LC LITE is one of the very first blockchain-based alternatives to traditional bank-managed letters of credit (LCs), a financial instrument that guarantees payment from an importer to an exporter upon the shipment of goods. Traditional LCs are usually expensive and complicated to arrange, with 80 per cent of them having discrepancies when received by banks.
LC LITE enables companies to avoid intermediaries like banks by using smart contracts and private blockchain to execute transactions based on a predefined set of conditions. It also helps them eliminate fraud and manipulation. Digital letters of credit would be faster and safer to arrange and could save companies a lot of money that’s otherwise spent on trade documentation. Around 13 per cent of global goods trade is backed by LCs, and it’s a huge market worth $2.3 trillion.