Rapidly increasing numbers of startups, entrepreneurs, and investors in the blockchain market have triggered a spike in interest amongst financial institutions and establishments for blockchain-based financial solutions.
The blockchain technology, unlike other emerging fintech solutions, offer transparency and security to various platforms and applications. Two specific features of the blockchain, which financial organizations are determined to implement, is real-time visibility and irrefutable storage of data.
The blockchain network, which is spread across many computers, protocols, and a public distributed ledger, provides enhanced security benefits which allow organizations to store unalterable yet transparent data with low costs.
Over the past two years, an increasing number of startups have utilized these two features of the blockchain network to create smart contract platforms, which enable users to store, receive, and send sets of irrefutable data on an open network, without the presence of an intermediary or a mediator.
A smart contract platform built on a blockchain network can economically benefit industries such as the trade-financing industry, which heavily rely on the settlement of sensitive information.
Corporations and establishments in the trade-financing industry are estimated to spend billions of dollars annually, due to the complicated and time-consuming process of managing paper-based multi-party contracts that require a verification period of weeks.
Typically, the authentication process of trade-financing contracts take longer than others because of the involvement of a third party arbitrator that manually verifies the contractual benefits of each party.
This verification period can be eliminated if the contractual agreements of both parties can be integrated onto a distributed network that is transparent, so that once each party satisfies the contract, funds will be released from the benefiting party.
The advantage of the blockchain network in such cases is its ability to ensure each party owns its properties and a copy of the smart contract.
Financial institutions and banks in the R3 are already planning to pilot test smart contract-based applications in the trade-financing industry, with the help of its partners.