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UNIT V
Applications of Blockchain:

Cross Border Payments in blockchain

Blockchain technology in cross-border payments can enable secure

transfers between an infinite number of bank ledgers. This allows one to
bypass banking intermediaries who serve as middlemen to help transfer
money from one bank to another. The transaction is secure, quicker, and
cheaper and has end-to-end visibility anywhere in the world.

The use of blockchain technology in cross-border payments is very

different from existing methods such as SWIFT. Even SWIFT’s new GPI
(global payments innovation) relies on the same unidirectional messaging,
which means that it is not connected to any underlyingsettlement process.
Such a system has its drawbacks, where individuals can manipulate the
banking system to commit fraud. A case in point was the Punjab National
Bank fraud case, where INR 14,356.84 crore was stolen because
perpetrators of the fraud made unauthorized transactions on the SWIFT
network, where payment messages sent were not linked tothe system that
actually settled the transaction.

There are no such issues for payments processed on the blockchain. Any
transactions can be settled instantly. Using the bidirectional messaging
and settlement component employed in blockchain solutions, such as
Ripple’s, ensure that the transaction is validated on the blockchain before
the funds are transferred across the ledgers of transacting parties. If for
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some reason the payment does not go through, both banks are
immediately notified and no funds are transferred.

The use of digital assets (sometimes called crypto-currencies) such as

XRP (an independent digital asset) can help financial institutions convert
funds into the desired currency instantly. Given that India has the largest
diaspora population in the world, this means that banks often deal with
currency pairs such as SAR/INR to USD/INR. Sourcing liquidity for
payments into and outside India can be onerous and costly, and the use
of XRP as a bridge asset for currency conversions takes just minutes and
is cheaper than what it would cost if one did a traditional fiat-to-fiat
exchange. Additionally, the ability to do this in real-time would also reduce
a financial institution’s exposure to forex volatility as well.

Blockchain - The cross-border payments for India

Blockchain can help India’s financial institutions develop world-class

payment platforms. Banks and payment providers are aware of the pain
points in facilitating cross-border transactions, and have made some
progress in addressing them. In India, blockchain technology has been
adopted by banks to help improve the payments experience for its
customers. For example, last year, YES BANK has signed a partnership
with Ripple to help facilitate inbound remittances from North America, the
Middle East and the United Kingdom.

Apart from facilitating greater efficiencies in existing payments

infrastructure, there is much to be said about what blockchain can do for
India and its people. Let us consider its benefits at a more human level.
For example, let’s say an Indian construction worker in Dubai urgently
needs to transfer funds back home for a medical emergency his family is
experiencing. If his bank used blockchain technology, the remittance
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transfer could be completed within minutes, with fees that are significantly
lower than existing methods of transferring money. Had the conventional
means of cross-border payments been used, it would have taken 3-4
days, with the money going through multiple intermediaries and incurring
extra fees, before finally reaching the worker’s family.

Blockchain can also allow a bank’s customers to use their more efficient
cross-border payments service and reduce their dependency on hawala
brokers, where fees can also be quite high, while improving financial
inclusion amongst the Indian populace as well.

Such instances highlight the centrality of remittances to India’s economy,

where the World Bank has stated that India is the world’s largest recipient
of remittances worldwide (at about INR 4.6 trillion a year). From a macro-
economic perspective, inbound remittances are often used by families for
household purchases and investments. The rise in consumption levels will
in return create a ripple effect, driving growth in other industries as well.
Therefore, the importance of cross-border payments cannot be
understated in India, and it is imperative that financial institutions look
closely on leveraging blockchain technology for the broader purpose of
socio-economic development.

Although much of the current debate on blockchain revolves on its

‘disruptive’ element and focuses on how it seeks to challenge the status
quo, innovative cross-border payment solutions built on blockchain
technology are not here to replace financial institutions, nor do they seek
to circumvent financial regulations. Blockchain technology can enable
banks to improve and future-proof their cross-border payments services.

Going back to Mr Modi’s address to world leaders and global CEOs at the
World Economic Forum, he said: “This technology-driven world has
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influenced every aspect of our lives ... Technology has the ability to bend,
break and link...” With blockchain technology, we bend and break the
existing system, and link the world more seamlessly through cheaper,
faster and better cross-border transactions of funds. Blockchain can have
a transformative impact on how cross-border payments are conducted,
augmenting and reshaping entire financial infrastructures of countries.

