Fifteen international companies have launched a joint venture to digitize commodities trading through an ethereum based blockchain platform called komgo SA.
“The potential that distributed ledger technologies (DLT) have in transforming the commodities sector is clear as evidenced with the success of the Easy Trading Connect experiments” said Toon Leijtens, Chief Technology Officer of komgo SA.
Easy Trading Connect was a prototype by commodity trader Louis Dreyfus, Societe Generale and a number of others which found blockchain tech can reduce processing times from hours to minutes.
In a video describing the project at a high level view, they say commodities trading, like oil or grain, has not changed in centuries.
Just as then, so too now, an exporter of a ton of copper, for example, sends the bill of lading (sort of an invoice) with certificates and other documents to his bank.
The bank then checks the documents, approves them, and sends them to the bank of the buyer, where the documents are checked again with the bank then paying on behalf of the buyer.
All this is time consuming and requires a lot of paper to be moved around, paper which can be removed with the help of blockchain tech.
At a high level, once instructions from the bank’s client are received, the bank creates a smart contract where the terms are laid. The ship owner then enters the information regarding the loading of the copper on the blockchain.
An inspector then checks the quality and gives the green-light or otherwise on the blockchain. The insurance company then confirms the goods are insured.
If all is fine and all are satisfied, the tittle to the goods then moves from the seller to the buyer, with blockchain tech basically turning the paper letter of credit or bill of lading or any document into an immutable digital form.
As it is digital, you can sort of just tap into the network wherever you are and give your own seal of approval without needing to move paper around, thus saving time and costs while increasing efficiency in potentially reducing fraud through false documents or in reducing the chances the documents are lost.
How this works exactly underneath is not clear, but Alex Fisher, an ethereum developer, says: “Komgo launched today – Fifteen of the world’s largest banks, trading companies, and an inspection company with Consensys to develop Ethereum powered commodity trading platform.”
Oil giant Shell, one of the biggest commodity trader, Mercuria Energy Group Ltd and Gunvor Group, in addition to a number of banks and other companies, have joined, including:
“ABN AMRO, BNP Paribas, Citi, Crédit Agricole Group, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, Shell, SGS and Societe Generale.”
Ethereum’s ConsenSys will build the platform, with two products to launch by the end of the year, one regarding identification management, while the other is for digital letters of credit.
The intention here seems to be for live in-production usage after all the testing and the pilots, with ethereum seemingly entering the second stage of its adoption as now some products start going to market.