Understanding blockchain’s role in trade finance

Fundamentally, blockchain is a decentralised digital ledger that records transactions across multiple computers meaning the registered transactions cannot be altered retroactively. In trade finance, blockchain applications aim to replace traditional, paper-heavy processes with streamlined digital ones as, historically, trade finance operations have involved multiple intermediaries - from banks and insurance companies to customs authorities and shipping firms. Each party maintains its own records, resulting in a lack of transparency, duplication of efforts and a heightened risk of discrepancies and fraud. Blockchain’s inherent characteristics of immutability, transparency and security address these issues by offering a single source of truth accessible to all authorised participants. By recording each step of a transaction on a blockchain, all parties involved can verify its authenticity in real time without relying on intermediaries. Smart contracts, which are self-executing contracts…