Blockchain in Commodities

Note from the CEO: A very good article on an overlooked (at least not covered) asset class that could readily benefit from ‘disrupted ledger technology’ (aka blockchain). Commodities. Yeah, we all know banks and trading firms are gearing up in so many areas (lending, forex, bonds, stocks, etc) but don’t forget oil, soybeans, corn etc. So many uses, so little time………till someone beats you to it.

“Distributed ledger technology – popularly known as blockchain – has the potential to become a massively disruptive force in financial services. By enabling ‘smart contracts’ with automated post-trade processing, for example, the technology could eliminate the need for clearing houses.  Big banks and exchanges are paying attention. “On the blockchain front, [the second quarter of 2016] saw a number of banks and financial institutions globally begin focusing on proof-of-concept initiatives, moving from initial ideas to actual pilot-testing of solutions,” said a report on fintech investment published last month by KPMG and CB Insights, a New York-based research firm…………

…………So what will be the killer app of blockchain in financial services? I may be biased, but I would take a close look at the firms seeking to apply distributed ledger technology to energy and commodities markets.

The blockchain concept may be a natural fit for the tracking of physical commodities along the supply chain, where transfers in ownership are often still recorded on paper and fraud remains a persistent risk, as illustrated by the Qingdao port scandal in China in 2014. If title transfers were recorded electronically though a shared ledger, and verifiable by any participant along the supply chain, that could help build trust between physical market players and, ultimately, yield greater efficiencies.”

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