Blockchain and Trade Finance Tech (Series: Blockchain Basics)

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Practical and entertaining education for
attorneys, accountants, business owners
and executives, and investors.
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DISCLAIMER
The material in this webinar is for informational purposes only. It should not be
considered legal, financial or other professional advice. You should consult with an
attorney or other appropriate professional to determine what may be best for your
individual needs. While Financial Poise™ takes reasonable steps to ensure the information
it publishes is accurate, Financial Poise™ makes no guaranty in this regard.
About this PowerPoint: if you are looking at this PowerPoint without the benefit of
listening to the conversation that surrounded it then you are doing yourself a disservice.
This PowerPoint was prepared in contemplation of being viewed in conjunction with
listening to a one hour webinar on the topic
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MEET THE FACULTY
Moderator:
Chris Cahill – Lowis & Gellen LLP
Panelists:
Michael Baumert – Barnes & Thornburg LLP
Oscar Jofre – KoreConX
Bryan Kagel – Meridian Finance Group
Jeffrey Kamins – Integrated Trade Finance LLC (ITF)
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ABOUT THIS WEBINAR:
Blockchain and Trade Finance Tech
The financing of the international trade of goods — and the underwriting thereof —
implicate a many-staged process of manufacture, storage, movement, delivery,
inspection, and vending. The parties involved are many. The documentation of
rights and responsibilities used to fill a small library of paper, and now involves
paper, electronic communication, and some digital information transfer. Many
points of delay and potential contention persist. Can blockchain clean this up?
What other technological developments are reshaping trade finance?
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ABOUT THIS SERIES: Blockchain Basics
In Dr. Strangelove, a party created a ―doomsday machine‖ that would automatically destroy all life if the
machine detected a nuclear attack on that party. There was no override, and, well, let’s just say that the
film is hilarious but probably not a comedy in a conventional sense. There, if the ―network‖ received certain
information, the device would activate. Like a smart contract on a blockchain. The problem in Dr.
Strangelove was that the party that created the doomsday machine activated it before telling its adversary
(i.e., the other network participant). That ―smart contract‖ was critically not smart. Blockchain smart
contracts (with much smaller but still meaningful stakes) are computer code designed to adjust
automatically the rights and obligations of network participants based upon the inputting of information to
the network, with such information visible to all and inputted per means and procedures agreed upon by
all before the contracts become effective. And thus paper-intensive, multi-step and multi-party
transactions, like securities sales, supply chain coordination, and supply chain finance, might proceed with
greater ease and security. Costs could be lowered, transactional speed quickened, and litigation simplified
or evaded entirely. We will examine these areas of promise.
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EPISODES IN THIS SERIES
8/23/19 Episode #1:
Blockchain and Smart Contracts
9/20/19 Episode #2:
Blockchain and Supply Chain
10/18/19 Episode #3:
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Dates shown are premiere dates.
All webinars will be available
On Demand approximately 4 weeks
after they premiere.

Episode #3:
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WHAT IS BLOCKCHAIN?
• A ledger
• Not stored in any one place
• Composed of a decentralized network of nodes
• New data on the blockchain must be verified by a majority of nodes
• Verification occurs by executing energy-intensive cryptographic
calculations
• Once validated, a block of data is added to the chain
• Blocks may never be removed or edited
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WHAT IS BLOCKCHAIN? (cont’d)
• Decentralized – data on the blockchain is not stored in any single
place but distributed across many nodes
• Immutable – once data is added to the blockchain, it cannot be
removed, edited or backdated
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TYPES OF BLOCKCHAINS
• Public Blockchains (permission-less)
• Private Blockchains (permissioned)
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FROM CENTRALIZED LEDGER TO
DECENTRALIZED
Blockchain establishes a decentralized ledger, by contrast to the familiar
centralized ledger, with a custodian or administrator being trusted to process
monetary transactions and manage the transfer of property
See the two diagram on the following pages, from David Sneyd, ―Blockchain
solutions to ESG problems‖ (BMO Global Asset Management, Oct. 2018)
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TITLE
Content
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HOW DOES BLOCKCHIAN ESTABLISH
A DECENTRALIZED LEDGER?
