A business case for letter of credit based on blockchain technology

1. www.vestforsk.no
Smart Letters of Credit
How blockchain technology
can make trade and finance cheaper and faster
Svein Ølnes and Parth Desai
DFIN-513 Work group project, 21st of April 2016

2. www.vestforsk.no
 Joint development with a bank
 Secure funding
 Seek competence in trade & finance
 Service for the banks, not a service to replace banks
 LCs: Huge volume and value
 Conservatively $3-$4 trillion of trades done with LC as payment
 Appr. 1 % fee for today’s LCs (that is $30-$40 billion a year!)
 Lowering the fees of only 10 % will generate $3-$4 billion in margins
 The solution: Smart contracts/Ethereum + Ripple
Smart letters of credit

3. www.vestforsk.no
 A credit issued by a bank as a guarantee of payment for the
seller
 The payment is effectuated after certain conditions are met
 goods received
 x days after shipping (Bill of laden)
 after x days
 Governed by the International Chamber of Commerce’s (ICC)
 UCP 600 (Uniform Customs and Practice for Documentation)
What is a letter of credit?

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How does LC work today?

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How does a smart LC work?
Blockchain (e.g. Ethereum)
LC as smart contract

6. www.vestforsk.no
How does a smart LC work?
Blockchain (e.g. Ethereum)
LC as smart contract
Buyer says OK
Payment executed

7. www.vestforsk.no
Thanks for your attention!
E-mail: svein.olnes@gmail.com
pdesai587@gmail.com
Bitcoin address:
1HpvvptgrYJh4xUHerm1ruZtvnyUnnnHkU