Commodity trading using blockchain: is it possible for real? A cargo of soybeans shipped from U.S.A. to China, is the first fully-fledged agricultural trade conducted using blockchain. The companies involved in this trading are Louis Dreyfus Company, Shandong Bohi Industry and the banks ING, Société Général and ABN Amro.
The global head of trade operation at Louis Dreyfus, Mr. Robert Serpollet, said that they noticed very significant efficiency gains, more than they expected. By using blockchain for digitize sales contract, letter of credit and certificates they have reduced five-fold the time spent on processing documents and data.
The transaction involved not only, as said, the teams of Louis Dreyfus as the seller, Bohi as the buyer and the banks issuing and confirming the letter of credit, but also Russel Marine Group, Blue Water Shipping have also taken part in processing, issuing all required certificates and the U.S. Department of Agriculture by issuing phyto-sanitary certificates.
This cost saving process is very useful in a business with very low margin, and the financial institutions have understood that this mechanism can be used in many other similar markets: as a matter of fact they have been investing large sums to test whether the technology can be used to simplify transactions and reducing costs.
How is blockchain changing the commodity trading industry?
Commodity trading using blockchain is now possible: If the transaction shown above is the first fully-fledged trade in agricultural market, other markets have already experienced this process, mostly in energy ones. In January 2017 Mercuria, an energy and commodities company based in Geneva, has sold a cargo of oil shipped from Africa to China by using this technology. In this case all the concerned parties – ChemChina, ING and Société Général – could simultaneously view the status of the transaction. This, from the time the trade was confirmed to its final delivery.
Blockchain can improve trust and security on a specific market, since information can only be added and not removed: this guarantees the authenticity of the underlying transaction, even providing a further control in order to protect from frauds. Specially in those transaction in which are involved different companies, from different countries, for commodities like oil, where proving the ownership of the goods needs long time and many documents.
There is another aspect to highlight: as can be easily noticed, the financial institutes that are believing most in this mechanism are ING and Société Général. The secondo ne, three days ago has issued a press reales in which it explained how Blockchain boosts commodity trading and financing, saying also that in this project Société Général “and its European partners are at the forefront of this shift. We take a closer look at this new technology and its numerous impacts on trading and financing”. Therefore if you have some saving, you should probably seize the opportunity and invest them in this bank, maybe you are still in time.
In conclusion blockchain can ensure a drastic reduction of the time needed in issuing and processing certificates, documents and data- In addition, it also represents a protection from frauds and a innovative way to control shipment of commodities from the confirmation of the trade to its delivery.
Written by Edoardo Leggio