A Blockchain Technology Approach for the Security and Trust in Trade Finance

Abstract

Majority of current businesses are interested in building communities by collaborating with each other for solving common business problems forming decentralized peer to peer network. International trade is one of such industries which is striving to work in collaboration. Multiple entities involved like buyer, seller, service providers and regulators want to work together but having major trust and security concerns. Such applications are distributed in nature therefore require distributed control and security mechanisms. The current practical security solutions have centralized approach, so they might be inefficient for these applications. The blockchain technology is distributed in nature. Prominent features of blockchain like distributed ledger Technology and smart contracts makes it a promising solution for decentralized and distributed cross border trade business. The aim of this paper is to provide pain points of global trade system with respect to security and trust, and to provide solution by blockchain technology considering Letter of credit as a method of trade finance. We propose a blockchain technology enabled smart contract approach for ensuring the security of and trust in the trade ecosystem.