The financial ecosystem needs to be looking at implementing thoughtful

regulations that can encourage innovative solutions for cross-border
payments. At the same time, any implementation of blockchain technology
should be done responsibly, with a careful amount of deliberation over the
security, risk and stability of cross-border payments solutions. This is the
right way on how financial institutions and policy makers can reap
maximum benefits with blockchain.

Blockchain and KYC (Know Your Customer)

KYC is a process by which banks obtain information about the identity and
address of the purchasers. It’s a regulator governed process of performing
due diligence for verifying the identity of clients. This process helps to
make sure that banks’ services aren’t misused. The banks are responsible
for completing the KYC procedure while opening accounts. Banks also
are required to periodically update their customers’ KYC details. KYC may
be a manual, time-consuming, and redundant across institutions. Sharing
KYC information on Blockchain would enable financial institutions to
deliver better compliance outcomes, increase efficiency, and improve
customer experience.

KYC processes are the backbones of a financial institution’s anti-money

laundering efforts. Find out how businesses are revolutionising the long,
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tiresome process. Know Your Customer or KYC processes are the

backbones of a financial institution’s anti-money laundering efforts.
According to current estimates, the amount of KYC spending rose to up
to $1.2 Billion in 2020 on a global level.

With a whopping amount as this being spent on making KYC processes

better, it is easy to assume that the process would be unhackable and
issues-free. But inspite of the importance of the process, KYC continues
to operate inefficiently. Clenched by labor-intensive and time-consuming
tasks, the high scope of effort duplication, and the risk of error, it is
estimated that 80% of KYC efforts go on gathering information and
processing while only 20% of efforts are assessing and monitoring
focused.

Key Problem Areas and Solution Benefits

1. Redundancy: Most large files use similar data and processes to
verify an equivalent client. The solution benefit is to eliminate
the redundancy documentations that got to be verified only once
before the approval information is shared.
2. Inefficiency: Manual and time-consuming process to collect and
verify documentary evidence. The solution benefit is to extend
automation where documents and approvals are digitized and
may be verified without manual intervention.
3. Lack of specificity: Requirements for due-diligence are often
fuzzy, creating uncertainty on compliance to avoid legal
sanctions. The solution benefit is to standardize process i.e.
standardized, automated KYC processes sanctioned by the
regulators.
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The Idea Behind Blockchain and KYC

Each company has to verify your identity somehow, and it’s particularly
important for financial institutions. From this ‘know your customer,’ or KYC
protocols was the rise to assist companies to ensure they know whothey’re
doing business with. Typically, this involves an extended, drawn- out
practice where certain documents are shown, and a few kinds of
background checks or verification takes place.

KYC Blockchain Implementation

In the traditional KYC system, each bank will conduct its identity check
i.e. each user is checked individually by an individual organization or
government structure. Hence, there is a waste of time for checking each
identity from scratch.

The blockchain architecture and the DLT allow us to collect information

from various service providers into one cryptographically secure and
unchanging database that does not need a third party to verify the
authenticity of the knowledge. It makes it possible to form a system where
the user will only need to undergo the KYC procedure once to verify
his/her identity.

The process is as follows:

1. For KYC procedure a user submits documents to one of the

banks where he wants to take a loan or use another service.
2. Individual participants are responsible for collecting personal
data(banks, government agencies, companies, or users
themselves) and stored in a decentralized network.
3. The bank checks and confirms the passage of KYC if everything
is normal.
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4. The bank is responsible for entering the data about the user into
the blockchain platform, to which other banks, organizations and
state structures have access. All parties can control and regulate
the KYC process. The system will monitor changes andupdating
of the user data, and if someone breaks the rules, it will become
known to all parties.
5. When a user wants to use the services of another bank, this
second bank accesses the system and thus confirms the user’s
identity.
6. The access to user data will be based solely on its consent. The
user must log in with cryptocurrency transactions i.e. use the
private key to initiate the information exchange operation.

Benefits of Blockchain implementation

Distributed data collection

The introduction of blockchain in KYC brings data on a decentralized

network which can be accessed by parties after permission has been
given to them. Moreover, the system offers efficient data security since
the data can only be accessed after permission has been given by the
users, thus eliminating instances of unauthorized access.

