Blockchain and International Trade, Trade Finance and Supply Chain. How can a business blockchain benefit a global trade network?

1. BLOCKCHAIN AND INTERNATIONAL TRADE,
TRADE FINANCE, AND SUPPLY CHAIN
How can a business blockchain benefit
a global trade network?

2. ● Market Context
● Blockchain Overview
● Opportunities and Considerations
● Use Cases
● Why Ethereum
● Our Products and Services
● How You can get Involved
Summary

3. Market
Context

4. International trade is the exchange of capital, goods,
and services across international borders or territories.
It is a $16tn market:
● 75% of various goods typically shipped by
shipping containers or ground transportation
● 25% of commodities
International Trade is a $16tn market...
4

5. … of which, around 1/3 benefit from Trade Finance
5
Depending on estimates, around $5tn of International
Trade benefit from Trade Finance mostly from banks,
financial institutions and more recently from
institutional investors or funds.
The Asian Development Bank highlighted the
potential for growth of the global Trade Finance
market by identifying a $1.6tn gap between supply
and demand for trade finance, particularly for SME and
midcap firms (74%) and trade flows from/to emerging
markets (40% of the gap originates in Asia and the
Pacific) .
This gap stems primarily from:
● KYC concerns (29%)
● Lack of information and transparency (21%),
● High operational cost/poor profitability (15%)
● And a lack of alternative investors to banks
despite the favorable risk profile of trade finance
as an asset class (good return w/ low default
rates)

6. Rapid globalization has outpaced the industry’s ability to
standardize and digitize its system of record-tracking
6
Industry Challenges Operational Challenges
Complexity
Regulation &
Compliance
+
Paper Based
KYC
High Operational
Cost
Could be reduced by 35%
Pain Points
As a result trade and financing requires a tremendous amount of trust between transacting
parties to hedge against all of the vulnerabilities the industry’s complexity allows.
Delays
Fraud
Loss of Income
& Opportunity

7. Trade finance: 3rd most targeted use case for DLT in finance
7

8. Ethereum is widely used across the commodity post
trade sector
8
Commodity trade financeEnergy commodity trading
Energy tracking
Consortium interest from 20 key-
stakeholders
Energy blockchain consortium
Amongst 65+ affiliates
• ChainTrade: forward
contracts, trade finance
• RWE: electric cars charging
stations
• TEO (Engie): renewable
energy consumption tracking
• Power Ledger: P2P
renewable energy trading
platform
• Grid+: Retail Energy Provider
Other Ethereum-based
projects:
Base metals post trade &
stock financing
ForceField

9. Shipping & Freight
9
GSBN
Other consortia initiatives:
- Secure Cargo (DHL, MSC, Hapag
Lloyd)
- NTT Data Corp (NYK, Kline, MOL)
- APL - K&N
Start-ups:
- Cargo X
- etc.

10. Trade Finance: a large number of consortia but some start-ups
too
10
Source: BlockData

11. Successful consortia initiatives are based on a strong
governance
11
-How to create solutions that can
scale?
-What technology choices to make?
-What are the building blocks
required? (e.g. identity system)
-What is the governance of these
solutions?
-What interoperability functionalities
should be implemented?
-Should the platform be for profit or
not?
Enterprise blockchain adopters are
facing non trivial implementation
questions
Clear consortium governance is critical
●Co owns IP, creates value for shareholders and customers.
●Board makes strategic decisions and appoints Executive team.
●Executive team is empowered on executive matters, making strategic
recommendations and executive decisions based on a clear set of
business outcomes / KPIs that they are incentivized to reach.
The most challenging issue - what technology should be delivered and
when - requires an empowered product management function with
strong convictions backed by analysis. Too many ventures fail because
they try to please everyone

