Block Chain Technologies (AD-604 (B)) Unit 4 Notes

How unit 4 is examined

This unit covers how permissioned blockchains are used in payments, KYC, food supply, mortgages, trade finance, supply chain financing and identity; no topic has been asked in recent papers, so learn each definition, the working steps and the benefits.

Enterprise application of Block chain: Cross border payments, Know Your Customer (KYC), Food Security

Not asked since 2022

Definition. An enterprise blockchain application uses a shared permissioned ledger, run by known organisations, so that they can record, verify and settle transactions together without a single central intermediary.

Cross border payments.

In the traditional route the payer's bank sends money through one or more correspondent banks (SWIFT messages), each keeping its own ledger, so settlement takes 2-5 days and every hop adds a fee.
On a blockchain the sender and receiver banks (or a token such as XRP or a stablecoin) settle on one shared ledger, so no correspondent bank is needed and settlement takes seconds.
The ledger is transparent to all participants, so the payment can be tracked end to end, and reconciliation between banks is no longer needed.
Examples are Ripple (RippleNet), JPMorgan's JPM Coin and Stellar; open issues are regulation, currency conversion liquidity and different laws in each country.

Traditional: Bank A -> Correspondent 1 -> Correspondent 2 -> Bank B   (2-5 days, many fees)
Blockchain : Bank A -> Shared ledger -> Bank B                        (seconds, one fee)

Know Your Customer (KYC).

KYC is the legal duty of a bank to confirm a customer's identity and address before opening an account, and every bank normally repeats it, which costs time and money.
With blockchain, the customer is verified once by one bank, the verified documents (or their hash) are stored on the ledger, and other banks accept them with the customer's consent.
The record is tamper-proof and time-stamped, so every change to the KYC data has an audit trail, and a permissioned network keeps the data visible only to approved banks.
Benefits are lower cost, faster onboarding, no duplicate checks and fewer fake identities; the main challenge is privacy and data-protection law, so personal data is kept off-chain and only its hash is on-chain.

Food security.

Food supply chains are long (farm, processor, transporter, retailer), so when food is contaminated it is hard and slow to find the source.
Each step is recorded on the ledger with time, place and batch number, and sensor data such as temperature can be added, so a batch is traceable from farm to shelf.
Walmart with IBM Food Trust cut the time to trace a mango's origin from about 7 days to 2.2 seconds, which shows the value of quick recall.
Benefits are safer food, less waste (only the bad batch is recalled), proof of origin and fair prices for farmers.

Answer frame. Open with the definition of enterprise blockchain; draw the traditional against the blockchain payment path; then develop cross border payments, KYC and food traceability in that order with two points each; close with the common benefit of trust, speed and lower cost.

Pitfall: Do not say personal KYC data is stored openly on the chain; write that documents stay off-chain and only a hash and permissions are on-chain.

Mortgage over Block chain, Block chain enabled Trade, We Trade – Trade Finance Network

Definition. We.Trade is a blockchain trade finance platform, built on Hyperledger Fabric by a consortium of European banks, in which buyers, sellers and banks agree trade deals and execute payment through smart contracts.

Mortgage over blockchain.

A mortgage is a loan secured on a property, and today it involves many parties (borrower, lender, valuer, land registry, insurer, lawyer) who each keep separate paper records, so approval takes weeks.
On a blockchain all parties share one ledger holding the property title, the borrower's verified documents, the valuation and the repayments, so each party sees the same data.
A smart contract can check the conditions and release the loan, record each instalment and clear the lien (charge) on the property when the loan is repaid.
Benefits are faster approval, lower cost, fewer frauds such as forged titles, and a clear audit trail; a legal challenge is that the land registry must accept the digital record.

Blockchain enabled trade.

International trade uses paper documents such as the purchase order, invoice, bill of lading and letter of credit, which are slow, can be forged and pass through many hands.
On a blockchain these documents are digital records shared by exporter, importer, banks, shipper and customs, and every change is signed and time-stamped.
Smart contracts trigger payment automatically when the shipment is delivered and the documents match, which removes manual checking and disputes.

We.Trade.

We.Trade was launched by banks such as Deutsche Bank, HSBC, Santander, Société Générale and UniCredit for small and medium exporters and importers in Europe.
A buyer and seller agree a deal on the platform; the seller's bank then gives a payment undertaking (bank guarantee) to the buyer's bank, so the seller is sure to be paid.
When the goods arrive, the smart contract confirms the conditions and the payment is made; every step is visible to all parties in the deal.
Because it runs on a permissioned Hyperledger Fabric network, only member banks and their customers take part, and data is shared only among the parties to a trade.