Better operational efficiency

The abilities like an unhackable digital process and sharing user

information on a permissioned network can massively lower the effort and
time needed in the early stages of KYC. This, in turn, expedites the
customer onboarding time and lowers the regulatory and compliance
expenses.
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Validation of information accuracy

KYC Blockchain systems enable transparency and immutability that, in

turn, allows financial institutions to validate the trustworthiness of data
present in the DLT platform. The decentralized KYC process acts as a
streamlined way for gaining secure and swift access to up-to-date user
data.

Real-time updated user data

Every time a KYC transaction is performed at a financial institution, the

information is shared within a distributed ledger. This Blockchain
technology KYC systems enable other participating institutions to access
real-time updated information with a guarantee that every time there’s a
new addition in the documents or there are any modifications, they’ll be
notified.

Is Blockchain Development Solutions the Answer to KYC Issues?

Gathering information and processing it takes up a great amount of cost,
time, and effort in the KYC process leaving very few resources available
for monitoring and assessing user behavior for anomalies. By offering
speedy access to up-to-date data, blockchain technology in KYC can
lower the time needed for the laborious tasks, which, in turn, can be
employed to find solutions to more complex KYC challenges. However,
blockchain cannot solve all the issues faced by KYC. After the data is
acquired, financial institutions still have to validate the information. For
this, AI and cognitive processing-like technologies have to be employed
for greater efficiencies. In its present state, blockchain when used in
combination with other technologies can showcase high potential to help
institutions lower the cost and time linked with the KYC process.
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Blockchain in Agriculture and Food Security

With global-scale food systems such as seafood, nearly 40 per cent of

which is traded globally, data transparency and traceability through
technologies like blockchain are important for socially and
environmentally conscious decision making and to facilitate trust among
stakeholders.

Global food supply chains proved brittle during the COVID-19 pandemic,
leading for calls to boost the resilience of global food supply chains
through improved efficiency in production, distribution and consumption of
nutritious food. How could technologies like blockchain that provide data
to producers, distributors and consumers be part of the solution?Big
data applications may present opportunities to address inefficiencies from
farm to table and improve global food security.
Blockchain, a linked decentralized database that stores auditable data
throughout entire supply chains, may change the game for food producers
across the globe.

With global-scale food systems such as seafood, nearly 40 per cent of

which is traded globally, data transparency and traceability through
technologies like blockchain are important for socially and environmentally
conscious decision making and to facilitate trust among stakeholders.

Blockchain agriculture means the use of blockchain in the agricultural

sector to improve the operating process and get profitable results. The
use of blockchain in the agricultural sector ranges from having a
sustainable business and reduction of waste, to informed consumer
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purchasing decisions, to having smooth future transactions with fraud

elimination. There is a new term that has surfaced in the marketplace,
Smart Agriculture. Smart agriculture includes the utilization of natural
resources and the decrease of environmental impact through the
execution of ICTs (information and communication technologies),
blockchain, and other modern technologies for gathering and analyzing
data.

How it impacts in food security?

 Gathering information: Blockchain technologies can be used to

consolidate information on the quality of the seed, track how crops
grow and record the journey once it leaves the farm. In Canada, for
example, Grain Discovery - an online blockchain marketplace - is an
example of data being leveraged by those involved in the food
system to grow and market globally competitive crops.
The data could enhance transparency in supply chains by providing
immutable records from production to consumption. Such data have
the potential to facilitate information transfer throughout every step
of the supply chain. And if blockchains are implemented with proper
validation, it can prevent illegal and unethical production and
distribution that undermines sustainability and community food
security.

This transparency also means consumers could make informed

decisions to protect vulnerable producers and the environment.
Access to product data may allow consumers to reward producers
who employ good practices, such as rural smallholder farmers and
fishermen who are among the most food-insecure groups.
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 Tracking pathways: Currently, there is little evidence supporting

the claim that blockchain and big data technologies are contributing
to global food security. Even though the average farm is projected
to generate 4.1 million data points by 2050, up from 190,000 data
points in 2014, increases in global food security have not been
impressive.
Part of the challenge is how blockchains have been implemented
until now. The corporate control of blockchains and big data
platforms could even undermine food security. For example, IBM
and Walmart have teamed up to track produce from farm to fork.
Producers and processors along the supply chain are required to
input information into IBM’s blockchain for the process to be entirely
transparent to consumers.
Traditional blockchains are decentralized and democratized in order
to ensure trust between users. Corporate control of supply chain
information could also leave out small-scale farmers that lack the
required size, scale and technological know-how to participate. This
division between large and small food producers can contribute to
global food insecurity, and many researchers believe that small, as
well as large farms, are required to feed the world’s growing
population.

