3.1. Escrow Safe Payments
Last updated
Last updated
The Escrow Safe Payment system forms a fundamental part of the Coimex platform, revolutionizing the standard foreign trade transaction process. This system substitutes traditional methods like letters of credit, providing a more secure, streamlined, and efficient way of conducting trade.
Typically, foreign trade transactions involve various sizes of deals, ranging from small (e.g., 1-2 containers worth $15–25K) to large (e.g., ship-based transactions worth $1–10M). The Escrow Safe Payments system primarily benefits small and medium-sized transactions, which form the majority of trades.
In this system, the stages of a trade transaction (as per WTO Incoterms) are taken into account, from pre-exwork (pre-production) to delivery at the buyer's warehouse. The contracting parties decide at which stage the first payment will be made, documented in a written sales agreement, and recorded on the blockchain.
The fee structure for this service involves a fixed cost payable by the buyer (importer) when initiating the smart contract. For example, a fee equivalent to 28 USD in Exim Token (EXIM) would be required to start the contract. This fee covers variable costs like gas fees and must be paid exclusively in EXIM.
Risk Reduction: This system significantly reduces risks commonly associated with trade, such as payment delays or defaults. By securing funds in escrow, both parties have assurance regarding the transaction's completion.
Increased Efficiency: Compared to traditional methods, the Escrow Smart Contract system accelerates the transaction process, enabling faster clearance and settlement.
Transparency and Security: Blockchain technology ensures transparency and security, allowing both parties to track and verify each transaction step.
Commission Structure: The commission for the escrow service could be based on the total transaction size or the non-prepaid portion of the deal. This commission might be set at a percentage, such as 1-2% of the transaction value. The exact rates and structures would be aligned with industry standards and potentially offer competitive advantages over traditional banking fees.
Fostering Trust: By providing a secure and transparent transaction environment, the Escrow Smart Contract system fosters trust between trading partners, which is especially beneficial for newer or less established traders.
Implementing the Escrow Smart Contract for Foreign Trade highlights Coimex's commitment to innovating in international trade, making transactions more secure, transparent, and efficient through blockchain technology and the Exim Token.