Benefits and Challenges of Implementing Blockchain in Cross-Border Trading
Benefits and Challenges of Implementing Blockchain in Cross-Border Trading
The blockchain technology is used in the tracking of goods and services and provides the full auditing process which improves traceability. Therefore, businesses gain confidence and authenticity and improve the quality of the products. The customers have capabilities of tracing each product through the authorized blockchain platforms. The businesses can easily locate and trace any problem that might come up due to technology.
Benefits
The process of operation of the blockchain technology increases accountability (Chang, Iakovou & Shi, 2019). The technology is actively used in recording the asset provenance, legalities, and the transfer of ownership. The system provides real-time transparent data that saves the time of solving the disputes.
Blockchain technology is expected to advances in the years ahead. Blockchain technology will improve the business, especially in enhancing chain and supply. Technology has enhanced the movement of cargo from one place to another. The paper presents the challenges and benefits associated with the blockchain technology and specifically in the cross border trading.
The blockchain technology is highly secure in terms of identifying the users using the unique identity that is linked to the personal account. The technology has strong encryption mechanisms that reduce the cases of hacking and disruption of the system. The cargos are also easily monitored and tracked through the blockchain technology.
The blockchain has also enhanced the digitization process of the supply chain (SC). The technology provides the mechanisms of storing information in the digital format, which reduces the cost and time for transactions. The automation process can also be extended to other related sectors such as insurance, legal, among others. The technology is also intending to automate each of the business processes.
Challenges
Scalability is a challenge in blockchain technology. The technology requires a widespread of approvals in several industry sectors (Chang, Iakovou & Shi, 2019). There is a need to process every transaction due to the requirements by the blockchain architecture. Time becomes a factor of consideration while processing the transactions. Additionally, Bitcoin and Ethereum can only process approximately 3 to 30 transactions per second. Therefore scalability becomes a challenge because of the limited number of transactions.
Interoperability of blockchain technology. The interoperability is the ability to share information and transacting across other blockchain systems. The interoperability has been proven elusive in blockchain technology. The users should interact easily with another blockchain.
The challenge of standardization. The standards are critical in establishing market confidence for the support of blockchain technology. The standardization process is a requirement when several transactions are made among the users. Standardization is still a challenge, especially by providing the international agreed ways of working in the environment of blockchain technology. The international organizations are working in establishing the standards and rules that will help in increasing the relevance of blockchain.
Legal and Regulatory challenges. There exist several legal challenges in the adoption of the blockchain. The challenges include the distributed jurisdiction and laws, the legal framework, which enhances the legal validity, responsibility, and accountability as well as data privacy.
In conclusion, blockchain technology has challenges and well as benefits. The challenges include interoperability, scalability, and standardization, among others. The benefits of blockchain technology will increase due to the increase in the application in several sectors. The researchers are looking forward to minimizing the challenges of technology.
References
Chang, Y., Iakovou, E., & Shi, W. (2019). Blockchain in global supply chains and cross border trade: a critical synthesis of the state-of-the-art, challenges and opportunities. International Journal of Production Research, 1-18.
