Non-Fungible Tokens are Changing the Future of Trade Finance
With the rise of digitization in the pandemic and post-pandemic era, various industries are realizing the significance of blockchain technology and its huge possibilities. The problem with many industries, including trade finance, is that they are still dependent on paper-based manual processes, leading to inaccuracies in documentation and higher costs.
Here’s good news: Blockchain along with other digital technologies are helping trade finance sectors to digitize their processes. Since trade is primarily decentralized in nature, blockchain, which is a decentralized public ledger, would be a perfect fit for trade finance.
With the evolution of blockchain technologies, one key development that is benefiting trade finance participants is the non-fungible token system. The NFT or a non-fungible token refers to a non-interchangeable and unique unit of data, which is securely stored on a shared digital ledger, known as a blockchain.
Trade finance firms can easily access, trade, or sell this stored data within a safe and protected environment. Various types of NFT data files may be included within a blockchain, like photos, audio, text, videos, and so on, and each of these unique items can be reproduced easily. NFTs provide their users with public ownership proof using blockchain technology.
The concept of tokenization is becoming extremely popular for its high usability and flexibility, especially during these challenging times. The trade finance industry is backed by endless financial institutions, including banks, insurers, investors, customs officials, and others.
You may have already heard of numerous NFTs associated with the entertainment industry, but they have huge applicability potentials in the trade finance sector and other financial industries. Today, trade finance platforms have started implementing NFTs. For instance, Marco Polo, an end-to-end trade platform, has already started tokenizing its invoices and payment processes.
Besides, storing one’s ownership data on the blockchain via NFTs eliminates any manual errors and hectic paperwork while reducing costs. To handle asset distribution tasks in trade finance, firms are using both tokenization and smart contacts to digitize and modernize their processes completely.