The trade finance system isn’t quite obsolete, but it’s definitely antiquated. Inefficiencies within this process are holding back the global economy and the entire system is failing to meet the demands of a faster-paced, more integrated world. Envoy has built a blockchain-based ecosystem to solve these problems and bring trade finance into the 22nd Century. Yes, the 22nd Century is still 82 years away. But it’s always best to aim high.
This ecosystem is powered by the NVOY token, a cryptocurrency that acts as the lifeblood of the platform. We can better understand how Envoy works and how it solves the many efficacy issues of trade finance by following the typical process that buyers, sellers and financiers must follow in its use.
First, buyers and sellers must agree on a contract and relevant contract terms as they normally might, outside of the Envoy ecosystem. Envoy is essentially the platform where this contract can be posted and made visible to financiers shopping for potential investments.
In order to use Envoy however, all parties must stake a certain amount of NVOY tokens and lock up a certain portion of the total NVOY supply. Once a contract is agreed, a listing fee is charged in NVOY and paid to the platform. A portion of the payment is burnt and the contract is immediately sent to the blockchain and listed on Envoy’s marketplace.
Financiers then search the marketplace for contracts that match their own investment strategy. Multiple financiers can fund a single contract through the Envoy system in a system of distributed risk that is critical to the Envoy platform and business model. By allowing multiple parties to fund a contract, Envoy is expanding horizons and opportunities for lower tier entities that struggle to find financiers due to short or poor credit histories or the lack of established partnerships or banking relationships.
Instead of forcing financiers to take on the risk that both buyers and sellers are trying to avoid, allowing for multiple financiers on the same contract distributes that risk and significantly larger amounts of liquidity are generated. This in turn allows for contracts to be funded quicker and the entire process is sped up.
Once they find contracts they’d like to fund, financiers must pay a fee in NVOY to claim it. A portion of this fee is also burnt. Once a contract has full funding, it is sent off-platform for settlement but users can still track the progress of the contract on the Envoy platform. At the end of the entire process, the relevant smart contracts execute automatically and oversees the conclusion of the transaction.
This is the power of Envoy and the ENVOY token: the introduction of blockchain to reshape the trade finance system.
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