Modelling the Process of Building Digital Security in Commodity Markets using Blockchain

Abstract

Blockchain technology is acquiring momentous popularity in commodity markets over the past few years. A commodity can be regarded as an article of trade between an importer and exporter nation. Several types of commodities—such as agricultural (i.e., wheat, soyabean, corn, rice, spices, oil, meal products, sugar, dairy, marine, and plantation) and non-agricultural (i.e., base metals and petroleum products)—can be traded. The process of commodity trading or shipment between nations involves several actors like exporters, customs, importer, insurance, and importer bank and activities like bills of lading, letter of credit, factoring, exporting credit, and insurance—which are paper based, interdependent, and require human involvement. Blockchain, on the other hand, is a decentralized and distributed ledger technology that is open, immutable or tamperproof, efficient, verifiable, and permanent. The integration of blockchain in commodity markets can revolutionize the entire trading or shipment process. Considering the abovementioned problems, this study attempts to offer a solution by performing business process modelling in commodity markets using blockchain. The inferences made in this study prove to be quite promising wherein paper-based trading processes can be replaced with paperless trading processes via smart contracts—self-executable codes—which operate on top of blockchain, thereby eliminating intermediaries or middlemen and improving not only efficiency but also transparency of existing trading processes.