What is Blockchain?

At its most basic level, Blockchain is a database that is shared across a network of Internet-connected computers. Data can only be added to the Blockchain rather than being changed or deleted. The newly added data will be examined for accuracy by a computer and shared with other computers in the system. As a result, data on Blockchain has the following characteristics:

  • Consensus: Blockchain participants agree on the method for checking and storing data on the Blockchain and this activity is performed by many computers. As a result, data on the Blockchain is the consensus of different participants and is reliable.
  • Provenance: data on the Blockchain network can only be added and cannot be deleted, therefore maintain data integrity.
  • Immutability: data on the Blockchain network is stored on many different computers and are identical. The data can only be deleted if the computers are down altogether, which is not likely for a network with a large number of participating computers.
  • Security: data is stored on the Blockchain network using the most cutting-edge cryptography to ensure its security. Besides, with Permissioned Blockchain, the administrator can manage data read/write permissions on the blockchain network.

Blockchain for Logistics

Given the aforementioned features, the best applications of blockchain technology are data storage and sharing between two or more companies, partners and organizations. Logistics itself requires coordination between different parties; therefore, blockchain technology can be very useful. This whitepaper presents 3 use cases which are likely to bring about the most values for the logistics industry. Those values are:

  • Paperless, reducing human effort and risks posed by human errors.
  • Cost reduction through digitalization of information, contracts, and documents.
  • Shorter information retrieval.
  • Increasing trust among partners thanks to the consensus in using a common method of storing and sharing data

Blockchain technology drew massive attention just in the past 2 years with the rise of cryptocurrency, technological advances and the launch of numerous Blockchain-based applications. It takes time to experiment and validate the efficiency of blockchain applications in enterprises. However, in Japan and around the world, the number of successful case studies for Blockchain application is on the rise. This not only inspires other companies to apply Blockchain but also pressures the legal system to promptly formulate policies to support enterprises in applying the technology. Developed countries, such as the US, China, and Japan have launched programs to develop their own cryptocurrencies. Meanwhile, the UAE is digitalizing its governmental document system, aiming to complete by 2020.

Cryptocurrency is considered one of the most cutting-edge and important inventions of humankind. For the first time in human history, people can make fund transfer of any value to someone thousands of kilometres away in just a few minutes without any intermediaries. Meanwhile, logistics is the industry with the highest number of transactions and goods value. Therefore, if cryptocurrency is adopted in Logistics, a considerable amount of time and money can be saved.

Problem

The biggest problems in cross-border fund transfer are:

  • High cost;
  • Lengthy transfer duration;
  • Complex procedure.

Solution and benefits

Comparison between conventional fund transfer and Cryptocurrency transfer.

Using cryptocurrency, companies can resolve all the problems of conventional fund transfer. For comparison, a fund transfer of $1,000 from the US to Hong Kong will cost $56, accounting for 5.6% of the transfer value. Besides, this method requires you to trust a third party to perform such transfer, such as banks or fund transfer companies. Meanwhile, the conversion of USD fiat into cryptocurrency to send from the US to Hong Kong and then convert back into USD fiat costs only $18 and requires no intermediaries. Seller and buyers can make fund transfer in real-time without any procedures or if yes, they can be fully automated.

In the near term, as cryptocurrency gains popularity as a medium of exchange, less fiat money will be used. At that time, the transfer of cryptocurrency costs only $1 or less.

Stable Cryptocurrency is a type of cryptocurrency with a fixed and volatility-free value. For example, Tether (USDT) is traded stably for 1 USD. Every day, more than $18 billion of USDT is traded.

Apart from funds transfer, Blockchain-based cryptocurrency can make automatic fund transfer using smart contracts. For example, when a condition is met, money can be automatically transferred. Or cryptocurrency can be “locked” in a special account that cannot be withdrawn by anyone. When all special conditions are satisfied, the amount of money encrypted in this account can be automatically unlocked and transferred to the programmed stakeholders. This application can also be adopted for the Letter of Credit.

Practical application

Currently, many countries, such as Japan and China, are examining to create their stable cryptocurrencies. Facebook, for example, has studied and published their stable coin called Libra. Libra can disrupt the global financial industry and promote wider acceptance of cryptocurrency, thanks to the access to 2.5 billion Facebook users worldwide. Libra will be monitored by Libra Association which engages numerous global powerhouses [1]. In 2018, HSBC performed the world’s first L/C transaction using Blockchain technology and cryptocurrency [2]. JPMorgan Chase, a multinational provider of financial and investment services and also the world’s sixth-largest bank, developed its own cryptocurrency called JPMCoin. JPMCoin is used for international transactions of its corporate customers.

Walmart, the world’s largest supermarket chain (by revenue) is also undertaking research to invent its own cryptocurrency to replace credit cards. Walmart’s customers can use this cryptocurrency to accelerate the transaction and reduce transaction fee from 3-15% on average to less than 1%.

Many large companies are also actively engaged in the application of cryptocurrency in payment and fund transfer, namely, Mitsubishi UFJ Financial Group (MUFG), AirAsia, Arias Intel Corp., Amazon, Tencent, Google and Rakuten. [3]

Blockchain CoE under FPT Software FWI has conducted a number of in-depth research on cryptocurrency and gained a profound understanding of both the technical aspect and trading market of cryptocurrency. Shortly after Facebook’s announcement on the impending issuance of Libra in 2020, Blockchain CoE’s engineers have experimented and developed a PoC for an e-wallet that can send and receive Libra.

The development orientations of the team are:

  • Developing cryptocurrency e-wallet for enterprises.
  • Connecting this e-wallet with other systems of the enterprise (financial and accounting software, etc.)
  • Automatic or conditional transfer of cryptocurrency, using Smart Contract.
  • Combined with 2 other PoCs on Bill of Lading and IoT device to perform automatic funds transfer for shipment fee and payment of goods.

Conclusion

The fourth Industrial Revolution, in which Blockchain plays an important role, will disrupt various industries, improve production productivity and reduce human tasks. According to the World Bank[1], Blockchain technology is a pillar of the 4th Industrial Revolution, comparable to the steam engine or Internet, which kickstarted the previous technological revolutions.

Big corporations and SMEs have been investing heavily in the experiment and application of Blockchain technology in different fields. Blockchain is at a stage comparable to the dawn of the Internet, in which every one doubts about its efficiency and consider it a hype. Email was not widely accepted at first, as it required both senders and recipients to have an Internet-connected computer. Likewise, website was deemed as something redundant, dull, ugly and incapable of reaching customers. However, the Internet is now indispensable. This will certainly happen with Blockchain technology. First movers can improve productivity, become a case study or common standard of an industry or create new competitive advantages.

[1] https://www.worldbank.org/en/news/feature/2019/01/24/blockchain-como-asegurarse-que-cada-dolar-llegue-a-quien-lo-necesita

[1] https://en.wikipedia.org/wiki/Libra_(cryptocurrency)

[2] https://www.cnbc.com/2018/05/14/hsbc-makes-worlds-first-trade-finance-transaction-using-blockchain.html

[3] https://cointelegraph.com/news/10-global-enterprises-looking-to-issue-their-own-cryptos

[4] https://www.worldbank.org/en/news/feature/2019/01/24/blockchain-como-asegurarse-que-cada-dolar-llegue-a-quien-lo-necesita

Vu Duy Anh – FPT Software

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