Commodities are big business. In fact, they are one of the largest markets in the United States, with a value at over $2 trillion annually. So it is understandable that this ecosystem has developed a set way of doing things.
However, that set way may not necessarily be the best way, especially not for the traders who want to buy and sell commodities derivatives, such as foodstuffs and materials. The current commodities exchanges are controlled by a monopoly that excludes many traders and imposes a large markup on the ones it does allow to participate.
The result is that the commodities market has remained relatively undisturbed for a long time. That is until now. With the development of new Blockchain technology, companies like ChainTrade have formed to help disrupt the sector altogether.
ChainTrade’s goal is to take the Commodities market out of the hands of the exchanges who currently run them with an iron fist. Instead, ChainTrade CEO Vincent Jacques is hoping to leverage the power of the Blockchain to create a new, decentralized marketplace with vastly lower fees, where even small traders can participate on equal terms.
Taking Back the Power
The idea of trading commodities and their derivatives is as old as the practice of bartering. But in the modern world, the marketplace of trading has become extremely centralized.
It was this frustration with the existing markets that inspired Mr. Jacques to create a solution. His company is founded on the idea that decentralizing the commodities trading ecosystem would hand power back to the people. For the commodities exchanges, that would mean a decentralized marketplace that operates more efficiently than the system it seeks to replace.
“The commodities markets are made up of established exchanges that only allow certain traders to buy and sell food and raw materials. ChainTrade is a powerful tool that not only makes commodities trading more efficient, but which will also democratize the markets by making them accessible to everyone,” said Mr. Jacques.
“The more inclusive a market is, the more efficiently it’s able to operate. We’re deploying Blockchain technology specifically because it can shake up the commodities market and deliver greater efficiencies. This is because the ChainTrade model is built with trust at its core (Smart Contracts) and so removes the need for costly middlemen.”
A Welcome and Affordable Change
The general trend with both digital currency and the Blockchain is toward inclusivity. As a result, the technology has the potential to help open up many established monopolies.
Through the ChainTrade platform, Mr. Jacques aims to provide better access to food, raw materials, and energy in all parts of the world, with full transparency. This can be done by placing the entire marketplace on the Blockchain.
In addition to the increased transparency, moving to the Blockchain also helps make the commodities exchange market more efficient. The result is that added fees will all but disappear. Mr Jacques and his company believe that lowering fees – which they hope to reduce overall by up to 50 percent – will attract people to the more decentralized exchange. They also believe that this will open up the market more as currently it is very exclusive and closed off.
A New Investment Opportunity
Perhaps ironically, as ChainTrade works to reinvent this old and established market, they have also had a hand in changing the key demographic of commodities exchanges. Jacques explains, “Our funding model places the emphasis on institutional crypto investors, including VCs and banks with an interest in Crypto such as Citibank because many of them already take part in commodities trading and so understand the ways in which we can disrupt the current model.”
“To date, we’ve been greatly encouraged in our discussions with institutional investors who clearly see the potential for ChainTrade to transform the commodities markets and usher in a new era of open-access, highly efficient and fully transparent trading.”