12. Options of Governance of Initiatives
12
LIGHTHOUSE
● Single large market participant starts initiative, build PoC / first version and brings others onboard
● Successful in supply chain in particular when driven by large corporate buyers with smaller supplier partners, or with large
trader and its service providers
CONSORTIUM
● Multiple companies come together to build a use case/platform
● Poses significant challenges in terms of governance and ability to execute quickly and successfully
● Most consortia eventually become ventures to overcome such challenges
VENTURE
● Utility vs profitable venture
● Decentralised infrastructure as utility or business model. Decentralised infrastructure can be seen in two ways (dependant on
use cases, industry, etc.):
● A utility funded by market participants via equity or utility token issuances
● A core business value that can also be monetised

13. Blockchain
Overview

14. Blockchain is a distributed and immutable ledger,
inherently resistant to attacks and malicious behaviours
14
Cryptographically Secure
Public/private key
cryptography to secure
identity, allowing only
verifiable transactions
Decentralized
A peer-to-peer platform
distributing the same
replica of data.agreed upon
by network consensus
Immutable
A distributed ledger that
preserves an immutable
record of all network
transactions
T
Smart Contracts
Business logic reflecting
terms of contract between
parties involved and
execution is guaranteed by
cryptographic signature
and network consensus
Key Components
● Removes the costs of intermediaries
● Reduces processing, re-work, and
manual errors
● Creates new decentralised business
● Open the possibility of new
products/services
● Captures potential value lost in delays
● Immutable and resistant to collusion
● Shared data with privacy by design
● Reduces double entries/human errors
● Execution of contractual terms via self-
executed code
● Real time propagation of data and events
● Preserves complete audit trail
● Allows T+0 delivery vs payment
Value Proposition
Reduces cost
Increases
opportunities
Reduces risk
Increases
speed, trust and
transparency

15. From bilateral interactions and siloed/duplicated data
To a shared decentralised ledger and rich interactions
15Source: BLOCKDATA

16. Public v Private Blockchains
16
● Anyone can read/write data subject to smart
contract code
● Transaction processors must invest financially to
prevent fraud and spam
● Strong trust creation via Proof of Work or Proof of
Stake consensus algorithms and direct economic
incentive
● Process fees paid by digital currency
● Uncertainty on transaction finality (forks)
● Private blockchains also known as permissioned
● Best suited for enterprise/consortia initiatives
● Assumes minimum trust between participants
● Accountable validators incentivized by
reputational risk
● Proof of Authority (PoA) or Byzantine Fault
Tolerance consensus algorithms that guarantee
transaction finality
● Privacy through private smart contract (i.e. off-
chain) or Zero-Knowledge privacy
Public Private (Permissioned)

17. End-to-end flow on a decentralised blockchain
platform
17
Corporate requests financing of trade from bank, or present documents to bank
CORPORATE BANKUI & APPLICATION
STACK
CORPORATE
BLOCKCHAIN
NETWORK
Request
trade financing
/ Present
documents
Sign and
execution
transaction
UI & APPLICATION
STACK
BANK
1. Create Private Smart Contract
2. Record Transaction Data Off-
Chain
3. Emit Event
Capture and
process event
Notify user
of new event
1

18. End-to-end flow on a decentralised blockchain
platform
18
Bank’s response to corporate
CORPORATE BANKUI & APPLICATION
STACK
CORPORATE
BLOCKCHAIN
NETWORK
Notify user of
Bank’s response
Capture and
process event /
response
UI & APPLICATION
STACK
BANK
4. Record Response
5. Execute Business Logic
6. Emit Event
Sign and execute
transaction w/
response
Send response
2

19. Opportunities
& Consideration

20. Current blockchain opportunities
20
Sharing verifiable data with privacy by design
● Shared immutable ledger
● On-chain privacy or off-chain privacy
with cryptographic proof on-chain
● Public cryptographic proof of executed
transactions and states
● Certify issuer and date of issuance of
documents or data on-chain
Real time events and business logic
● Emit smart contract events
● Near real time propagation to/processing
by relevant parties
● Execute contractual clauses or
conditions in smart contract
● Verifiable proof of contract execution of-
chain
Cryptographic signatures of documents, legally binding messages, and interactions
Execution of business processes and shared data across networks via traditional interoperable layers
Transaction finality, no fork via use of Enterprise consensus (IBFT, PoA, etc.)