 Data and Food futures: Before blockchain and other data

technologies can help address food security, a number of
challenges need to be addressed.

The implementation of blockchains must be be decentralized to

include small farmers and rural people. This will enable sustainable
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and equitable food systems and allow consumers to make informed

decisions.

However, as blockchains place additional responsibility on the end

users, challenges such as limited digital literacy among the world’s
poor and infrastructure constraints may undermine true
decentralization.

Also, they must be integrated into broader food security promotion

strategies to make them sensitive to social and environmentalvalues
critical to tackling food insecurity among diverse groups.

The untapped potential of harnessing big data through a transparent

and decentralized food distribution system may support sustainable
food production and provide accountability for food production.

This is crucial for efficient food systems and food security in the
future. But it is important that these innovations are deployed
equitably so that all stakeholders along the value chain may benefit.

 Food Inventory Management: Truth be told, many food

organizations aren’t prepared to utilize cutting edge technology to
deal with their inventories. This is actually leading to wastage of the
produce and the resources. Also the losses are borne by farmers.
Thus, this is a huge burden for the farmers, as they don’t have the
required tools to manage the issue. The use of blockchain
technology here can change that situation for great. Blockchain in
inventory management can help farmers by monitoring the storage
climate and inform you when produce will expire. In this way, you
can take legitimate measures.
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Blockchain in Mortgage Industry

The mortgage industry is a relatively slow-paced industry when it comes

to its various stages and processes. There’s a lot of friction between each
stage that makes it cumbersome to issue a loan. However, with the advent
of blockchain technology, the industry has been revolutionized to quite an
extent.

Blockchain technology is rapidly penetrating several industries such as

finance, fashion, pharmaceuticals, and more. It can do so because of its
efficient functioning structure that makes processes simpler, faster, and
more reliable. Blockchain technology is acting as the fundamental
framework upon which businesses are building their processes. The
mortgage industry, being one of the slower sectors, has immense scope
for improvement. Blockchain can cause this improvement by paving the
way for a digital mortgage.

The US mortgage system is primed for rapid process and technology

change, driven by shifting demographics, rising consumer expectations,
technological innovations, increased regulatory expectations, and
outdated legacy infrastructure. Collectively, these factors require
homebuyers, governments, and real estate and mortgage-related
companies to reimagine US housing finance and homeownership. In
response to these trends, digital mortgage, and housing finance solutions
are forming across the US at unprecedented speed and scale.

Role Of Blockchain In The Mortgage Industry

Conventional Mortgage Process

In a conventional scenario, there are several steps involved while getting

a mortgage. First and foremost, one has first to be eligible to apply. They
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then have to fill an application which will later be verified. Once all this has
taken place, and it all goes right, a loan would be approved and
sanctioned. This is a long process that easily takes about a month to two.
During this, several actors are involved at various stages, which gives
room for many inefficiencies and risks. There’s a lot of time taken, there’s
a risk of improper documentation, and since it is all manually done, there’s
a lot of room for human error. These challenges can be solved using
blockchain.

Mortgage Process Using Blockchain

One will first fill an application which will become a block. The application
will be verified by not one person/authority but several nodes. After the
verification, this said application will be added to the chain. The person
will then need to sign and accept this loan, following which funds would
be transferred to them from the entity supplying it. So, a process that takes
at least 30 days will finish in a matter of days and is made entirely digital.
Thus using blockchain tech as the base framework, mortgage software,
and consumer lending software can be developed.

Benefits Of A Digital Mortgage

1. Better record keeping: Each step of the process is stored as a

record, and these records are on a decentralized ledger. This means
there’s no one central hub that manages it all. Thus, there’s proper
proof of all the actions that is quite difficult to tamper with. So, it
becomes easier to verify all actors such as the loan borrower, the
seller, and entities that approve the loans.
2. Cost efficiency: It becomes relatively economical for one to get a
mortgage compared to the conventional process, where they’d have
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to pay a third party to streamline the process. Here, they can do it

all on their own, without any intervention from an outsider.
3. Instant Settlements: Usually, transferring funds takes time. With
this, the person will get their funds right away without having to wait.
4. Smart Contracts: A smart contract is a set of rules that are
automatically set in motion when an event occurs. It can be applied
in the verification and approval process such that the rules are
initially fed along with criteria. If the application follows these rules
and meets the criteria, it is approved, else it’s not. This way, the
complete verification process can be executed automatically instead
of manually carried out by multiple actors.