•Participant makes an entry, i.e., creates a new block
•Proposed transaction is broadcast to each participant on the network
•Validity of the new block is subject to pre-set criteria and a complex algorithm
called ―proof of work‖
•A majority of miners conclude that transaction is valid
•New block is created and time-stamped
•All are provided with an updated version of the ledger:
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SOME COMPONENTS OF A BLOCKCHAIN
•Each block contains:
A ―hash,‖ which is a digital fingerprint or unique identifier
Time-stamped batches of recent valid transactions
And the hash of the previous block
•The previous block hash links the blocks together and prevents the past
form being altered or rewritten
•Each subsequent block strengthens the verification of previous blocks
(and the entire blockchain)
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SOME COMPONENTS OF A
BLOCKCHAIN (cont’d)
Proof of work requires high computational capacity, provided by ―miners‖
Miners supply the network with computing power, to allow the updating of the database
A majority of mining power must be able to confirm the new blocks by decrypting the data
Once a “block” (a record of a purchases and sales created by miners by solving
a mathematical puzzle that validates the transactions) is added to the network
ledger of older transaction (the “chain”), such record on the blockchain can’t
be changed or reversed (i.e., the transaction is immutable)
Thus a blockchain, to be non-falsifiable, must not have any operator holding at any time
more than half of the computational power of the chain
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ACCORDING TO SATOSHI
• A coin can be defined as a chain of digital signatures
• The input to each transaction is the output of one or more other
transactions
• The balance in your Bitcoin wallet is the sum of your unspent
transactions
• The coins in your wallet can be traced all the way back to the miner
that mined it
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SO WHAT IS GAINED BY GOING FROM A
CENTRALIZED TO A DECENTRALIZED
LEDGER?
If a bank or credit card company keeping a centralized ledger is hacked,
then other participants lose access to their data
With a decentralized ledger, all participants keep a copy of the data
With a decentralized ledger, there is no extra cost of (or litigation from)
efforts to synchronize records kept by counterparties to a transaction
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SMART CONTRACTS
•Smart contracts are ―self-executing contracts with the terms of the agreement between [a]
buyer and seller being directly written into lines of code. Once a smart contract has been
created, computer transaction protocols will execute the terms of a contract automatically
based on a set of conditions.‖ Rensel v. Centra Tech, Inc., 2018 WL 4410110 at *10 (S.D.
Fla. June 14, 2018). The promise re smart contracts:
Self-executing
Additional parties not needed to monitor the transactions
Greater cost efficiency and faster transaction speed
•To determine whether contractual conditions are met, smart contracts use ―oracles,‖ which
are agreed-upon real-time data providers which confirm triggering events
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SMART CONTRACTS (cont’d)
• The rights and obligations of the parties are reduced to code in the form of if-
then scenarios that can be automatically executed as soon as data is received that
fulfills or negates the fulfillment of agreement benchmarks
• Sensor technology connected to the Internet of Things generates data then
received to verify that the shipment has reached a geographical threshold,
triggering obligations to pay or insure, or shifting the risk of loss
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LEGAL CONTEXT OF SALE OF GOODS:
BUSINESS RULES EMBEDDED IN
TRANSACTIONAL DOCUMENTS
• What exactly is being supplied? When and where must it be delivered?
• What are the warranties and disclaimers? Incoterms? Quantity? Last ship date?
• Price? Currency? Duration of supply obligation? Limitations of damages and
remedies?