21. Current challenges
21
● Early stage technology with limited
toolkit in 2018
● Greatly improved in 2019 - new
projects rely on low-level blockchain
toolkits and focus efforts on
development of business layers,
product design and UX/UI
● Interoperability: many consortia on
the same topics, and users may not
want to use several platforms
Technical Challenges
● Adoption of decentralised network and
applications depends on product value
that depends on adoption
● Need to consider functional flows in
and out and on/off platform, engage
with non-onboarded user, demonstrate
value and incentivise users to join
● Interoperability between
platforms/networks, with internal
systems and with industry standard
systems and protocols
Adoption
● Legal value of:
○ Cryptographic proofs on-chain
○ Digital documents and data
● Paper still rules for now: the first step is
to handle parallel flows of paper and
digital documents, gradually moving
towards pure digital documents and
data over time
● Recognition of digital documents by
P&I clubs (eB/L), legal systems and
industry bodies
● Standardisation vs customisation
Use Case Specific Challenges

22. Looking ahead
Eventually the few successful networks that will
create significant adoption and have the technical
foundation to evolve and grow with the
technology and leverage on it will remain.
The future is in building applications on existing
permissioned or public networks to aggregate
and maximise adoption and create exponential
value on the fulfilment of the promises of
blockchain technology.
22

23. Looking further ahead
23
Tokenisation of IOUs, invoices, purchase orders, documents,
physical or digital assets and payment via stablecoins/digitised FIAT currencies
Creating primary and secondary marketplaces for such digital assets,
increase liquidity and transparency
Metric and analytics by collecting aggregated and anonymised data via blockchain
or Trusted Execution Environments that can be used to assess asset valuations
Interoperability across networks and functional layers
(instant delivery vs payment, transfers of claims and digital assets across networks)
Open permissioned networks to third-party application developers/service
providers (AppStore model)
Increase adoption of permissioned networks with business based on utility
token economics and network economic incentives
Supply chain/trade finance funds could raise funds from alternative investors via
regulated token issuance of funds shares on public or permissioned networks

24. Use Cases

25. Trade Finance Execution
25
Trade Finance is heavily paper-based and requires a
tremendous amount of trust between transacting
parties to hedge against all of the vulnerabilities the
industry’s complexity creates.
Blockchain can provide speed, security, efficiency
through shared registry, standardized products and
tailor made functionalities to build a paper-less open
source financing platform - that will execute
transactions with greater assurance, lower
premiums, faster settlements and more financing
options.

26. 26
Trade Finance Execution
Re-innovating Trade Finance
with komgo
komgo partnered with ConsenSys Solutions to build
the komgo platform, and leveraged Kaleido’s
enterprise blockchain solution to deploy a flexible and
scalable interface.
As an open finance platform, komgo creates a secure,
streamlined, and digital network on which only
authorized parties can exchange data and transaction
records.
The platform enables significantly increased
transparency, while its “privacy by design”
architecture permits private peer-to-peer transactions.
CASE STUDY

27. Track & Trace
27
Blockchain technology offers greater transparency
and a single source of truth for for participants
using supply chain networks. Intelligent track and
trace of orders, goods and delays via blockchain
could expedite the sending and receipt of goods.
In particular, blockchain can be used to reduce
counterfeiting ; enhance supply transparency &
process tracking ; regulatory compliance &
reporting ; enable efficient ownership & licensing ;
drive efficiencies in product recalls.

