwork, benefiting parties that send or receive money.
For example, someone traveling abroad might send money home to family members through a digital currency exchange without needing an international bank account or credit card. The recipient then withdraws the funds from an ATM or mobile wallet app using their phone number as identification.
5. Access to capital
Small businesses often struggle to obtain financing from traditional banks because they lack collateral or sufficient resources to act as a form of guarantee in repaying loans and avoiding defaults.
Digital currencies provide you with an alternative source of funding for your businesses instead of relying on unobtainable loans from banks due to low credit scores or lack of assets.
Global Domination in the Digital Business Space
Blockchain technology and digital currency have gone a long way from being a payment mode and an avenue of earning passive income. It’s become way more significant than that, impacting modern businesses in revolutionary ways. Today, several business sectors utilize these technologies to expand their enterprise’s global reach.
From making worldwide transactions more straightforward and secure to giving small businesses access to funding, blockchain and digital currency are fast becoming an asset for corporations with dreams of globalization. Consider blockchain and digital currency in mobilizing your global expansion journey.
