DeFi offers exciting opportunities and has the potential to create a truly open, transparent, and immutable financial infrastructure. Moreover, the system's composability allows anyone to combine multiple applications and protocols, creating new and exciting services.
Efficiency: While much of the traditional financial system is trust based and dependent on centralised institutions, DeFi replaces some of these trust requirements with smart contracts. The contracts can assume the roles of custodians, escrow agents, and central counterparties (CCPs). Additionally, token transfers are much faster than any transfers in the traditional financial system. In fact, transfer speed and transaction throughput can be further increased with Layer 2 solutions, such as sidechains or state and payment channel networks.
Transparency: DeFi applications are transparent. All transactions are publicly observable, and the smart contract code can be analysed on chain. Additionally, financial data is publicly available and may be used by researchers and users. The availability of historical (and current) data is a vast improvement over traditional financial systems, where much of the information is scattered across numerous proprietary databases or not available at all. This benefit is particularly relevant in the event of a crisis. As such, the transparency of DeFi applications may help mitigate undesirable events before they arise and provide a much faster understanding of their origins and potential consequences when they emerge.
Accessibility: By default, DeFi protocols can be used by anyone. As such, they may potentially create a genuinely open and accessible financial system. In particular, the infrastructure requirements are relatively low, and the risk of discrimination is almost nonexistent due to the lack of identities.
If regulations demand access restrictions, such as security tokens, such restrictions can be implemented in token contracts without compromising the settlement layer's integrity and decentralisation properties.
Composability: DeFi protocols are often compared with Lego pieces: the shared settlement layer allows these protocols and applications to interconnect. On chain fund protocols can use decentralised exchange protocols or achieve leveraged positions through lending protocols.
Any two or more pieces can be integrated, forked, or rehashed to create something entirely new, and anything previously created can be used by an individual or other smart contracts. This flexibility allows for an ever expanding range of possibilities and unprecedented interest in open financial engineering.
Innovation: On the one hand, developers use smart contracts and the decentralised settlement layer to create trustless versions of traditional financial instruments. On the other hand, they are creating entirely new financial instruments that could not be realised without the underlying public blockchain. Atomic swaps, autonomous liquidity pools, decentralised stablecoins, and flash loans are a few examples that show this ecosystem's great potential. We are witnessing the disruption of how governments, companies, and people interact with financial products. While some industries will be more impacted, the future of finance will affect nearly every sector.
5G is the fifth-generation technology standard for broadband cellular networks, which cellular phone companies began deploying worldwide in 2019. It is the planned successor to the 4G networks that currently provide connectivity to most cellphones. According to the GSM Association, 5G networks are predicted to have more than 1.7 billion subscribers worldwide by 2025.
Considering the anticipated proliferation of 5G, drastic changes can be expected in virtually all business areas, and trade is no exception. Supply chains benefit tremendously from real-time product tracking, the automation of processes through robotics, and wireless sensors on roadways, railcars, airports, seaports, customs, yards, and warehouses. In addition, the decentralisation of business processes beyond the confines of one organisation promises to enable end-to-end transparency for the first time. Moreover, enhanced data availability allows moving from reactive event mitigation to proactive event management by, for example, anticipating late shipments.
Enterprise computing today is being increasingly augmented by decentralised, highly distributed applications that allow data access and capture anytime and anywhere. Moreover, increasingly capable hardware allows many business processes to be handled on mobile devices. Close to 9 million mobile applications are available globally, with over 200 billion downloads worldwide. Applications for shipments and freight movement are among the most active trade applications. The first generation of these applications was built around ensuring supply chain visibility by showing users what was happening in logistical processes across the different supply chain actors. Recently, a new class of supply chain visibility applications has emerged that drastically reduces and anticipates these issues through intelligent data sharing and real-time updates based on mobile data capture and loT sensors. The resulting cost and time savings can be substantial; however, it is ultimately the gain in quality of service and customer satisfaction that often makes a case for innovative and enhanced supply chain visibility.
Digital trade ecosystems are secure online platforms that facilitate data exchange between partners in trade finance networks. Many banking consortiums and other trade finance leaders compete to develop these platforms. Some focus on documentary trading (such as issuing electronic letters of credit), while others focus on open account trading (such as export factoring and credit insurance). Others still focus on facilitating shipping and freight, or some combination of the three. For many banks, the hope of digital trading ecosystems is to separate development costs from costs associated with regulatory work such as due diligence. Banks need trading ecosystems so they can focus on funding rather than promotion.
For business clients in the trade finance sector, the hope and vision of digital ecosystems are primarily linked to the promise of streamlined and accelerated operations. Unfortunately, there are many large competing digital trading ecosystems at present. A decade-long effort to digitise trade has struggled to include a growing number of small- and medium-sized enterprises that lack the scale or technical know-how to incorporate these platforms into their business models. As a result, while these platforms continue to grow, they have yet to reduce the need for paper documentation or manual data entry to any non-trivial degree. Despite this, many financial institutions and their corporate clients remain optimistic about the future of trading ecosystems. According to a survey by the Boston Consulting Group, over 75% of these groups expect to transition their trade finance operations to a digital ecosystem within the next three to five years. Most of the banks surveyed reported that they currently partner with at least one or more trading ecosystems or at least plan to do so.
FinTech companies want to give people more ways to manage their accounts and money across multiple platforms in one app, leading to the emergence of super apps. A super app is a platform for offerings and services delivered through third-party integrations and in-house technologies. It is a closed ecosystem of two or more apps that people regularly use due to the demand for an integrated, seamless, contextualised, and efficient experience. Unlike multiple apps, a super app is a mobile-first solution that requires less memory and storage.
Super apps are like malls with multiple shops offering various services. The very reason they are what they are is their ability to support collaborations and partnerships. 16 The app structure allows for other platforms to be seamlessly integrated within the built ecosystem, which in itself is a determining factor in a super app’s success.
For a program to be considered a super app, it must offer most of the following: financial services, social platform, e-commerce services, transport services, food delivery, payment of bills and utilities, and medical and insurance services.
A network economy is the natural outcome of interconnecting all the actors inside a business ecosystem. These interconnections enable customers to drive choices, select preferences, and make their predispositions known through technology. Such interoperability fundamentally flips the script and puts the value of the extended enterprise in the hands of consumers.
The Trade Finance Super App will allow quick international payments via the platform, invoice financing, electronic bills of lading, company money accounts, and shipping insurance. Still, the most valuable feature will be establishing legally valid sale contracts worldwide on the blockchain.