Blockchain enabled Trade

The trade finance industry has emerged as a key focus area for realizing
the efficiencies of blockchain technology. Blockchain has the potential to
disrupt the trade landscape by making it easier to reduce disputes and
fraud to provide delivery and payment certainty, enable transparency of
trade asset movement, and facilitate the flow of trade receivables. The
result: increased collaboration, automation and oversight in trade
transactions. Trade finance by banks and other financial institutions is a
vital function in international commerce, as it provides delivery and
payment assurance to buyers and sellers, and it helps close the trade
cycle funding gap for these parties. The growth and sustenance of the $16
trillion international trade market depends on the easy availability and
robustness of financing mechanisms. For this reason, trade finance is
often described as the fuel for global commerce.
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Blockchain enables data to be recorded in a secure digital format by

providing real-time information on transactions between different parties,
be they corporations, supplier networks, investment pools, or an
international supply chain. It provides all parties with a record that is
secure, encrypted, transparent, easy to access, and impossible to tamper
with. Although blockchain emerged within the financial system with the
launch of cryptocurrency Bitcoin, today it is used in a wide range of
activities, including ones that are directly or indirectly related to foreign
trade. The long value chain tied to international trade includes vast,
complex areas like logistics, transportation, customs administration,
financing, and administrative procedures between firms, all of which could
be streamlined by adopting this technology.

Blockchain optimizes processes, makes goods traceable, guarantees the

security of payments and financing, facilitates the verification of digital
quality and origin certifications, enables real-time sharing of information
on the different stages of trade, and helps improve how related public and
private services operate, among other benefits. Blockchain provides
solutions for trade operations by simplifying cross-border trade,
contributing to competitive improvements, and reducing transaction costs.
Although blockchain has been used within foreign trade for several years,
its significance has increased since the start of the COVID-19 health crisis
and it is expected to play an even more prominent role in the post-
pandemic world.

Benefits of blockchain enabled trade

1. Lower risk and operational costs: Quickly process credits and

guarantees electronically, gain deep insights into client financial
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positions and transaction histories, and monitor transactions from

start to finish.
2. Find new opportunities and markets: Discover revenue
opportunities through a new class of transparent, risk-mitigated and
standardized trade finance and trade credit insurance solutions.
3. Establish leadership in a new era of trade: Foster greater trust
and transparency in cross-border trading. Enjoy first-mover
advantages by convening new trade networks and creating new
trading hubs.
4. Leadership in trade facilitation: We’re reinventing complex trade
processes to help start, accelerate and innovate blockchain
networks — including the successful production development of
we.trade, now comprised of 15 banks across Europe.
5. Trusted business expertise: IBM knows trade and trade
processes, complex systems integration, regulated industries, and
— with 500+ client engagements to date — how to unlock
blockchain value. We provide the entire stack to run your business.

Blockchain in Trade Finance

Trade finance serves as the lifeblood of international trade in goods and

services by enabling transactions between buyers and sellers worldwide.
Trade finance provides the credit, payment guarantee, and insurance
needed to facilitate the transaction on terms that would satisfy all parties.
One of the difficulties involved with trade finance is the large volume of
paper documents that make up much of the information flow between
trading parties.
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Most of the trade finance activities involve a substantial amount of

physical paperwork being shuffled back and forth between the importer,
exporter, importer’s bank, exporter’s bank, shipping company, receiving
company, local shippers, insurers, and others. This reliance ondocuments
usually has drawbacks, including the cost and time required to prepare,
transmit, and check these documents. Paper documents mayalso be open
to errors and even forgery.

Furthermore, the COVID-19 outbreak has impacted different trade finance

steps, including deal origination and distribution, negotiable instruments,
document transmission, authorized signatures, and shipping. Nowadays,
several banks and financial institutions worldwide are trying to quickly
scale their digital initiatives to move toward a world where digitalization is
central to every interaction. Banks are looking to utilize technology to
streamline trade by creating digital ecosystems that reduce costs and
increase trade finance efficiency by replacing paper with digital data flows.
The International Chamber of Commerce (ICC) survey conducted in April
2020 indicated that banks are focusing on the rapid adoption of
blockchain, the digitization of documentation, and automated processing
and handling software in response to the COVID-19 pandemic.

