As the blockchain hype is growing, the traditional industries and sectors are actively testing the potential of the revolutionary technology.
In a partnership, Louis Dreyfus Company (LDC), Shandong Bohi Industry Co., Ltd (Bohi), ING, Societe Generale, and ABN Amro have together successfully completed the world’s first blockchain-based agricultural commodity transaction.
The transaction was conducted on a blockchain platform called Easy Trading Connect (ETC), which was developed by the banks. The platform was first tested and validated in February ’17 with an oil cargo transaction.
The entire trading process was fully digitized, from the documentation process of the sales contract, to the letter of credit and certificates. To avoid the task duplication and manual checks, automatic data matching was also implemented.
This was the first agricultural commodity trade using blockchain technology. The transaction consisted of soybean being sent from the United States to China. In this particular transaction, Louis Dreyfus Company from the US was the seller, while its China-based counterpart Bohi was the buyer. The role of the participant banks was to issue the letter of credit, a necessary financial instrument in the trading process. Two other parties – Russell Marine Group and Blue Water Shipping – also participated in the process for issuing the necessary certificates. The US Department of Agriculture (USDA) was also involved in the process and provided guidance on how to include phyto-sanitary certificates in the process.
According to the firms, the decentralized system has reduced the time spent on the document verification and data processing by five times.
Gonzalo Ramírez Martiarena, Chief Executive Officer of Louis Dreyfus Company, said: “One thing is clear: the digital revolution is transforming the commodities sector.”
He added: “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. 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.”
This was a huge advance in the international trading business. The players involved are aiming to make commodity trading more efficient and convenient with digitization and standardization.