In a bid to revamp commerce and speed up financial transactions, some of the world’s most prominent oil merchants and banks have teamed up to unveil a new platform based on distributed ledger technologies.
These oil traders and global community trading companies including Mercuria, Gunvor and the sixth largest company in the world — Royal Dutch Shell are collaborating with international financial establishments to support the launch of a blockchain platform that will enhance productivity and security within the commerce space. This platform is projected to eventually become the official standard for the commodity trading industry.
The komgo Partnership
The consortium of partners (banks and oil giants) led to the formation of komgo SA, a venture based in Geneva which is responsible for managing the commodity trading blockchain platform.
According to Souleïma Baddi, Chief Executive Officer of komgo SA:
“The launch of komgo SA highlights a shared vision for industry innovation and underlines the ongoing commitment among members to build a truly open and more efficient network within commodity trading.”
komgo Blockchain Solution
Currently, trade documents like invoices, contracts, and letters of credit score exist in paper form making management of data problematic and inefficient since corrections or modifications have to be made in person. Aside from this, there is also the hassle of sharing large amount of paperwork between trade parties. Blockchain technology can make a difference here; digital letters of credit could be used to enhance data management and speed up transactions.
This is one of the ideas behind the komgo blockchain solution. The company forms part of an emerging global blockchain system seeking to augment the flow of physical commodities. The platform will focus on creating a distributed ledger-based system to boost traceability of commodity transactions; this will be achieved through digitization of trading data, allowing for smooth coordination of documents on the distributed ledger network.
komgo will first be deployed in the energy sector to smoothen out crude cargo business in the North Sea. In the near future, the platform services will expand to cover the metals and agriculture industries. The komgo blockchain solution was developed in conjunction with ConsenSys – a New York-based blockchain software technology company involved in building infrastructure, applications, and solutions on the Ethereum network. Consequently, komgo blockchain solution will rely on the Ethereum network to serve as the strata for the project’s infrastructure.
Joseph Lubin, co-founder of Ethereum, and Founder of ConsenSys had this to say about the project:
“We are thrilled to see leading commodity trade finance banks and commodity houses come together to create komgo SA, which will radically simplify and accelerate trustworthiness, auditability, and accessibility to trade financing across the industry.”
komgo is expected to release two products before the end of the year. The first will seek to create a system to facilitate and standardize Know Your Customer (KYC) processes without requiring a central database. This system will adopt a need to know policy with regards to data sharing while security protocols will ensure that data exchange is executed in an encrypted manner over the blockchain.
The second product will focus on the creation of digital letters of credit which will allow trade platforms or commodity houses to submit documents and other digital trade data to any komgo SA customer bank of their choice.
The original founding partners of komgo include ABN AMRO, BNP Paribas, Citi, Crédit Agricole Group, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, Shell, SGS and Societe Generale. Komgo and VAKT, a blockchain powered oil trading platform, have an overlapping set of shareholders and a similar interest in developing commodity/trade blockchain solutions; the two enterprises have decided to resolve any conflict of interest by consulting together to explore possible collaboration between their two platforms; this could lead to the development of other innovative products in the future.