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How linking blockchain, AI, IoT can unlock $1Trillion trade value

Linking blockchain, AI, IoT among other technologies could unlock more value especially for supply chain operations. This is one of the main findings by a new research by World Economic Forum (WEF) white paper published in September 2018. Furthermore, more than $1 trillion in trade volumes could be unleashed by using distributed ledger technologies such as blockchain. This would be attributed to more efficiency and transparency  adopted by new technologies such as blockchain.

Moving flowers from Kenya to Netherlands

IBM and Maersk run a test shipment of how flowers move from Kenya to Netherlands. They found that there are 200 communications documents along the way. Costs are associated with processing and admin costs. Such costs make up to one-fifth of physical transportation costs. IBM and Maersk went further and launched a shipping platform called Tradelens.  Tradelens is meant to use blockchain to have a trusted and efficient way of connecting, coordinating, the shipping process which is an integral part of the global supply chain.

If it works as expected it could play an important role in unlocking new value in the $16 trillion industry. Tradelens seems to gain support of many players in the shipping industry. In my view, Tradelens is to shipping what Ripple is to banks payment system, SWIFT.

Digitizing supply chain workflow would increase transaction efficiency.

If countries could reduce 2 supply chain barriers: border administration and telecom/transport infrastructure- to half of global best-practice levels, global GDP could improve by 5% while trade could improve by 15%.

In comparison, eliminating all import tariffs could increase global GDP by just 0.7% while boosting trade by 10%.

Therefore, improving efficiency could have more impact than tariffs.

This is how a combination of blockchain, AI, IoT could work together to improve supply chain operations:

Tokenization: ability to give symbols to sensitize data (goods and services) enabling creation of digital identity for goods in transactions. Furthermore, this allso improves traceability in the process of supply chain transparency. Eg use of crypto tokens inside a blockchain to transfer goods/services from one person to another. Then the holder can exchange those tokens for fiat or any other crypto if they want. This eliminates the need for payment gateways. Meanwhile, process is cheaper, fully transparent and reduces complexity in payment processing.

Smart contracts: self-executing contracts upon fulfillment of certain conditions- eg payment and delivery terms.

IoT devices;enabling communication between devices. Reducing need for central control.

AI tools: predictor tools that could further enhance efficiency of blockchain eg prediction of working capital requirements.

APIs: Application programming interfaces: allow communication between applications and blockchain.

Example of application: Australian cotton trader Brigham Cotton Marketing (BCM) wanted to ship 88 bales of cotton from Texas in USA to Chinese port of Qingdao. 2 separate banks, Commonwealth bank of Australia and Wells Fargo used a combination of blockchain, smart contracts and IoT to facilitate the trade.

image source: Bain & Company

How the flow happens: IoT sensors allow banks to monitor shipment route. Thereafter,  smart contracts are then triggered to release payment for cotton once it crossed a predefined destination. In future, this could be optimized further to have native tokens such that payment is released in terms of tokens. Recipients can later convert to any other cryptocurrency of their choice or fiat.

It is still sometime off before all these processes are optimized in order to work in the way they are intended. However, various organizations are working to see the way in which they can tap into these new technologies. You can read the full WEF whitepaper here.


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