While it wouldn’t necessarily boost commodity prices, the innovation could offer a secure means of exchange of raw materials, open up channels of trade among buyers and sellers that had until now have been perceived as credit risks, and provide more transparency and liquidity to a market that has slowly lost favour among financial institutions.
The technology provides a way of accounting for financial transactions. It was developed as a means of addressing the vulnerability of stored data on exchange of assets. Many associate blockchain with bitcoin. The cryptocurrency has undergone a meteoric price increase this year, up more than 17-fold. Future contracts began trading on Cboe and CME Group this month. By December 18, the January contract had soared to over $20,000.
The mainstream adoption of bitcoin is becoming a reality despite sceptics who compare the boom to the 1636 tulip mania. It is unclear whether the crypto-currency serves more as a medium of exchange or a store of value. Another uncertainty is the longevity of the currency, which has many competitors. There are 4,543 cryptocoins with a $567.7 billion market capitalisation, according to Cryptocoins Charts. Yet, no matter how many cryptocurrencies succeed or fail, the blockchain technology underlying digital assets is likely to remain and could make commodity trading more secure.
That has already begun to happen with gold, the most liquid commodity traded. As of Nov. 1, you can own physical gold as a digital asset in a digital wallet and transfer that holding to any other wallet on the network. Although gold has multiple tradable products (spot, futures and options, ETPs, indices, physical), blockchain accomplishes what none of the other offerings do — the ability to bring together all market participants (miners, refiners, wholesale traders, financial institutions, investors and traders and the retail sector).
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Source :https://m.economictimes.com/markets/stocks/news/blockchain-may-upset-commodity-markets-globally/amp_articleshow/62237412.cms
