In an effort to increase transparency and prevent fraud, blockchain may be the next platform for trading goods.
Global banks and trading firms are using blockchain in the trading of commodities like oil and wheat, reported Reuters on Wednesday. The platform will be launched by a new venture named komgo SA, and is set to go live later this year, said Reuters.
The founders of komgo SA include executives from ABN AMRO, BNP Paribas, Citi, Crédit Agricole Group, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, Shell, SGS and Societe Generale, according to a Wednesday press release.
Blockchain, a distributed ledger technology, is a cryptographically secure log of transactions, as well as the technology underpinning bitcoin transactions.The technology is an open, anonymous, but protected history of transactions for virtual currencies.
Komgo SA aims to use the same technology for the trading of goods, in an effort to prevent fraudulent actions and improve transparency, said Reuters. Blockchain employs a shared database, which updates in real-time, to process transactions in a matter of minutes, not needing third-party verification, added Reuters.
This process also drastically expedites the trading process, as commodity trading had before involved mountains of paperwork, according to Reuters.
Blockchain will first be used on crude cargo carriers in the North Sea, expanding to agriculture and metals next year, the report noted. Komgo SA is the proprietary financer for blockchain use on most commodities, said Reuters.
“We are now entering a new era of simple and inclusive access to blockchain technology to advance stronger, more collaborative, business relationships previously out of reach,” said Joseph Lubin, founder of ConsenSys and co-founder of Ethereum, in the release. “We are thrilled to see leading commodity trade finance banks and commodity houses come together to create komgo SA, which will radically simplify and accelerate trustworthiness, auditability, and accessibility to trade financing across the industry.”