The Blockchain Is Set To Impact Every Stage Of The Commodity Supply Chain
From mine operations to commodity financing, the blockchain will improve how mining is managed.
The entire process of commodity management could soon be impacted by blockchain technology. As the industry begins to implement blockchains, opportunities are appearing which will change the commodities business from the mine operations to capital markets. New approaches to managing transactions will become feasible and open the industry to greater community participation.
Here at The Enegra Group, we engage with traditional mining operations but are also deeply invested in the blockchain ecosystem. We have tokenised 100% of our equity and believe in the benefits of blockchain implementation throughout the mining supply chain. The opportunities are significant and in this article, we look into some of the efficiencies that blockchain can deliver to commodities markets.
Blockchain technology has been hailed as a “new era of banking” but it is set to revolutionise more than just banking products. In mining, the opportunity exists to register each stage of commodity movement along a supply chain to deliver transparency and accountability. As we have identified previously, the ability to audit production processes should help to reduce human and environmental exploitation in mining operations.
The income from cobalt mining in the Democratic Republic of Congo sustains an estimated two million people and artisanal mining operators in the region are now beginning to host their operations on blockchains. Cobalt producers can register their products on blockchains with their phones and critical information is updated along each stage of the supply chain. This accountability and transparency should ensure a greater degree of equity in the industry and help to reduce human and environmental exploitation.
One of the most intriguing opportunities for blockchain in the mining supply chain exists in artisanal gemstone mining. Global consumers are becoming increasingly sophisticated and beginning to demand products which deliver equitable returns to indigenous communities. In the case of diamonds, the world’s largest producer De Beers is implementing a blockchain system that will ensure the quality of diamonds and guarantee that they have not been sourced from conflict zones. Artisanal gemstones could take the concept even further and deliver products to customers that can be traced back to the individual who mined the stone. As markets become increasingly concerned with fair trade the transparency and accountability delivered through blockchains is encouraging consumers to purchase products from smaller miners, ensuring that profits flow back to the source.
We have previously discussed how security tokens will improve commodity trading and this represents some of the greatest opportunities for social change in the mining industry. Providing financial services is a lucrative activity that has traditionally been the domain of the affluent. Credit Suisse’s 2019 report on global finance identified that almost 44% of the entire global wealth is owned by less than 1% of the population. This striking inequality could soon be addressed by the adoption of blockchain technology in capital markets.
One of the greatest barriers to entry for financial services has been the investment threshold. Without access to significant amounts of capital, it is impossible to deliver the necessary financial services. The fractional nature of security tokens has the potential to open mine financing to smaller investors who have previously been excluded from these markets. In many ways, this will democratise capital markets and through group investments could deliver capital to commodities projects that are unpalatable to the incumbent financial system.
A recent HSBC report identified that there will soon be 2.4 billion new members to the middle class and 90% of these people will come from the Asia Pacific region. The positive impacts of opening capital markets to small investors could deliver more than just financial inclusion. Affluent foreign investors have traditionally benefited from Asia’s commodities through exploiting the region’s cheap labour and lax environmental laws. Asia’s booming new middle class is aware of this exploitation of their human and natural resources and may choose to financially support projects with a greater sense of social equity.
The famous Indonesian term gotong royong translates to mutual cooperation and if this attitude is extended to commodity finance, projects in Asia could soon be held to higher ethical standards. Blockchain technology has the potential to improve every stage of the mining supply chain and will significantly impact the industry’s future.
Enegra Group Ltd (LL15959) is a commodity trading company focused on resources in Southeast Asia. Equity in Enegra has been tokenised via the EGX security token. For enquires related to the purchase of EGX please contact email@example.com.