Blockchain technology has found use cases in the crude oil trade. This is one of the reasons why a post-trade blockchain platform for oil, Vakt, has been signing up new members. In fact, the US-based platform has signed up two-thirds of all the crude oil dealers in the North Sea oil trading. This progress shows that the oil industry has welcomed the emerging technology due to its significant benefits.
Vakt Signs Up Big Names In The Oil Industry
The Vakt platform initially went live last December. At first, only its direct backers had access to it. This included traders like Gunvor and Mercuria as well as banks like Socit Gnrale and ABN Amro. Yesterday, Vakt announced that it has signed up four new clients. This signing comes just before its official launch at the International Petroleum Week which is scheduled to take place in London.
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The Vakt platform is gaining a lot of traction because the commodities trading sector requires a great deal of paperwork. This gives room to human error and fraud. There are many transactions that typically involve several counterparties including buyers and sellers. The network of parties involved in moving crude oil through the supply chain is wide. They have to exchange information with each other at different stages of the transaction. They have to exchange emails, letters of credit, contracts and so many other vital things related to each transaction.
By placing the required information on the blockchain, Vakt reduces the possibility of human inefficiencies and fraud. The long trail of paperwork is removed from the supply chain process. Apart from removing paperwork, blockchain technology also increases the profit margin for traders. This is because, in the current system, there is a democratization of information that reduces profit for traders. They no longer have the proprietary knowledge of the supply chain that allowed them to benefit from price inefficiencies in the past.
Blockchain technology provides transparency and access to information allowing traders to make more profit. Financial Times reported that over the last two years, there has been a significant drop in the return of equities for commodity trading houses. This is why these firms have started turning to blockchain technology for solutions. Blockchain-based systems significantly reduce the administrative costs these companies incur during the supply chain process. It also speeds up the entire process.
Vakt has a link with Komgo. Komgo is another blockchain-based platform that is used to digitize commodity trade financing. This platform was founded by brands that back Vakt. Both projects are going to use blockchain technology to reinvent the commodity trading industry. Many players are starting to recognize this. Those who don’t would eventually start reporting losses.
Blockchain technology isn’t just making waves in the commodity trading sector, it is also gaining traction in other supply chains like the agriculture and food supply chains. It is reinventing the data management and identity verification industries. In the next ten years, blockchain technology is predicted to become the gold standard in various sectors. This shows that there are many other applications of blockchain technology other than the common financial use cases.
Do you think the progress blockchain technology is making in the commodities trading market will continue in the coming years? Share your thoughts in the comment section.