The companies that trade commodities like oil and wheat make a lot of money. But they also do a lot of paperwork. They have to send invoices, contracts, and letters of credit around the world, and it’s pretty tedious and time-consuming.
Now, a consortium of prominent energy and financial institutions including Royal Dutch Shell and Citigroup plans to start trading commodities on a new blockchain platform called Komgo.
“Blockchain technology will answer the needs of key participants in commodity trading by improving efficiency and security,” said Souleima Baddi, the chief executive of the startup, in an interview with the Financial Times.
The new platform will run on the Ethereum network, a distributed computing platform that uses a blockchain to host contracts. Similar organizations have tried trading commodities on the blockchain in the past few years, according to Reuters, but Komgo stands out because of its prominent launch partners and because any firm will be allowed to use it.
If all goes according to plan, Reuters reports, the system will become available for energy trading in November. Next year it will expand to agriculture and metals.
Not every major player has bought in. Bloomberg points out that the top three independent oil traders — Vitol Group, Glencore Plc and Trafigura Group — are “notably absent” from the Komgo founders.
But if Komgo is a success, it could be a proof of concept for any industry that want to use a distributed ledger to make complex contracts and paperwork easier.
READ MORE: Energy traders and banks back new blockchain platforms [Financial Times]
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