Is Ethereum the Future of Commodities Trading?
BLOCKCHAIN is the latest buzzword in the commodities trading industry and Ethereum is a platform based on Blockchain technology. Before we answer the question whether Ethereum is the future of Commodity trading or not, let’s talk about Ethereum in a little more detail.
Ethereum platform is used to build and deploy decentralized applications. It is a distributed network, made up of transactional codes that are not controlled by any individual or central entity.
Before the arrival of Ethereum technology, Blockchain was primarily thought of as the foundation for bitcoin and first generation Alt coins. Now, it has evolved far beyond, underpinning the virtual currency. The following image shows how Ethereum has helped broaden the scope of Blockchain or the Decentralized Ledger Technology:
Citing GitHub, the design behind Ethereum is intended to follow 6 principles- Simplicity, Universality, Modularity, Agility, Non- discrimination and non-censorship. The Ethereum protocol should be so simple that any average programmer can easily follow and implement the entire specification. Ethereum is modular. If any small protocol modification is made in any module of the Ethereum platform, the rest of the platform is not affected.
Ethereum’s core innovation, the Ethereum Virtual Machine (EVM) makes the process of creating Blockchain application much more efficient and easier. Instead of building original Blockchain for each new application, it is now possible to develop thousands of different applications on a single platform.
A discussion on Ethereum is incomplete without touching upon smart contracts. Smart contracts are self-operating (executed automatically when specific conditions are met) computer programs that are state machines. For example, its uses are (but not limited to) facilitating the exchange of property, money, shares or anything of value. In smart contracts, the terms of agreement between a buyer and seller are written into lines of code across a distributed, decentralized Blockchain network. The transactions in smart contracts are carried out among disparate and anonymous parties without the need for any central authority, third party or legal system. As they are run on the Blockchain, smart contracts are immune to the possibilities of censorship, downtime and third party interference or fraud.
What differentiates Ethereum from any other cryptocurrency is that it’s not just a currency, but a global computing resource. Ether is the token or currency with which everything is powered to run the computations.
Will Ethereum disrupt the commodity market ecosystem?
In this day and age where everything is digital and instant, the physical commodities trading industry is heavily reliant on manual paper documentation. Manual documentation is not only time-taking but also prone to human error and systematic abuse. It is estimated that four out five LC documents contain discrepancies when presented to banks, and according to the International Chamber of Commerce, 70% of documents presented for LC evaluation are rejected on first presentation. To make the process efficient, transparent and trusted, it is important to replace paper documentation with smart contracts. While Blockchain technology provides the features of immutability, Ethereum is the platform which provides computing power to the products to solve to inefficiencies plaguing Commodity Trading industry such as lack of trust among stakeholders, lack of transparency due to many intermediaries, and high overhead cost.
About Kratos
Our Flagship product KRATOS™ is a decentralized commodities trading platform. KRATOS™ is built on Ethereum and it uses smart contracts to remove the need for unnecessary middlemen and paper documentation, to enhance transparency and efficiency as well as to lower the cost and time involved in the trade process. Currently, in the beta testing phase, KRATOS™ will be released soon.
Email us at contact@triterras.com
