NEW YORK – Years ago, the idea that machines would replace humans on the commercial floor seemed far-fetched and the suggestion that the algorithms could replace humans was completely ridiculous.
But both have happened in some form or form, making the advent of the blockchain – which is now being boasted as the next technology game change – far more realistic than the opponents might initially think.
Dozens of tests and projects are already underway in a multitude of sectors. Only in raw materials, blockchain is used to finance oil cargoes, track the movement of mangoes from one farm to another, and detect unused capacity in the naval industry.
In a survey conducted by Mizuho Bank, there were almost 100 communications for a tractor moving from Australia to Japan – a time-consuming and impractical situation that turned the company into blockchain .
Technology is used to trace supply chains and ensure that corporate sustainability and social responsibility objectives are intact, involving Walmart in the food sector and De Beers in diamonds.
There are plans in various phases of use for minerals such as cobalt, tin and tantalum produced in the Democratic Republic of the Congo and in Rwanda, while the gold market saw Tradewind Markets launch a project of origin of the supply chain in collaboration with the various miners and the Royal Canadian Mint.
Meanwhile, the blockchain for post-trade settlement is examined, including the Australian Securities Exchange, the Depository Trust and Clearing Corp and Hong Kong Exchanges & Clearing, as well as the precious metals division of INTL FCStone which uses Paxos.
Trading platforms are emerging based on technology, including Acquifer Institute, Crypto Commodity Group, Open Mineral and ConsenSys & # 39; Minerac, Metalshub and TradeCloud.
The most astute observers will not be surprised that the guest speaker at the annual London Metal Exchange dinner in October was Blythe Masters, former global chief commodity manager at JPMorgan and now CEO of Digital Asset Holdings, a pioneer. in the supply of digital ledger technology. His topic was blockchain.
Overcoming the obstacles
Commercial finance is seeing a huge amount of business, but it is a sector that could really benefit from collaborative work.
Over 60% of over 250 banks in over 90 countries surveyed have implemented or are implementing technological solutions to digitize their commercial finance operations, a survey conducted this year by the International Chamber of Commerce exposures.
How close they are to achieving this remains to be seen.
The rush to use blockchain has led to a plethora of platforms based on different technologies and running along different sets of rules. Trials prove that the technology works. Taking it to a place of interoperability, in which a blockchain network can communicate with another, is still far away.
A phrase used repeatedly by blockchain aficiandos is "the only source of truth", the holy grail of any platform because it combines data in one place, making them verifiable, secure and easy to access. Once again, this requires an element of standardization – and trust – to allow the different participants to interact on an equal footing.
Not everyone is on the network: storage companies, for example, are the next step with a number that is experimenting with technology and demonstration of concepts in progress. Last week, Rabobank, Concord Resources and the PGS warehousing company said they were already developing a new blockchain repurchase agreement platform.
In an ideal world, platforms must be inclusive, with commercial companies, banks, logistics, shipping and insurance companies, as well as the customs authorities involved in the process.
Technology must continue to move towards a smaller number of supply companies, a process that is likely to continue as the decentralized nature of projects lends itself to working with peers. Progress must be made to achieve a more common set of technology standards and business processes.
It seems unlikely that there will be a global master network run by an operator on which all participants do business and who works according to the same rules in each jurisdiction. It is much more likely that there are a number of separate technology networks for digital accounting, but with interoperability, creating a kind of ecosystem with common standards.
Blockchain is undoubtedly set to transform the way institutions do business, but it's not quite there yet.
But do not underestimate the pace of change; a year made a huge difference in the use of blockchain in raw materials, and things should be significantly more advanced in another 12 months.
Andrea Hotter
