On the sands of Arrakis and in the bustling markets of feudal Japan, trade is the lifeblood of society.
Just like the characters in Dune And Shogun Navigating complex networks of alliances and trade, companies face similar challenges in today’s complicated global trade landscape.
But as supply chains become increasingly complex, it is blockchain technology that is tasked with revolutionizing and modernizing trade finance, providing a transformative solution to the persistent trade finance gap.
While trading may sound like a complex conversation, two recent publications on the topic have attracted a wide audience. Dune: part two has generated over $490 million at the box office, and Shogun amassed 9 million streaming views worldwide, becoming the best global debut yet for a scripted series from Disney General Entertainment.
Today, in the real world, trade also extends across the globe, creating challenges for micro, small and medium enterprises (MSMEs) that need financing to support their operations.
The recent rise in interest rates and tightening of credit have led to more problems managing capital demand, putting pressure on companies on both sides of their ledgers with higher production costs and higher costs to borrow.
Today’s financial institutions are unable to respond to these demands on their own, especially in regions where adequate banking systems are lacking. It is clear that the traditional banking system has not caught up with the needs of the global supply chain.
Enter blockchain.
Blockchain offers financial institutions the opportunity to use distributed ledger technology and digital asset solutions to meet the excessive demand for capital with sufficient supply. For that reason, the most common and impactful use case for blockchain will be in the trade finance sector.
The $5 trillion trade finance gap represents the collective difference in the demand for and supply of capital for global transportation, hindering the flow of money to where it is needed most: SMEs.
A reflection of the struggle of those small traders Shoguns In legacy markets, MSMEs are disadvantaged due to inefficiency, lack of visibility and centralized systems that hinder their access to finance.
As a decentralized and transparent ledger, blockchain is emerging as a powerful tool to address the shortcomings of traditional trade finance. It is clear that the most common and impactful use case for the technology will be in the trade finance sector.
Blockchain creates new opportunities – for suppliers, buyers, banks and non-bank originators – and new rails to trade in real-time, while simultaneously transporting immutable data, documents, capital and digital representations of real-world assets.
As governments around the world recognize this potential, blockchain’s role in global trade will become increasingly indispensable. We are already seeing this with the United Nations Model Law on Electronic Communicable Documents (MLETR), which enables transferable documents and instruments in electronic form, and other regulatory developments in Europe, Asia, the Middle East, Africa and South America .
Different than inside Dunes Arrakis and Shoguns On the shores of feudal Japan, our modern trade networks can flourish and help solve growing supplier demands, even easing pandemic-era disruptions.
Blockchain also presents the greatest opportunity for SMEs, originators and investors – who have found themselves in the trenches of the global supply chain – to rise above outdated models and create a new vibrant ecosystem for businesses. And when user-friendly interfaces become more widespread, blockchain’s momentum will truly become unstoppable.
Read more in our opinion section: Blockchain really is better than intermediaries
With these opportunities, you would think that people in the blockchain and crypto space would embrace its power to create new rails on which businesses can build and economies scale. But there seems to be a real misunderstanding about the possibilities of blockchain. Or perhaps there is a lack of understanding of trade finance and its value proposition.
Investing in the most popular dog memecoin, on the other hand, is an easy-to-understand proposition. This is the riddle of blockchain. Users want the excitement of a fervent market over the slower path to trade finance adoption.
The route is more challenging for protocols to gain traction with those in the space who don’t understand blockchain’s value proposition in trade finance. This limiting spirit will not solve the problem of financing MSMEs around the world and in turn return value to blockchain networks.
Ultimately, our ethos should be rooted in this question: How do we create a more egalitarian way to raise all boats, to ensure that everyone succeeds?
We do this by making blockchain more accessible to more people. Everyone will win: those who want to own a memecoin and those who want to create a better way for businesses around the world to grow and prosper. Or even those who want both.
Billy Sebell is the Executive Director of the XDC Foundation and an early contributor to the XDC Network. Since early 2018, Billy has been working to develop the XDC community, focusing on ecosystem and network growth and implementing use cases in trade finance. Billy previously worked for more than 25 years in the manufacturing and consumer products industries, addressing the challenges companies face in the capital markets and international trade.