How trade finance works?

Trade finance could be understood by the following example. Let's

assume that there is a company named MHW in India and this company
wants to import a certain number of goods from a supplier company that
is located in the United States. Let's name this supplier company as SSI.
Now to import the goods the company MHW needs to pay for the goods,
but it wants to make sure that the goods should arrive as ordered and thus
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is hesitating in processing the payment. Now on the same hand, the

exporter is also hesitant to ship the goods, without being certain that the
payment will arrive for the goods they supply.

Now at this step, the banks get involved to solve the issues faced by the
importer and exporter company. The importer's bank issues a letter of
credit to the exporter via the exporter's bank and promises to pay the
required amount once the exporter bank provides the valid documents
proving the ordered goods have been loaded to the ship or any other
means of transport. Thus the involved banks ensure that the trust is being
built between the importer and exporter parties by holding the money for
each party.

Benefits of Blockchain in Trade Finance

The key benefits of blockchain technology in trade finance is that it can

reduce processing time, eliminate the use of paper, and save money while
ensuring transparency, security, and trust. Removing intermediaries from
the process removes the risk of manipulation by the participants in the
process.

Here are some major points demonstrating the advantages of blockchain

in trade finance:

 Efficiency: Blockchain technology makes the trade finance process

more efficient by completing the transactions directly between the
relevant parties with no intermediary and with digitized information.
With blockchain, the parties can operate smart contracts that trigger
commercial actions automatically. This allows to dramatically
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streamline trade finance processes, thereby cutting costs and

increasing the transaction speed.

 Traceability: With blockchain technology, the importers and

exporters can track goods and assets and where they are currently
residing. Also, related asset information can be received from the
previous and pass on to the new owner for possible action. This
allows new financing opportunities and can improve the perfection
of an interest in the trading of goods. This is considered one of the
main benefits of blockchain in trade finance.

 Transparency: Blockchain, being a distributed ledger technology

can record multiple details of the transactions against commercial
agreements and can distribute the data to improve further trust. This
allows reducing the risk of tampering the records and offers more
options for financing trade.

 Auditability: Utilising Blockchain each trade finance transaction can

be recorded sequentially and indefinitely. This provides a lastingaudit
trail for the life of the traded asset as well as better verification of
assets authenticity with a reduction of compliance costs.

 Security:Each transaction within the trade network is verified using

independently verified cryptography. The encryption and
cryptographically protected keys securely transmit data between
different financial institutions and thus privatize the data.
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Blockchain in supply chain finance technology

Supply chain finance and blockchain technology is revolutionizing

businesses around the world. As businesses expand, they build new
domestic and global ties to strengthen their procurement process and find
more affordable yet better solutions. While this bodes well for buyers’
balance sheets, it can trigger working capital concerns. Valuable capital
may get locked into supply chains, forcing businesses to scramble for
solutions.

Supply chain finance is a creative way out that can help buyers as well as
their suppliers. Using a supply chain finance provider, buyers can pay their
suppliers early and lengthen their payment terms. Besides assisting
buyers in optimizing their working capital, supply chain finance also
provides an affordable way for suppliers to get cash.

However, despite these features, supply chain finance does not solve
everything. For instance, it is usually reserved for the top suppliers. Small
and medium-sized enterprises are left out, which is unfair as they could
benefit significantly from early payments.

Fortunately, the relevant stakeholders are aware of these problems and

have looked at different tools to improve supply chain finance. Many
proposals have been presented, but none look better (at least right now)
than using blockchain to enhance supply chain finance.

How can blockchain improve supply chain finance?

The intersection of supply chain finance and blockchain technology has

remarkable benefits for the relevant stakeholders. Some of these include:
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It increases authenticity in the supply chain

Supply chain finance is a massive web involving many stakeholders. From

buyers to suppliers and intermediaries, there are many interested parties,
and the exchange of information is not always transparent. Each
stakeholder may prioritize their needs over others, triggering delays in the
supply chain.

Blockchain can solve this problem. Copies of the same digital ledger,
which keeps the records in the network, are distributed among the
stakeholders, who have access to the same information. The immutability
of blockchain prevents confusion and ensures transparency and
authenticity in the network. It can enhance supply chain management and
smoothen the supply chain.