28. 28
Track & Trace
Proving the authenticity of
luxury items to battle fraud and
counterfeiting
The global luxury goods industry is dealing with growing
challenges (such as counterfeiting & IP) when it comes to
protecting brand value and authentic relationships
between customers and brands.
ConsenSys​, in partnership with ​LVMH and ​Microsoft​,
recently announced AURA, a platform that makes it
possible for consumers to access the product history and
proof of authenticity of luxury goods — from raw
materials to the point of sale, all the way to second-hand
markets.
Several brands of the LVMH Group are currently involved,
and advanced discussions are underway to onboard
additional luxury brands globally.
CASE STUDY

29. 29
Treum, a ConsenSys formation is a blockchain-based
trust platform focused on traceability, transparency,
and tradeability, building the supply chains of the
future.
Its traceability feature seamlessly records an asset’s
end-to-end source information.
Its transparency capability allows manufacturers to
verify that their supply chain meets product goals.
All together, Treum is able to give both companies
and consumers the full product story.
Track & Trace
FOCUS ON TREUM

30. 30
Track & Trace
FOCUS ON TREUM
Tracking intellectual property with GSK
As an industry used to license constraints and logistics risks, a transparent supply
chain management system for the pharmaceutical industry can help to better
ensure products are protected.
Treum partnered with GlaxoSmithKline to use blockchain to track intellectual
property (IP) licenses used by scientists as well as ensure that products are
produced, transported, and stored in proper conditions.
Tracking food sources with WWF
Treum teamed up with WWF to bring traceability and transparency to the
fishing industry in Fiji.
The supply chain process, actors and the tuna attributes were modeled on the
Treum platform to generate smart contracts needed for tracking, enforcing and
recording the steps along the journey of the tuna. The result was immutable,
verifiable proof that the yellowfin tuna was caught in sustainable waters, shipped
in cold storage, and arrived in a safe window to consume the food.
CASE STUDIES

31. 31
Commodities & Logistics
CASE STUDIES
A post-trade management platform for the oil industry
Vakt is a blockchain based post-trade platform designed for the oil industry. As a post trade
platform, it connects key parties to trades allowing them to handle every step between the
initiating trade and final settlement. This includes deal recap, confirmation, contract, logistics, and
invoicing.
Standardizing and digitizing the global
agricultural shipping transactions
ABCD composed of Archer Daniels Midland, Bunge, Cargill, COFCO, and Louis Dreyfus are
investigating ways to standardize and digitize global agricultural shipping transactions for the
benefit of the entire industry. The initiative will initially be focused on developing technologies to
automate grain and oilseed post-trade execution processes, significantly reducing costs and
resources needed to move documents around the globe.
A post-trade inventory management system
Forcefield is a metals post-trade blockchain consortium project from Accenture, ABN Amro, Anglo
American, CMST International, Hartree Partners, ING Bank, Mercuria and OCBC Bank. It is an
inventory management system that will implement blockchain, Internet of Things (IoT) sensors,
and near-field communication (NFC) for post-trade processing.

32. Why
Ethereum

33. Largest ecosystem with the richest functionality
33
Community
Rapidly growing community
encompassing 150,000+
developers
Vendor-neutral
Ethereum is developed by a
non-profit organization not
related to any suppliers
Smart Contracts
Improved capabilities thanks
to Smart Contracts and
formally specified security
Governance
Private and permissioned
Ethereum blockchain can
answer specific enterprise and
governmental use cases
Interoperability
Compatibility between public
and private Ethereum
blockchain
Enterprise Ethereum
Alliance
is growing faster than all other
blockchain consortia
Trust
Multi-billions dollar of value
are protected on the public
network
Tokenization
Ethereum is the dominant
platform for the “token
ecosystem”

34. Enterprise Ethereum Alliance
34
EEA’s 350 members contribute standards &
specifications across Special Interest
industry, Technical Specification and
Legal Advisory working groups. It also
established a Test Net and Certification
process to validate compliance against
standard .
V2 of Client Spec Standard contributed by
50+ authors

