Blockchain
Technology: How the Bullion Industry Will Benefit
Joshua
Rotbart, Managing Partner, J. Rotbart & Co.
Blockchain is a single,
shared, tamper-evident ledger in which recorded transactions can’t be altered.
It’s a shared system that requires consensus or verification from all parties
in the network to create or add transactions.
Although its best known
use is for cryptocurrencies, most notably with Bitcoin, blockchain technology
has created a stir in the business world with its main properties.
Decentralization
Blockchain transactions
history and information isn’t stored in one place. It’s recorded in every
computer within the network. There’s no core authority.
Transparency
Every party can fully
access every transaction in the blockchain. Complex cryptography encodes an
individual’s or company’s details, which are publicly represented only by an
address.
Immutability
Data can almost never
be altered. The ledger remains unchanged. Every block in the chain has a
digital signature, ensuring that no one can tamper with it.
Applications
in the bullion industry
From supply chain to
shipping, many projects are exploring how to harness blockchain technology to
cut costs, improve efficiency and expedite processes.
As blockchain continue
to enjoy popularity among major industries, one might wonder how the
traditional precious metals industry could benefit.
Mining
to Refining: Traceability
Within a blockchain,
all users can record and trace transactions, strengthening supply chain
management and improving safety, quality, and governance, while reducing
potential confusion and complexity.
In 2018, the Republic
of Congo began using TrustChain, a blockchain collaboration between IBM and
diamond and jewelry companies. It tracks and authenticates diamonds and
precious metals at all stages of the global supply chain—from mine to retailer.
The project also focuses on enforcing compliance with regulations preventing
child labor.
The bullion industry
has seen how this technology can track raw metals from mines to refineries. A
few projects are already trying to standardize a system.
Transportation:
Documentation Efficiency
TradeLens, developed by
IBM and Maersk, is a blockchain logistics network allowing easy access to
tamper-proof documents on a distributed ledger that makes physical paperwork
largely unnecessary. The precious metals industry is still quite paper rich and
implementing similar systems may dramatically reduce costs and transportation
time.
Production:
Gold Bar Integrity, Security, and Authenticity
In 2018, the London
Bullion Market Association (LBMA) started examining blockchain technology
implementation. This could include a responsible sourcing programme to minimize
fraud and security risks.
This could also include
safeguarding supply chain governance, such as through a blockchain “kilobar
database”, which identifies bars by digital imaging or QR codes. This system
could securely record bar-specific data like brand, purity, weight, origin, custody,
and storage location on an inviolable platform for smoother transactions.
The
Precious Metals Industry and Blockchain: A Conclusion
The bullion industry is
quite traditional. But blockchain technology is here, and key players are actively
moving towards adoption. The results may be unprecedented boosts in trust,
credibility, and efficiency.
Blockchain’s golden
promises shouldn’t be overlooked. Many aspects of the bullion industry can be
improved, although some will, by necessity, remain “old school”.
About the author:
Joshua Rotbart is the founder and managing partner of J. Rotbart & Co., a
Hong Kong and Singapore-based bullion house providing solutions for high net
worth individuals, family offices, and private banks wishing to procure, store,
and transport physical precious metals and other tangible assets worldwide.
Disclaimer: Views are personal and not
the views of the publisher.