Blockchain revenue growth may cross the mark of $1 trillion in world trade, predicts the new report from World Economic Forum (WEF).
A white paper entitled “Trade Tech – A New Age for Trade and Supply Chain Finance” published in June, analyzes the supply chain management and the role blockchain is going to play in the upcoming future, especially with small and medium-sized businesses (SMEs). According to the Asian Development Bank, the trade gap/ trade deficit is expected to increase from $1.5 trillion to $2.4 trillion by 2025. The gap is primarily because of the inaccessibility of small business to credit, specifically affecting businesses in the Pacific and East Asia.
The importers require payment for their goods in advance from the suppliers, $1.5 trillion trade gap here refer to the deficit created by businesses when they are unable to front the payment capable of generating the trade revenue.
The report mentions, “Distributed ledger technology, can reduce a large part of this gap, facilitating about $1.1 trillion of new trade volumes globally. Trade allows countries to specialize in industries; it helps technologies and ideas to spread and yields economies of scale.
But a major impediment stands in the way of expanding trade and making it more efficient and safe: namely, paper-intensive, manual processes.”
A section of the white paper called “Financing: suffering under the paper monster” discusses this in detail, referencing to an experiment in which a single shipping container was tracked from Kenya to the Netherlands by Maersk and IBM only to find out, how deeply faulty the process was. It took the container 34 days to get from the farm to the retailers, among them 10 days were spent waiting for the documents to processed and even after this wait one critical document went missing, only to be found later between the stack of papers.
Highlighting the problem WEF says, “Paper-based, manual processes, some created centuries ago, lead to complexity and delays, introduce errors and risks, and stand in the way of reliable, real-time information gathering and tracking required for credible financing decisions.”
Moving these processes from the paper trail to a DLT will positively impact the environment and will also help in reducing the smuggling. And the use of blockchain in tracking will save a lot of valuable time.
The trillion dollar growth predicted by WEF in the next decade equates to 1.5% growth of the global GDP credited entirely to the blockchain technology.