[PDF] Can Blockchain revolutionize international trade?

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Can Blockchain revolutionize international trade?

Table of contents Acknowledgements v Executive summary vii 1 Introduction 1 2 Blockchain in a nutshell 3 1 A brief history 3 2 Blockchain 101 5

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Can Blockchain

revolutionize international trade?By Emmanuelle Ganne

Can Blockchain

revolutionize international trade?

By Emmanuelle Ganne

© World Trade Organization 2018

Reproduction of the material contained in this publication may be made o nly with the written permission of the WTO Publications Manager.

Print ISBN 978-92-870-4760-1

Web ISBN 978-92-870-4761-8

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Photo credits:

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Published by the World Trade Organization.

Disclaimer

The opinions expressed in this study are those of the author. They are n ot intended to represent the positions or opinions of the WTO or its members and are without prejudice to members" rights and obligations under the WTO. Any errors are attributable to the author.

Table of contents

Acknowledgements

v

Executive summary

vii 1.

Introduction

1 2.

Blockchain in a nutshell 3

1.

A brief history 3

2.

Blockchain 101 5

3.

Types of blockchains 8

4. Smart contracts - A smart invention with no smart component 13 5. Multiple applications... but not a solution to everything 14 3. Can Blockchain revolutionize international trade? 17 1.

Towards paperless trade? 17

2.

A new generation of services? 46

3.

Strengthening intellectual property rights 57

4.

Enhancing government procurement processes 67

4.

A world of opportunities... and challenges 77

1.

Multifaceted opportunities 77

2.

Success is not a given 90

5.

Conclusion

111

Annex - Blockchain for tech fans

113

Glossary

120

Bibliography

128

Abbreviations

142

List of figures and tables

144
iii

Acknowledgements

My sincere thanks go to my colleague Ms Kenza Le Mentec for her precious guidance. Kenza introduced me to the subject and provided invaluable inp uts, in particular for the technical sections describing the technology and the section on trade facilitation. This publication would not have been possible withou t her support. I am also most grateful to Mr Shashank Rai, Senior Strategic Technology

Specialist

at UNICC, for his technical insights, advice and guidance, and for having taken the time to exchange views and review the report. His technical inputs were extremely valuable. My thanks also go to the various experts from Accenture, the Danish Cust oms, Deloitte, the Dutch Customs, Everledger, IBM, Maersk, VCargoCloud and We .trade, who took the time to talk to me and share their insights on Blockchain a nd the various projects on which they have been working. In addition, I wish to thank Enrico Camerinelli, Senior Analyst at Aite

Group, Shantanu

Godbole of IBM Research, Philippe Heeren, Lawyer at Deloitte Legal, Jona than Koh, Managing Director at Trade Facilitation Pte Ltd, Lance Thompson, Secretary, UN/CEFACT - UNECE, as well as the Hyperledger team, in particular Bri an Behlendorf, Executive Director of the Hyperledger project, Ry Jones, Com munity Architect, and Marta Piekarska, Director of Ecosystem, for their technical comments. My thanks also to WTO colleagues who provided comments: Rob Anderson, Ma rc Auboin, Robert Koopman, Juan Marchetti, Nora Neufeld, Simon Padilla, Rob erta Piermartini, Melvin Spreij, Jayashree Watal and Christiane Wolff. v

Executive summary

Blockchain is much more than Bitcoin.

Blockchain"s first implementation as the technology underpinning Bitc oin has led many to associate Blockchain with Bitcoin. However, the potential use of Blockchain goes well beyond the world of cryptocurrencies. For some, it is a techno logy that will change our lives, while for others it is a pipe dream; no technology has stirred up so much debate since the advent of the internet. However, despite the numer ous headlines on Blockchain, the technology remains difficult to apprehend f or many. Blockchain: a tamper-proof, decentralized and distributed digital record of transactions that creates trust and is said to be highly resilient. A blockchain is a decentralized, distributed record or “ledger" of transactions in which the transactions are stored in a permanent and near inalterable wa y using cryptographic* 1 techniques. Unlike traditional databases, which are administered by a central entity, blockchains rely on a peer-to-peer network that no single party can control. Authentication of transactions is achieved through cryptographi c means and a mathematical “consensus protocol"* that determines the rules by which the ledger is updated, which allows participants with no particular trust in each o ther to collaborate without having to rely on a single trusted third party. Thus , Blockchain is, as The Economist calls it, a “trust machine". Participants in a blockchain can access and check the ledger at any time. Blockchain therefore ensures immediate, across-the-board transparency, a nd as transactions added to the blockchain are time-stamped* and cannot easily be tampered with, blockchain technology allows products and transactions to be traced easily. Smart contracts* - i.e. computer programmes that self-execute when certain conditions are met - can be used to automate processes, further reducing costs. Because of their decentralized and distributed nature and the use of cry ptographic techniques, blockchains are said to be highly resilient to cyber-attacks compared to traditional databases - although there is no such thing as perfect re silience. vii viii CAN BLOCKCHAIN REVOLUTIONIZE INTERNATIONAL TRADE? Blockchains can be public, private or managed by a consortium of companies, and they can be accessible by everyone (permissionless) or restricted (permissioned). There are various ways to categorize blockchains. Blockchains are often classified as public (no specific entity manages the platform), private (the pla tform is controlled by a single entity), or managed by a consortium of companies. Another c ommonly used classification is permissionless (the blockchain is open to everyo ne - the most well-known example being the Bitcoin platform) or permissioned (restri ctions can be imposed on who can read and/or write on the blockchain). There are, in practice, many variants of blockchains depending on the objectives being sought. M any applications in the field of international trade fall into the category of permissioned/ consortium blockchains. While, strictly speaking, Blockchain is only one type of distributed ledger technology (DLT), the term is now commonly used to refer to distributed ledger technologies in general. Blockchain"s potential trade-related applications are numerous and could significantly transform international trade... but the technology is not a solution to everything. From finance, including trade finance, to customs and certification proc esses, transportation and logistics, insurance, distribution, intellectual prop erty (IP) and government procurement, possible applications of Blockchain encompass a diverse set of areas related to WTO work. While the technology opens interesting opportunities to enhance the efficiency of a number of processes and cut costs in these areas, it is not a panacea. Carefully weighing the costs and benef its is essential. Blockchain could open new opportunities to enhance the efficiency of processes in a number of areas related to WTO work. Blockchain could help trade move closer to becoming paperless. From trade finance to customs clearance, transportation and logistics, t rade in goods involves multiple actors and remains paper-intensive. Blockchain i s seen by many as an interesting tool to improve the efficiency of trade processes and help move towards paperless trade. However, the challenges to overcome are equivalent to the opportunities offered by the technology.

EXECUTIVE SUMMARY ix

Blockchain is seen as a possible game-changer to digitalize and automate trade finance processes, in particular letters of credit, and to ease supply c hain finance. An array of banks working with financial technology (fintech) startups and information technology (IT) companies are investigating the potential of the technology. Pilot projects are encouraging, but a number of technical an d regulatory issues need to be addressed before the technology can be used on a wide scale. The intrinsic characteristics of the technology also make it a potential ly interesting tool to help implement the WTO Trade Facilitation Agreement (TFA) and to facilitate business-to-government (B2G) and government-to-government (G2G) proc esses at the national level. Blockchain and smart contracts could help adminisquotesdbs_dbs4.pdfusesText_8