35. Purpose-built enterprise implementations
35
● Open-source project led and
supported by ConsenSys, under
flexible Apache 2.0 license
● Brand new client written in Java
● Built for both public and private
blockchains
● Supports network permissioning
(live) and transaction privacy (beta)
● Zero knowledge proofs to be
integrated in 2019
● Transaction finality with IBFT 2.0
consensus
● Enterprise license and support
plans available
● High throughput (100s of
transactions/s) (1)
● Open-source project led by JP
Morgan, under LGPL license
● Fork of go-ethereum
● Built for private/permissioned
blockchain
● Supports network
permissioning and transaction
privacy (Tessera, Constellation)
● Transaction finality with RAFT or
IBFT 1.0 consensus
● High throughput (100s of
transactions/s) (1)
Pantheon by
(1) For reference Paypal = 193 transactions/s
● Blockchain Business Cloud
that’s radically simplified the
creation and operation of
private blockchain networks for
Enterprise.
● Full-stack platform for building
and running cross-cloud, hybrid
enterprise ecosystems
● Cloud partnerships with AWS
and Azure
● Offers no-charge access to their
SaaS platform for business
organizations to register, spin
up, and configure a custom
blockchain environment in a
matter of minutes.

36. Our Products
& Services

37. Relevant ConsenSys products
37
Smart Contract
Development and
Security
Truffle MythX C-Diligence
Enterprise
Environments
Pantheon Kaleido
Transaction
Orchestration
CoreStack
Interoperability
CoreStack
Bridge
CoreStack
Relay
Integratable
Supply Chain
API
Treum
Smart
Contract
Oracle
Rhombus
Embeddable
Legal
Frameworks
OpenLaw
Global
Liquidity
Management
Adhara
Decentralized
Identity
Private Key
Custody
uPort Enterprise ID Trustology MetaMask
User Identity, Asset, & Data Management
Asset
Digitisation
CoDeFi

38. ConsenSys Solutions
38
Education
● Discovery
workshops
● Executive training
● Technical training
Advisory
● Strategy
● Use case
discovery
● Solution
architecture &
design
Products
● Protocol and
infrastructure
components
● Blockchain platform
as a service
● Identity
● Tokenization
● Track & trace
Development
● Product and project
management
● Agile application
development
● Token design
● Smart contract
auditing
● Co-investment
Scaling
● Venture scale-up
● Ongoing support
● Maintenance and
upgrades
● Full managed
service
Helping corporates and governments understand and adopt blockchain technology through the journey of building
new solutions that harness the power of Ethereum.

39. 39
Strategy
Financial
services &
asset
tokenization
Tracking,
supply
chains and
workflows
Identity and
certification
Working with high profile Enterprise & Government partners

40. How You Can
Get Involved

41. How to get involved
41
LARGE
CORPORATE
BUYERS
SME &
COMMODITIES
TRADERS
BANKS & FUNDS
SUPPLY CHAIN /
TRADE FINANCE
FUNDS
START-UPS
- Build Track & Trace
application/
platform for your
industry
- Contact us to
discuss tokenised
reverse factoring
programs for the
benefit of your
suppliers
- Closely monitor
the evolving
landscape in this
space
- Build Track &
Trace
application/
platform for your
industry
- Join existing
trade finance
platforms
- Join existing trade
finance platforms
- Start your own
initiative and build
an application on an
existing network
- Contact us to discuss
Trade finance asset
issuance and
distribution
marketplace use
cases opened to
alternative investors
- Join existing trade
finance platforms
and benefit from
digital exchange of
documents and
execution of
transactions to
reduce operational
costs
- Possibly raise funds
via regulated
token issuances
- Contact us if you
want to use
ConsenSys products
or discuss potential
opportunities to
collaborate

42. Contact us
Didier Le Floch
Partner & Architect -
Trade, Supply Chain & Commodities
didier.lefloch@consensys.net
consensys.net
Guillaume Dechaux
Venture Partner
Trade, Supply Chain & Commodities
guillaume.dechaux@consensys.net