Brings inclusivity to the ecosystem

The existing supply chain finance ecosystem has shortfalls, especially

regarding financial inclusion. Supply chain financiers usually offer to fund
buyers’ top 10 to 50 suppliers, leaving behind many small and medium-
sized enterprises. This is unfair, as smaller suppliers can benefit more
from early payments through buyer-led supply chain finance than larger
counterparts.

Blockchain technology has the potential to address this issue and make
supply chain finance available to everyone. The nature of the blockchain
network can allow supply chain finance providers to fund invoices sent by
all the suppliers.Every transaction and information exchange is recorded
on the ledger, so finance providers do not have any reason to limit
financing to only the top suppliers.
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Redefines financiers in the supply chain

Financial institutions are generally the financers in buyer-led supply chain

finance. They are the ones that make the invoice payments to the
suppliers. Buyers pay them back through a repayment plan consisting of
the borrowed sum along with a small fee and interest.

While financial institutions will remain relevant in buyer-led supply chain

finance, blockchain could open up the system to other stakeholders in the
ecosystem. Corporate foundations and individual investors could also
participate in supply chain finance and earn returns on their investment.
Platforms like CredSCF are already using blockchain to allow different
financiers to leverage supply chain finance to earn returns.

Enhances the functioning of the supply chain

Information exchange is always an issue when there are many parties

involved. Supply chain finance has suffered from the same ailment.
Information inaccuracy is, in fact, one of the significant reasons why
supply chain finance has struggled to solve the age-old issues in the
supply chain.

However, using blockchain technology in supply chain finance might be

the answer. The digital, immutable ledger can keep track of information
exchange, asset transfer, product quality, and timelines to smoothen the
supply chain. It can reduce lags in the system, saving money and time for
all the stakeholders.
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Blockchain in identity management

Also known as “identity and access management”, or IAM, identity

management comprises all the processes and technologies within an
organisation that are used to identify, authenticate and authorize someone
to access services or systems in that said organisation or other associated
ones.

Examples of this would range from customers and/or employees

accessing software or hardware inside a company/enterprise – and the
level of access, privileges and restrictions each user has while doing so –
or, in a governmental setting, the issuing and verification of birth
certificates, national id cards, passports or driver’s licenses (that allow a
user/citizen to not only prove his identity but also access services from the
government and other organisations).

The problem with current Identity Management Systems

Identity has a problem. If it’s paper-based, such as birth certificates sitting

idly in a basement of a town hall, it’s subject to loss, theft of fraud. A digital
identity reduces the level of bureaucracy and increases the speed of
processes within organisations by allowing for a greater interoperability
between departments and other institutions. But if this digital identity is
stored on a centralised server, it becomes a target for hackers. Since 2017
alone, more than 600 million personal details – such as addresses or
credit card numbers – have been hacked, leaked or breached from
organisations. Most of the current identity management systems are weak
and outdated.
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Identities need to be portable and verifiable everywhere, any time, and

digitization can enable that. But being digital is not enough. Identities also
need to be private and secure.

Several industries suffer the problems of current identity management

systems:

 Government: The lack of interoperability between departments and

government levels takes a toll in the form of excess bureaucracy.
Which, in turn, increases processes’ times and costs.

 Healthcare: half of the world’s population does not have access to

quality healthcare. The lack of interoperability between actors in the
healthcare space (Hospitals, clinics, insurance companies, doctors,
pharmacies, etc) leads to inefficient healthcare and delayed care
and frustration for patients.

 Education: It is estimated that two hundred thousand fake

academic certificates are sold each year in the USA alone. The
difficulty in verifying the authenticity of these credentials leads to
hiring of unqualified professionals, brand damage to the universities
and the hiring companies.

 Banking: the need for login details such as passwords decreases

the security of banking for users.

 Businesses in general: the current need to store clients’ and

employees’ personal data is a source of liability for companies.
A personal data breach may result in huge fines due to
GDPR infringement – such as the British Airways case – or
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simply due to customer trust loss and consequential damage to the

organisation’s brand.

How Blockchain brings privacy and security to Identity Management

Through the infrastructure of a blockchain, the verifying parties do not

need to check the validity of the actual data in the provided proof but can
rather use the blockchain to check the validity of the
attestation and attesting party (such as the government) from which they
can determine whether to validate the proof.

