Blockchain is upending the world’s financial markets with the rise of bitcoin, and now the digital-ledger system is poised to do the same next year for raw materials like food and energy.
Companies including BP Plc, ABN Amro Group NV and Mercuria Energy Group Ltd. said last month they will adapt blockchain to streamline physical energy transactions. In October, four banks joined a venture started by UBS Group AG and International Business Machines Corp. to use the technology in a platform for the global goods trade. Natixis SA and Trafigura Group Ltd. announced in March they will employ the system to finance buying and selling oil.
“We’re talking about this massive change in the way that business is being done,” said Eric Ervin, the chief executive officer of Reality Shares Inc., a San Diego fund manager that created an index to track returns of companies adopting the technology. “Everything happens automatically, without a bunch of paperwork, processing and transferring.”
Blockchain is an online ledger that records transactions using encryption to ensure security while allowing a network of users to verify them. The most-prominent use was in bitcoin, which became a global sensation in 2017. Over the past year, as investors became more comfortable with how bitcoins and ledger systems work, the price of the cryptocurrency has surged more than 2,000 percent and touched a record this month of $17,578.45.
“Cryptocurrencies stand as a potential challenge to the millennia of confidence-building measures that have gone into the construction of fiat currency,” he wrote.
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