 How manage adjustments due to changes in production capacity, split
shipments, dramatic rises in raw material costs
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PLAYERS IN INTERNATIONAL TRADE
FINANCE: A PARTIAL LIST
• Importer, exporter, importer’s bank, exporter’s bank
• Freight forwarder, insurer, pre-shipment inspector,
• Export customs, document courier, shipper (multiple)
• Import customs, correspondent bank
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DOCUMENTS IN INTERNATIONAL
TRADE FINANCE: A PARTIAL LIST
Purchase order, sales contract and trade terms (terms and conditions); Commercial
invoice; Letter of credit; Insurance policy; Certificate of origin; Customs value
declaration; Export licenses/certificate; Weight/packing list; Bill of lading, airway
bill, delivery note; Shipment status (e.g., booking confirmation, arrival
notification); Port declaration, manifest; Customs clearance; Import
licenses/certificates; Letter of Credit processing; KYC/AML sanctions
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THE PROMISE OF BLOCKCAIN:
LINKAGE AND VISIBILITY IN REAL TIME
• A smart contract registers content and moment of effectiveness of Bill of Lading,
whereby goods are loaded onboard and booked re: sailing date,
origin/destination ports, vessel name, and bill of lading number
• Smart contracts help fulfill requirements to file manifests, submit importer
security filings and apply for customs clearance
• All of the above is recorded in real time on a digital ledger visible to all of a
defined group of participants
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SMART CONTRACTS AND
UNDERWRITING: AN EXAMPLE
• On what data should trade credit insurers rely in underwriting a policy to insure
payment to a lender or seller on credit?
 Invoices can be uploaded onto the Ethereum smart contract blockchain
 Thereon, a smart contract can identify the network of companies trading with
a given purchaser
 Whenever a seller is not paid timely by purchaser X, smart contract can
decide, based upon the rules programmed into it, whether and when to send
notice to other suppliers of the same purchaser
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BLOCKCHAIN AND INTERNATIONAL
TRADE, PER THE WORLD TRADE
ORGANIZATION REPORT (2018)
• Per the WTO report (cited below), the WTO:
 expects blockchain technology to add US$3tn to international trade by 2030
 acknowledges that blockchain is (in 2018) in the ―irrational exuberance‖ phase
 sees need for regulatory overlay
 sees need for blockchains to be interoperable and connected to all banks
 notes that large trade finance banks and fintech firms and industry bodies are working on
the Universal Trade Network to connect networks
Eammanuelle Ganne, ―Can Blockchain revolutionize international trade?‖ World Trade Organization 2018
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BLOCKCHAIN AND TRADE
PROJECTS UNDERWAY
• IBM and Maersk are developing TradeLens (shared visibility of each transaction, real-
time shipping data and documents
• FedEx, UPS, and DHL working together under Blockchain Transport Alliance (build
blockchain standards and urge blockchain-related shipping standards re counterfeit and
illegal goods)
• Walmart and IBM developing blockchain platforms to improve traceability of produce
• BMW partnering with blockchain start-up to track cobalt sourcing for its EVs
See Cole Callihan, ―When Supply Chains Become Blockchains‖, Industry Today (May 14, 2019)
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ABOUT THE FACULTY
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Chris Cahill – ccahill@lowis-gellen.com
Mr. Cahill is Head of the Bankruptcy and Restructuring Practice Group at Lowis & Gellen LLP,
in Chicago, Illinois. He guides secured lenders, creditors, debtors, creditors’ committees,
potential purchasers and others through bankruptcy cases, out-of-court workouts, assignments
for the benefit of creditors, and receiverships. Mr. Cahill has substantial mega-case
experience representing very large debtors, and counsels and litigates on behalf of
manufacturers and secured lenders in large and middle-market cases.
Mr. Cahill also publishes frequently and speaks regularly on commercial insolvency issues. He
is an executive editor of Commercial Bankruptcy Litigation, 2d Edition (Jonathan P. Friedland,
Elizabeth Vandesteeg & Christopher M. Cahill eds., 2017) and is the host of Financial Poise
Radio, a periodic broadcast for investors and other curious persons,
on www.financialpoise.com.
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Michael Baumert – mbaumert@btlaw.com
Michael Baumert is an associate in Barnes & Thornburg’s Chicago office. As a member of
the Intellectual Property Department and Corporate Department, Michael focuses on
technology-driven transactions, sourcing, cloud computing, and data privacy and security.
Michael has earned a Certified Information Privacy Professional/United States (CIPP/US)
certification offered by the International Association of Privacy Professionals (IAPP).
Michael also counsels clients in technology and intellectual property transactions, and has
developed a focus on blockchain and distributed ledger technologies, autonomous vehicles,
machine learning, and other artificial intelligence-related concepts. Prior to becoming an
attorney, he worked as a software engineer designing and developing business intelligence,
warehousing, and customer relationship management software.
