- REUTERS/Charles Platiau
- Soybean shipment from the US to China completed using blockchain platform.
- Energy trading businesses including Gazprom and Total are trialling blockchain-based technology for settling trades.
- Proof of concepts and pilots highlight the continued corporate interest in blockchain, a technology that was originally popularised by bitcoin.
LONDON – Energy and commodity trading businesses have announced successful pilots and early-stage trials of projects using much-hyped blockchain technology.
A recent soybean shipment from the US to China has become “the first full agricultural commodity transaction using a blockchain platform,” according to a consortium of banks and trading businesses involved.
The deal involved agricultural trading businesses Louis Dreyfus Company and Shandong Bohi Industry, and banks ING, Societe Generale, and ABN Amro announced.
The group said in a statement on Monday that the shipment was carried out on the Easy Trading Connect (ETC) blockchain platform developed by the banks, which digitises documents such as sales contracts and letters of credit. The group claims the technology reduced the time spent processing documents by fivefold.
Separately on Monday, Canadian-British blockchain company BTL announced that European energy trading businesses Eni Trading & Shipping, Total, Gazprom Marketing & Trading, Mercuria, Vattenfall, Petroineos, and Freepoint are all trialling its technology for back-office settlement of trades.
While both projects are still early stage deployments, they highlight the ongoing corporate interest in blockchain technology and the progress being made to bring it into mainstream business.
BTL, which has previously piloted gas-trading projects with BP & others using its blockchain tech, said its latest trial is revenue-generating, although it did not specify figures.
Blockchain technology, also known as distributed ledger tech, was first popularised by bitcoin, the digital currency created in 2009. The technology allows a shared database that means all parties to see the same version. It uses complex cryptography and group authentication to police the editing of the ledger.
The technology was originally developed to do away with the need for a central bank for bitcoin, meaning it could be totally independent. But this feature has almost endless applications for other industries and processes that involve a trusted middleman or central authority.
Banks and trading businesses are particularly keen to adopt blockchain, as its inbuilt security and trust checks they can cut out middlemen in processes like settlement and clearing. This, in turn, cuts down costs. Santander estimated in a 2015 report that the technology could save banks as much as $20 billion.
‘Exciting and potentially disruptive’
Gonzalo Ramírez Martiarena, CEO of Louis Dreyfus Company, said in a statement on Monday: “Distributed ledger technologies have been evolving rapidly, bringing more efficiency and security to our transactions, and immense expected benefits for our customers and everyone along the supply chain as a result.”
Catherine Newman, general manager of global IT & Delivery at Gazprom, said: “Although it is early stages yet, the proof of concept with BTL represents an exciting and potentially disruptive prospect in the near future.”
Philippe Chauvain, vice president of risk control and IT at Total, said in a statement: “At the moment, we hear a lot about blockchain and how this technology could transform the trading processes.
“If successful, this initiative with BTL could help us to reduce the risks of human errors and to increase the speed in the reconciliation process of transactions with our fellow counterparts.”
The two projects highlighted on Monday are just one of a number of initiatives aiming to bring blockchain technology mainstream. Big banks such as Deutsche Bank and HSBC are working together to bring blockchain to trade finance and Citi has invested in a startup aiming to bring blockchain to foreign exchange markets. These are just two examples among many.
While BTL’s pilot and the soybean trade represent progress, we still have a long way to go until blockchain goes mainstream.
Louis Dreyfus Company’s Martiarena said: “The next step is to harness the potential for further development through the adoption of common standards, and welcome a truly new era of digital trade flow management on a global level.”