Research on Payment Settlement Mode in Cross-border Business Trade Based on Blockchain Technology

Cross-border commerce trade is an important part of economic development, and its payment and settlement mode has received widespread attention. This paper mainly introduced blockchain, analyzed its characteristics and composition and the possibility of its application in cross-border business trade, and took the Ripple payment settlement mode as an example for a case study. The analysis found that the model had smaller time and capital costs, greater transparency and security of transactions, and simple and convenient processes than the traditional payment and settlement mode, which can be further promoted and applied in practice.


Introduction
Blockchain technology, which originated from Bitcoin, is a decentralized, distributed shared network ledger technology based on computer cryptographic algorithms [1], involving technologies such as peerto-peer (P2P) networks and Hash functions. At present, the development of blockchain is still in its infancy, but it has received extensive attention from researchers and has been very widely used in nancial, monetary, and non-nancial elds [2]. Choi et al. [3] analyzed the application of blockchain in shipping logistics and proposed how to apply blockchain to explore supply chain operational risks. Claudia et al. [4] conducted a study on smart energy grid demand management, using a blockchainbased distributed ledger to collect energy production information, validated the method on the Ethernet platform, and found it be able to track demand response signals with high accuracy. Hammi et al. [5] designed an Internet of Things (IoT) identity veri cation system with the blockchain and found through experiments that the method could satisfy the demand of IoT. Zhu et al. [6] designed a storage system that made full use of the remaining space of the user's personal hard disk to store all information in the blockchain with high security. In cross-border business trade payment, the traditional payment settlement mode has many de ciencies. The introduction of blockchain has some unique advantages for crossborder business trade payment, which has the characteristics of less infrastructure and strong resistance to attack and can effectively improve the security and e ciency of payment; therefore, this paper studied the blockchain-based cross-border business trade payment settlement mode. This paper analyzed the characteristics of blockchain and introduced a Ripple mode to examine its application possibility in cross-border business trade payment.

Blockchain Technology And Payments
In cross-border business trade, risk is one of the biggest problems, especially payment risk. The current payment process needs to go through multiple enterprises and institutions, with high cost and low e ciency, which is a very complicated transaction settlement mode. With the rapid development of the economy, this traditional mode has become increasingly unable to meet the current demand, and nding a new payment settlement mode has become an inevitable choice for the development of cross-border business trade.
Blockchain is also known as a distributed ledger. When a transaction is performed, rst, the transaction is de ned by the counterparty, and a transaction block is established; then, the block information is disseminated to all nodes to jointly validate the transaction, the result is fed back to all nodes if it passes validation, and the nodes where the validation is completed is time-stamped to record the transaction.
The features of blockchain include: (1)decentralized [7]: information exchange and transactions can be realized between any two points, and the withdrawal of any node will not affect the stability of the blockchain; (2)trustless: all operation rules and data contents are disclosed, and nodes cannot cheat each other; (3)collectively maintain: the data blocks are maintained by all nodes together; (4)reliable database: modi cations to the database by any node are invalid.
The blockchain is composed of three parts, including: (1)Smart Contract [8]: It is a type of contract that is implemented electronically and is visible to all nodes, allowing all developers to write program logic.
(2)Encryption principle: It refers to the encryption technology of blockchain, generally hash function or elliptic curve algorithm.
(3)Consensus algorithm: It refers to the management mechanism used to con rm the validity and immutability of transactions, and the mainstream algorithms include: Proof of Work (POW) [9]; Proof of Stake (POS) [10]; Delegate Proof of Stake (DPOS).
Blockchains can be divided into the following three types.
(1)Public chain: It is accessible to anyone, has mature technology, is simple to build, which is generally used in scenarios with relatively simple logic, such as Bitcoin.
(2)Private chain: It is a blockchain that only one organization has the management authority, with small application scope, a closed mode, and more secure data storage, which is more widely used within nancial institutions.
(3)Federated chain: It is a blockchain that only authorized companies and organizations can join. The nodes can ensure privacy security and great scalability while increasing e ciency. It has wide applications in banks.
The payment and settlement model of the blockchain-based cross-border business trade can be simply described, as shown in Fig. 1. Through blockchain, buyers and sellers, banks and foreign exchange dealers in the payment process are involved in the network as nodes, and then the real currency is connected to the digital currency to complete the nal payment and transaction. Blockchain greatly improves the transparency and feasibility of the transaction using common veri cation and con rmation, thus reducing the payment risk, and it also eliminates the need for synchronization of information from individual banks, reducing their time costs and thus improving payment e ciency.

Ripple payment settlement mode
Ripple [11] allows direct peer-to-peer transactions that transfer any kind of currency, such as RMB, Euro, USD, Bitcoin, etc. Compared with the traditional mode, Ripple's cost is close to zero, the transaction is in seconds, no cross-border payment fees are required, and money can ow between any person or institution, which has attracted several banks to join [12]. The Ripple payment settlement mode is shown in Fig. 2.
In the mode, several key elements are as follows.
(1) Ripple connection: Ripple uses an independently developed connection protocol to connect to the Ripple network for payments and settlements.
(2) Distributed consensus mechanism: Ripple's consensus mechanism enables veri cation of nodes across the network, enabling 7 × 24 h payments and effectively improving payment e ciency.
(3) Market maker network: The presence of multiple banks in the Ripple network that can act as market makers enables more e cient exchange tasks to be completed.
(4) XRP [13]: Ripple uses XRP as a proxy currency to act as a medium of exchange between traditional currencies as well as digital currencies. In addition, Ripple requires each trading account to hold at least 20 XRPs, and each transaction permanently destroys 1 in 100,000 XRPs. When Ripple is attacked from outside, the volume of transactions rises dramatically and XRP is rapidly consumed. The cost of attack is extremely high for attackers, and in this way, Ripple payments can be effectively secured.

