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.

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