The blockchain technology is increasingly being adopted, not only in areas related to finance and commerce, but also in a myriad of other fields. The rate of adoption is skyrocketing to the extent that we see news about new blockchain based solutions come out almost each and every day!
IBM, Natixis and Trafigura have announced the innovation of the first ever blockchain solution in commodity markets for US crude oil transactions. The innovated decentralized ledger platform, which is programmed on Hyperledger Fabric, an open source Linux Foundation, opens the door to crude oil transactions to be encrypted on the blockchain, offering optimum transparency, heightened security and competitive efficiency.
Via having the seller, buyer and their corresponding banks all on the same public ledger, all transacting parties can simultaneously monitor and share data regarding the status of a given transaction, starting from the second a new trade is successfully validated and confirmed, to the point at which crude oil is actually inspected, all the way through to its final delivery until the letter of credit is cancelled.
The proposed solution has several key benefits including reduction of money cycle times, improvement of efficiency through lower cost third parties, more competitive overhead costs, improved transaction visibility to aid in the reduction of the threat of fraud, tampering and cybercrime, and offering transparent transactions via usage of shared record keeping. This innovation is a part of broader efforts of modernization of trading across the world’s crude oil industry, which is currently being managed via manual, non-digital mechanisms.
This trading platform utilizes a single public ledger for sharing trading documents, payment statuses and shipment updates, which aids in the reduction of transaction times, document duplication, and authentication procedures for all trading parties. Conventionally, such transactions rely on complex workflows and paperwork via which documentation is usually shared through fax, courier and email communication. The solution is hosted on IBM’s cloud based platform, Bluemix, and managed by IBM France.
Soon enough, the platform will be expanded to enable all parties, participating in a transaction, to store data directly on the blockchain. For instance, the shipping company, inspector, pipeline operator or warehouse can update the status of a given transaction in real time via the blockchain, which aids in lowering the risk of fraud. More essentially, the public ledger for crude oil transactions is particularly designed to be deployed on a large scale across the entire crude oil industry. Through the creation of a public permissioned ledger that can be used by all trading partners, including multiple sellers, buyers, trading partners and banks, even much more efficiencies can be expected.
Image from IBM.com