Case Study
Suppose that Firm A in China needs to trade with Firm B in the United States, with A as the buyer and B as the seller. The payment amount is 100 U.S. dollars. A has 5,000 ¥ in Bank C, and B has 3,000 $ in Bank D. In the payment process, Bank C injects 200,000$ into the account as a market maker, and Bank D injects 100,000$ into the account as a market maker. At this point, the funds in the three ledgers are shown in Fig. 3.
It is seen from Fig. 3 that: (1)The ledger of Bank C: 5000 for Firm A, 200,000 for the market maker, 0 for the fee account, 0 for the shadow account, and 0 for the external account.
(3)The ledger of Bank D: $100,000 for the market maker, $0 for the fee account, $0 for the shadow account, $0 for the external account.
Next, the market maker asks the bank to make a payment to the blockchain, transferring 100,000$ from Bank C to the external account and 50,000$ from Bank D to the external account. The funds of the three ledgers are shown in Fig. 4.
It is seen from Fig. 4 that: (1)The ledger of Bank C: 5000 for Firm A, 100,000 for the market maker, 0 for the fee account, 0 for the shadow account, and 10 for the external account.
(2)Ripple distributed ledger: 100,000$ for the shadow account of Bank C, 50,000$ for the shadow account of Bank D, and 100,000$ and 50,000$ for the Ripple account.
(3)The ledger of Bank D: $50,000 for the market maker, $0 for the fee account, $0 for the shadow account, and $50,000 for the external account.
Then, A sends a request to C to pay $100 to D and B. Bank C, after receiving the request, connects the local Ripple connection to Bank D's Ripple connection and then makes a request to Bank D. Bank D, after receiving the request, checks whether B is its customer and audits B. If the audit does not pass, it replies to Bank C that the transaction is terminated, and if the audit passes, it sends the calculated fees and information about B to C for review. C, the calculated fees and information about B will be sent to C for review. After C receives D's reply, it looks for a market maker through Ripple to get the exchange rate, and then the market maker returns the exchange rate quotation: 100$ = 639.45 , in which the RMB is rst converted into XRP and then converted into USD through XRP.
Both Bank C and D add the transaction fee. C provides A with the nal list of fees, and after Firm A con rms it, Bank C sends a con rmation notice to the market maker as well as Bank D via Ripple connection to start the transaction. Meanwhile, Firm B submits a shipping statement to D. After D con rms it is correct, it informs the market maker as well as C that the seller has shipped the goods; after both parties con rm and verify the information, it indicates that all parties to the transaction have reached a consensus.
Finally, Bank C records in the system a debit to Business A of 669.45 yuan, a credit to expense of 30 yuan, and a shadow account of 639.45 yuan. At the same time, Bank D sends a message to the Ripple network that Bank C's bookkeeping is successful and then tells the market maker through the Ripple connection that the bookkeeping is o cial. After the market maker closes the record in the shared account, it informs that all bookkeeping is nished due to the Ripple connection of Banks C and D. Bank D performs bookkeeping after receiving the settlement notice and then informs Bank C that the credit is successful. The above is the process of Ripple payment and settlement.

Discussion
Cross-border business trade can be divided into three parts: purchase, transportation, and payment, among which payment is the foundation of the nancial industry and plays a very important role in the growth of the economy. The goal of payment is no more than to improve e ciency and reduce costs, thus improving the quality of nancial services. At present, the traditional payment and settlement mode is usually used, which has a complicated process, numerous procedures, high costs of settlement and management, and low payment e ciency [14]. The traditional mode cannot meet the needs of trade development more and more, therefore, it is very important to nd a new payment and settlement mode [15].
From the perspective of the entire payment process, the Ripple mode has multiple advantages over the traditional mode: considering from the cost, the traditional mode needs to go through institutions such as remittance banks and foreign exchange intermediaries, which requires account checking and liquidation and consumes a lot of time and money, while the Ripple mode does not need intermediaries, which greatly reduces the transaction costs; considering from capital occupation, the traditional mode has a high occupation cost for bank transactions, while the Ripple mode only requires a margin account; considering the security of transactions, the blockchainbased Ripple mode is signi cantly better than the traditional mode in terms of tamper-proof information and privacy encryption, etc. If the veri cation is not passed during the transaction, the transaction will not be carried out, which is conducive to reducing the risk of losing funds. In addition, in the Ripple mode, all transaction information is fully recorded, jointly stored, transmitted and veri ed, transparently supervised, and conveniently queried.
It is found from the research results that blockchain technology has great development potential in payment; therefore, more and deeper research on blockchain technology is necessary. Although the research in this paper has yielded some results, the Ripple mode still faces many challenges, for example, the technology of blockchain needs to be further matured, and there are many uncertainties in the nancial industry. In future research, further work is needed to promote blockchain-based payment and settlement modes to develop in a more controllable and healthy direction to facilitate better and cross-border commerce and trade to develop faster.

Conclusion
This paper introduced blockchain technology, analyzed the feasibility of its application in crossborder commerce and trade, studied the Ripple payment and settlement mode, and explained the operation mechanism of the Ripple mode through case studies. Compared with the traditional mode, the Ripple mode was found to have signi cant advantages in terms of cost and security and was more capable of meeting the needs of cross-border business trade payments, which can be further promoted and applied in practice.

Declarations
Availability of data and material The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request.

Competing interests
None.

Funding
Not applicable.
Authors' contributions XYW designed research, performed research, analyzed data, and wrote the paper.  Status of funds in ledgers (2)