For example, when an identity owner presents a proof of their date-of-

birth, rather than actually checking the truth of the date of birth itself,the
verifying party will validate the government’s signature who issued and
attested to this credential to then decide whether he trusts the
government’s assessment about the accuracy of the data.

What are the challenges that exist in the traditional identity

management system?
The present identity management system faces the following four major
challenges:
1. Identity theft

2. Combination of usernames and passwords

3. KYC onboarding

4. Lack of control

Identity theft
People share their personal information online via different unknown
sources or services that can put their identification documents into the
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wrong hands. Also, as online applications maintain centralized servers for

storing data, it becomes easier for hackers to hack the servers and steal
sensitive information. According to the Breach Level Index, 4,861,553
records are stolen every day, accounting for:
 202,565 records every hour

 3,376 records every minute

 56 records every second

The breach statistics indicate how quickly a hacker can steal personal or
other confidential information.

A combination of usernames and passwords

While signing up on multiple online platforms, users have to create a
unique username and password every time. It becomes difficult for an
individual to remember a combination of usernames and passwords for
accessing different services. Maintaining different authentication profiles
is quite a challenging task.

KYC Onboarding
The current authentication process involves three stakeholders, including:
 verifying companies/KYC companies

 users

 third parties that need to check the identity of the user

The overall system is expensive for all these stakeholders. Since KYC
companies have to serve requests of different entities such as banks,
healthcare providers, immigration officials, etc., they require more
resources to process their needs quickly. Therefore, KYC companies
have to charge a higher amount for verification, which is passed to
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individuals as hidden processing fees. Moreover, third-party companies

have to wait for a long time to onboard the customers.
A global survey of “Know Your Customer” challenges found that global
annual spending on KYC is estimated as the US $48million.

Lack of Control
It is currently impossible for users to have control over personally
identifiable information (PII). They do not know:
 how many times PII has been shared without their consent

 where all their personal information has been stored

As a result, the existing identity management process requires an

innovative change. Using blockchain for identity management can allow
individuals to have ownership of their identity by creating a global ID to
serve multiple purposes.
Blockchain offers a potential solution to the above challenges by allowing
users a sense of security that no third party can share their PII without
their consent.
By using blockchain:
 a platform can be designed to protect individuals’ identities from
breaches and thefts

 people can be free to create self-sovereign and encrypted digital

identities

 the need for making multiple usernames and passwords can be

removed
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Now, let’s understand how could Blockchain Identity Management

work
Currently, people need the right way to manage their identity than paper-
based documents. The app for Blockchain Identity management will help
people to verify and authenticate their identity in real-time.

Step 1: Installation of Mobile App

An individual will first have to download the mobile app from the play store
or app store to establish his/her identity.
After downloading the app in mobile phones, a user will create a profile
on the app.
Once the profile is created, the user will get the unique ID number, which
will help organizations access the user’s identification documents.

Step 2: Uploading the documents

After the user gets ID number, they need to upload the government-issued
IDs on the app that will be saved in the IPFS with hashed addresses stored
in the blockchain.
The app will extract the personal information from these IDs to do self-
certification of his/her details.
The user will own their data. It helps users decide the information to be
shared with organizations. Without the user’s consent, no data can be
shared with any identity seekers.

Step 3: Smart contracts generating trust score of the person

Suppose there is a score that determines the trustworthiness of a person.
Smart contracts containing the business logic can generate a trust score
for a user from the information provided by them while creating a self-
sovereign identity.
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Step 4: Third-party companies requesting access

Every time any company will have to access specific details of a person
for authentication purposes, a notification will be sent to the individuals
owning the identity.
Once the user allows the companies to access their details, third parties
can use the identifiable information for authenticating a person. Also,
individuals will be able to trace the purpose for which their PII has been
used.
Blockchain does not store the user’s data or information. Instead, the
transactions made between identity holders and companies will only be
recorded on the blockchain.

For example, if an immigration authority verifies the person’s identity via

an app, then that transaction will be added on the blockchain and visible
to all the connected nodes.
Let’s discuss the example in more depth.
Suppose a person named Alex needs to authenticate himself to apply for
study abroad programs. Thus, the education center can validate his
identity quickly because of the blockchain-enabled identity management
app.
Alex will provide the unique ID number to the center, enabling them to
submit the request for accessing information. After he validates the
request, the education hub can check his documents, and the transaction
will be recorded on the blockchain.