How Blockchain Can Reshape Commodity Trading

Commodity trading companies perform scores of transactions everyday to gain trading profits. Blockchain is such a technology that is strengthening the financial system. In the next few years, it is going to be considered the biggest digital distributed ledger system. Blockchain technology is still in the development stages, but its potential uses in the commodity market are favourable.

The adoption of blockchain technology in the commodity business can result in efficiencies and critical cost savings for traders in the market. Leveraging blockchain technology can significantly affect the commodity trading. Companies are using blockchain technology for developing powerful applications to boost commodity transaction life cycle. Gold traders are already making use of blockchain and other sectors of businesses dealing with physical commodity are also aware about its potential. It provides secure way of exchange of raw materials.

Companies put in so much money to make multiple systems and a complex array of automated processes to manage credit and other key risks.  With this public ledger system, more transparency and liquidity to a commodity market could be achieved.

Financial management system and digital physical assets both are benefited by blockchain. All the financial transactions might come into the contact of duplicacy, fraud and deletion of records. But with blockchain technology , stored information is secure.  It helps to combat fraud and allow for accurate and complete information. It consists of a chain of blocks in which each block stores data. Any changes in the blocks are replicated across the network. All blocks are interconnected to the previous block, that makes it safe from any corrupted data by the use of cryptography.

Bitcoin and blockchain, these two terms are used together. But bitcoin is digital currency . The price of bitcoin is soaring up meteorically. How long bitcoin is going to remain in the market is doubtful. However, the blockchain technology behind bitcoin is expected to go a long way. Commodity trading will get more security with this technology.

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Physical gold can be used as a digital asset and can be kept in digital wallets. It is transferrable to other wallet connected to the network. Blockchain makes  possible what others are not capable to do which is  joining all market participants  together (miners, refiners, financial institutions, investors and traders and the retail sector).  Earlier, transactions would prone to fraud . It might be deleted and corrupted. Blockchain is a distributed ledger which helps to remove this drawback. It does not use database or server to store data. A chain of blocks keeps data. Any change happened in one block will be reflected to all connected with peer to peer network.

The use of blockchain by commodity traders will ensure timely settlement, transparency, facilitates capital allocation and provides security. It has enhanced transparency in the digital gold market of physical commodity. Needless to say, blockchain has great potential to  revamp the commodity sector.