How Cryptocurrency Improves Supply Chain Finance

Managing supply chains is an extremely complex process that often seems daunting due to a number of steps it can comprise. Supply chains are associated with multiple geographic locations, contracts, legal entities, physical persons, payment documents, and, most importantly, transactions. In this long cycle, lasting up to several months, efficiency and transparency of financial operations have become a cornerstone for all the parties involved.

Source: ScienceSoft

Progress in numbers 

In recent years, we have observed a growing adoption of cryptocurrencies as a strategy for operating finances in supply chains. The need for transparent and secure transactions has prompted the growth of the global blockchain supply chain market. Valued at $1.47 billion in 2022, it is forecast to reach a CAGR of 48.25 percent by 2032.

Among other benefits of cryptocurrencies is the potential to reduce supply chain-related expenditures. Recent studies show that blockchain contributes to a 35 percent decrease in transaction costs.

Blockchain vs. cryptocurrency 

Before proceeding further to the benefits of cryptocurrency in supply chain finance, it’s important to understand why this notion and “blockchain” are often used in the same context.

Actually, this happens because the first often relies on the second. In other words, blockchain is an instrument for creating and managing cryptocurrencies, acting as their open ledger. Standing behind cryptocurrencies, blockchain allows for recording and saving the history of all transactions. No one owns this ledger as it’s decentralized, so several parties have to verify them, which nearly excludes the chance of fraud and, therefore, ensures trust. As for now, there are hundreds of cryptocurrencies apart from well-known Bitcoin and Ethereum. They are digital assets that leverage encryption in generating funds and confirming transactions.

How applied in supply chain finance 

Transparent transactions 

Every network participant can see the ledger with a history of transactions where data can’t be changed or deleted. For supply chains, it means that no authorized party remains blind as they can check the records at any time, trace the stages of transactions, track the chain processes and verify the financial operations.

Optimized business processes  

Implementing blockchain in the supply chain is a way to streamline its operations and ensure internal data control. This is achieved through the use of smart contracts – digital agreements that are automatically executed if the predefined conditions are met. For example, they can help automatically verify transactions between companies, initiate payments upon successful delivery and invoice approval, fill standard documents and perform data and settlement checks.

These benefits contribute to minimized involvement of intermediates and manual work, reduced processing time, and streamlined operations.

Apart from increasing supply chain performance, automation helps companies save money on supply chain management as they don’t have to allocate funds on paper, dedicate staff to performing manual tasks, and incur other expenses associated with error correction.

Security and risk mitigation 

With advanced cryptographic techniques that secure transactions and control access to data, blockchain protects sensitive financial data and personal details stored in supply chains. All transactions are encrypted and linked to the previous one, which makes them safe from unauthorized access and changes.

Transparency, safety and traceability ensured by blockchain minimize the risk of fraud, errors, and disputes leading to fund savings and building trust between stakeholders.

Success stories

Given the above, one can hardly deny that cryptocurrencies can benefit supply chains and can be leveraged in a lot more spheres. Let’s consider some success stories of developing crypto solutions for businesses.

Dramatically reducing crypto wallet development costs 

Expert consulting in the blockchain domain can bring incredible value and help reduce blockchain development risks. This was exactly the case with Secure-DeFi – an EU fintech startup producing solutions that secure crypto funds of investors. They were planning to design and build a multi-chain cryptocurrency wallet, however the initial cost seemed incredibly high. Thanks to the roadmap ScienceSoft created, the risks were minimized, and the project cost decreased by a factor of 12.

Secure crypto wallet integration with Near Protocol 

CoolBitX is a blockchain security company offering cold-storage solutions. ScienceSoft integrated their crypto wallet serving 300,000 users worldwide with the Near Protocol. The transformation of their solution resulted in enhanced security and usability, increased user satisfaction and, therefore, increased value for the business.

There is absolutely no doubt that cryptocurrencies and blockchain are revolutionizing not only supply chains but the global economy in general. They challenge habitual approaches to conducting business. Hence, more and more companies are adopting these solutions to stay attractive to their customers and gain a competitive advantage. It’s hard to overestimate the benefits of blockchain as hardly ever before transactions were so transparent and secure. For this reason, cryptocurrencies are sure to continue their expansion and stretch their influence across various industries in the following years.

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