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Oscar Jofre – oscar@koreconx.io
Oscar is currently one of the Top 10 Global Thought Leaders in Equity Crowdfunding, a Top 5 Fintech
Influencer, Top 10 Blockchain and a Top 50 InsureTech. He has published an eBook that has been downloaded
in over 20 countries, and been distributed by partners worldwide. Oscar is a featured speaker on Blockchain,
Digital Assets, Digital Securities, Securities Token, Fintech, regulated, equity crowdfunding, compliance,
shareholder management, investor relations, and transparency in the USA, Australia, UK, UAE, Peru,
Germany, France, Netherlands, Canada, Singapore, Indonesia and China. He speaks to audiences covering
alternative finance, digital securities offerings, equity crowdfunding, DSO, STO, TAO, ICO/ITO, RegTech,
insurance, banking, legal, and crowdfunding. Oscar also advises the world’s leading research, accounting, law
firms and insurance companies on the impact Blockchain, STO, TAO, ICO, Fintech, RegTech, LegalTech,
InsurTech and OrgTech is having in their business. He is a member of the Crowdfunding Intermediary
Regulatory Advocates (CFIRA) in the USA, and a contributing author to The Fintech Book, the world’s first
crowdsourced book on Fintech globally. He writes for Sharewise, Locavesting, Equities.com, Business.com,
Crowdfund Insider, Crowdfund Beat, Bankless Times, and Agoracom. Oscar has been recognized as one of the
10 most influential Hispanic Leaders in Canada. In May 2010, Oscar A. Jofre Jr. was recognized by the Rt.
Hon. Stephen Harper for his accomplishments. Oscar was awarded the Vision 2012 Business Man of the Year
by the Toronto Hispanic Chamber of Commerce on September 2012.
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Bryan Kagel – bkagel@meridianfinance.com
Bryan Kagel is the Regional Director of Midwest at Meridian Finance Group. He assists
companies with the management and utilization of their domestic and international trade
receivables, specifically those looking to eliminate customer non-payment issues, grow
sales while protecting cash flow or looking to increase access to working capital financing.
In most instances this is achieved through some sort of account receivable protection like
trade credit insurance. He works with Business Owners, C-Suite Executives, Credit
Departments, Asset Based Lenders, International Bankers and U.S. Exporters. He starts
with a consultation where he gets a firm handle on the unique challenges facing the
business with respect to the management of its trade receivables. He then learns where the
company may be at risk and what factors might affect its ability to grow safely, either
domestically or abroad. From there, a plan is developed to respond to these challenges and
empower the company to trade safely anywhere in the world.
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Jeffrey Kamins – jkamins@itf-finance.com
Jeffrey Kamins, MBA/MIM, is the CEO and Founder of Integrated Trade Finance LLC (ITF), a global
finance and market development company founded in 2009, headquartered in Omaha, Nebraska. Jeffrey
has over 22 years of international finance and sales/distribution experience, mainly in industrial
machinery, agriculture equipment, infrastructure finance and renewable and nuclear energy. He has held
senior international management positions at three corporations including AGCO Corporation (NYSE:
AGCO) Valmont Industries, Inc. (NYSE: VMI), and RWE NUKEM GmbH formerly part of RWE AG in
Germany. He also served in the United States Department of Commerce working extensively US exporters
to the former USSR republics.
ITF's mission is to help manufacturers and exporters expand internationally by integrating finance
solutions into the sales process. ITF's total portfolio of projects consists of nearly $2.3 billion globally
supported by a network of over 235 financial institutions worldwide, representation in 52 countries, and
directors in 12 cities worldwide. In the past two years, ITF has built 18 captive finance programs with 55
agreements between manufacturers and foreign banks and leasing companies. ITF works with over 30
Export Credit Agencies worldwide to facilitate cross-border trade and project finance.
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QUESTIONS OR COMMENTS?
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IMPORTANT NOTE: The material in this presentation is for general educational purposes only. It has been prepared primarily
for attorneys and accountants for use in the pursuit of their continuing legal education and continuing professional education.
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Blockchain and Trade Finance Tech (Series: Blockchain Basics)

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