Buyer <-> Seller: agree trade on platform
Seller's bank -> Buyer's bank: payment undertaking (guarantee)
Goods shipped and delivered -> smart contract checks conditions
Payment released -> all parties see the same record

Answer frame. Open with the We.Trade definition; draw the buyer, seller, two banks and shared ledger with the guarantee arrow; then develop mortgage, paper-free trade and We.Trade steps in order; close with the benefits of speed, lower cost and reduced fraud.

Pitfall: We.Trade is a bank-owned permissioned network on Hyperledger Fabric, not a public cryptocurrency network.

Supply Chain Financing, and Identity on Block chain

Definition. Supply chain financing is short-term credit that lets a supplier receive early payment against an approved invoice, and blockchain makes the invoices, orders and deliveries trusted records that all parties and financiers can verify.

Supply chain financing.

In a normal chain a large buyer pays its supplier after 60-90 days, and small suppliers at the lower tiers cannot easily borrow because the financier cannot see their invoices.
On a blockchain the purchase order, delivery proof and invoice are recorded on a shared ledger, so a bank can see that the invoice is genuine and approved and can pay the supplier early at a low rate.
The same invoice cannot be financed twice (double financing), because the ledger shows that it is already funded, and a smart contract repays the bank automatically on the due date.
Benefits are better cash flow for small suppliers, lower risk and cost for banks, and transparency across all tiers of the chain.

Buyer approves invoice -> recorded on ledger
Supplier -> Bank: request early payment
Bank pays supplier (minus a small fee)
On due date the buyer pays the bank (smart contract)

Identity on blockchain.

Traditional identity is held in central databases (government, banks, social sites), which can be hacked, misused or duplicated, and the person has no control.
Self-sovereign identity (SSI) lets the person own and control their identity: an issuer such as a university or government signs a credential, the person keeps it in a digital wallet, and the blockchain stores only public keys and hashes (decentralised identifiers).
To prove a fact, the person shares just that credential (for example "age above 18"), and the verifier checks the issuer's digital signature against the ledger, so no central database is queried and no extra data is revealed.
Benefits are privacy, one reusable identity, protection from identity theft and no single point of failure; examples are Sovrin, uPort and India's blockchain pilots for digital certificates.

Answer frame. Open with the definition; draw the invoice-to-early-payment flow, then the issuer, holder and verifier triangle for identity; then develop points 1-4 for each part in order; close with the benefit of trust and transparency without a central authority.

Pitfall: The identity data itself is kept in the user's wallet; the chain holds only keys and hashes, not the personal details.

Last-minute revision

Enterprise blockchain is a shared permissioned ledger among known organisations, with no central intermediary.
Cross border payment: removes correspondent banks, so settlement takes seconds instead of 2-5 days.
KYC: verify once, share with the customer's consent, keep documents off-chain and hashes on-chain.
Food security: batch-level traceability from farm to shelf; Walmart traced a mango in 2.2 seconds instead of 7 days.
Mortgage: one shared record of title, documents, valuation and repayments, with smart contract release and lien clearing.
Blockchain trade replaces paper (bill of lading, letter of credit) with digital records and smart contract payment.
We.Trade: European bank consortium, Hyperledger Fabric, bank payment undertaking to the seller.
Supply chain financing: early payment against a trusted invoice; ledger stops double financing.
Self-sovereign identity: issuer signs, holder keeps in wallet, verifier checks the signature on the ledger.
Common benefits: speed, lower cost, transparency, tamper-proof audit trail, less fraud.

Memory hooks

CKF: Cross border, KYC, Food, the three applications of topic one.
MTW: Mortgage, Trade, We.Trade, the second topic.
We.Trade = banks + Fabric + guarantee + smart contract.
Supply chain finance = trusted invoice, early cash, no double financing.
SSI triangle: Issuer signs, Holder keeps, Verifier checks.

Coverage checklist

Enterprise application of Block chain: Cross border payments, Know Your Customer (KYC), Food Security: definition, three applications, benefits; no past questions.
Mortgage over Block chain, Block chain enabled Trade, We Trade – Trade Finance Network: mortgage, paper-free trade, We.Trade steps; no past questions.
Supply Chain Financing, and Identity on Block chain: financing flow, self-sovereign identity; no past questions.

Account

Block Chain Technologies (AD-604 (B)) - Unit 4 Short Notes