Commodity Traders Might Look Into Blockchain Technology Next

BTC Wires: Commodity trading, which is roughly a multi-trillion-dollar industry is finally adopting a digital makeover as commodity traders come up with list of technologies to solve the prevalent problems in the commodities trading ambit. Right from products like condiments, spices to various oils, the orthodox commodity trade involves buying and selling such products. According to an estimate put forward by the Government of Singapore, nearly $10 trillion worth of commodities are produced and consumed on an annual basis.

Despite size and value of the industry, most transactions are carried in the conventional paper mode, which is applicable in the case of non-industrial and agricultural product. Middlemen are an indispensable part of the commodity trading industry and they do have their share of profits cut out.

According to Srinivas Koneru, the founder of Arkratos(a tech company that figures out ways to solve the existing problem), trading is all about manual documentation and the lack of trust among parties often plays a crucial role. This is where middlemen sneak in to rectify and provide for convenience in cases of documentations, etc. The involvement of middlemen is a double whammy, firstly, because it reduces the economic efficiency, and secondly, because it creates amicable situations for multiple frauds.

Following the trend of other industries, the Commodities sector is showing signs of shifting towards digital technology. Since Blockchain technology is a proven medium for storing cargo details secured and unaltered, it therefore has the potential to keep track of the cargo in an effective manner. As per the conventional process, commodity transactions require plenty of paperwork that include shipping documents which are further supplied through extensive supply chains. The documents pass through several hands. Such documents are stamped and emails are sent to the concerned groups along with scanned invoices.

With cargo documents changing hands and ships, it passes through a series of companies and countries. The rules and regulation are different in every stage, thereby it becomes quite easy to tamper with the documents and carry out frauds resulting in companies and individual dealers facing  huge losses. To tackle this issue, the introduction of blockchain technology has become important in the scheme of things.

However, a greater challenge lies in incorporating blockchain technology, based on one digital standard that is duly agreed upon by all, especially, with the kind of competition that exists currently. Oil and gas majors like Royal Dutch Shell and BP have already started working towards the development of blockchain based digital platforms, the first trade on which is scheduled in November, later this year.