THE USE OF BLOCKCHAIN TECHNOLOGY IN INTERNATIONAL TRADE

Abstract. In this article, we consider the development of the use of blockchain technology in international trade, one of the areas of digitalization of the economy, analyze the characteristics of the blockchain technology and the possibility of its application in companies, depending on the specific aspects of the business activity of each company. They emphasize that blockchain technologies are especially effective in preventing fraudulent transactions in the execution of a contract, in particular, for fixing the country of origin, controlling the movement of each part during its processing in different countries, in export deliveries of goods, in determining the conditions of consumption. of goods sold and prevention of errors in payment for purchased goods. Significant efforts of companies in financing start-ups in the conduct of research and development of new blockchain technologies are also noted.

Keywords: e-commerce, blockchain, commercial contract execution. 

I. Essence and possibilities of blockchain

One of the most important areas of application of the achievements of scientific research and development is the digitalization of the economy, that is, the widespread use of digital technologies in industrial and social life. The basis of the process of digitization of the economy is formed by such technologies as the widespread introduction of robots, automated workplaces, additive manufacturing technologies, and blockchain technology.[1] The essence of the latter is to use the technology of distributed information storage on several (sometimes thousands) computers, resulting in the sharing and synchronization of digital data, the geographical distribution of equivalent copies in different locations around the world, and the absence of a central administrator. In other words, a “blockchain” (block chain) is a distributed database in which data storage devices are not connected to a common server. This database stores an ever-growing list of ordered records called blocks. Each block contains a timestamp and a link to the previous block.[2] The technology under consideration allows you to record and store information in a network that is both decentralized (data is stored on several servers) and distributed (these nodes are interconnected and interact with each other). Such networks can be either private or public.[3]

II. Directions of use of blockchain

1. Countering fraud in relation to the quality and place of manufacture of the supplied goods in international trade. Transactions in international trade are made on the basis that the delivered goods have the quality and country of origin fixed in the contract. Buyers do not have a reliable way to verify the authenticity of supplier claims. This increases dependence on the need to conclude and execute long-term and large contracts with established players and creates natural barriers to entry of new and smaller suppliers into the market, which in turn damages real competition. Since transactions are shared and verified on a peer-to-peer basis, the computer system can function in a single company involved in the transaction or in trusted intermediaries, and information once added to the blockchain is time-stamped and cannot be easily changed. Thus, blockchain technology makes it possible to create a common reliable registry, to which all participants can access and check the information contained in the registry at any time, but which cannot be controlled by any party. As a result, blockchain technology has come to be referred to in the economic literature as a “trust machine.”[4]

2. An important point is the efficiency of using blockchain technologies to ensure the safety of goods. Globally, theft of cargo in international trade costs road and rail carriers between $23 billion and $60 billion a year.[5] Blockchain technology can help prevent and almost completely eliminate some forms of cargo theft. One of the most common forms of theft is when the attackers determine the scheduled pickup time of the goods from the shipper earlier than the scheduled time (for example, 2 hours), look through the documents and bring their vehicle. The attacker's driver connects to a loaded trailer, takes out the cargo, and only a few hours later the real carrier arrives. By then, the cargo is gone.

The use of blockchain technology to control the movement of goods makes it much more difficult for an attacker to carry out such a robbery, thanks to the ability to connect to a ledger in which information related to goods has been registered in advance and cannot be hacked. In addition, we note that in order to guarantee the export of goods by a real forwarder, and not by an intruder, it is technically possible to provide a confirmed digital copy of shipping documents and a photo of a real driver at the port.

3. ​​Another tool for transforming global trade is the digitalization of financial services, which makes it possible to reduce the cost of moving funds between transaction entities operating in different countries. There are three areas of blockchain application that can significantly improve the process of cross-border financial transactions.[6] The first is the cryptocurrency payment system, which is very popular in developing countries (BitPesa in Kenya, Bitso in Mexico, OkCoin in China, OkLink, Coinsensure in India, Remit.ug in Uganda). The second direction involves the use of blockchain to provide users with services for cheap, and sometimes even commission-free transfer of fiat money [7]. The third allows financial institutions to make payments without resorting to the use of the still rather slow institutions of the traditional financial system. As a result of the use of blockchain technology, it becomes possible to implement the transfer of money under a transaction in a short time. For example, if using the SWIFT system, the process of a cross-border transfer can take from 3 to 5 business days, then the Ripple platform, based on blockchain technology, allows it to be completed in 3–6 seconds. Major players in the financial business do not stand aside from new technologies and experiment with the creation of appropriate services based on the blockchain. Suffice it to say that Visa, MasterCard and J.P. are actively involved in the implementation and development of such products. Morgan, who consider blockchain as a powerful source of cost reduction. Thus, according to some data, by 2022, thanks to the blockchain, financial institutions will be able to save up to 15-20 billion dollars annually.[8]

III. Possible ways to solving the problems of the use of blockchain technology at the international level

The growth in demand for new technologies is spurred on by increased market competition: those companies that start using revolutionary technologies earlier benefit more than others from them. This is also true of the emerging technology called blockchain. As a powerful tool of trust, blockchain allows parties to exchange data and services or make payments with a high level of trust. This provides users with tangible benefits, according to new IBM research. Over the course of history, scientific and technological advances have dramatically increased the level of self-confidence through the emergence of such innovations as paper money, the banking system, the printing press, electronic payment systems, the Internet and secure e-commerce. Each of these advances stimulated economic activity, creating systems that instilled the confidence that parties needed to work together. As a result, blockchain technology has been adopted by industrial and commercial firms, academia and governments in many countries around the world.[9] Blockchain applications extend far beyond the digital realm of industry and commerce and can impact every aspect of the real economy.

The use of blockchain technology will be able to change international trade if favorable conditions are created for the active development of this technology, follows from the report of the World Trade Organization (WTO). “Blockchain can make international trade smarter, but smart trade requires smart standardization, which is only possible through collaboration. If we manage to create an ecosystem that promotes more active development of the blockchain, international trade can change radically within 10-15 years,” the organization’s report emphasizes.[10]