The climate is at the top of the global agenda with COP26 negotiations currently underway. As the world emerges slowly from the global pandemic and more people talk about rewriting the rules for trade to not only unblock the obvious inefficiencies made manifested by the Evergreen Suez-blocking disaster but also to help the planet escape its growing climate catastrophe.
The way commodities are traded could be a large part of the solution. What would happen if you made digital trade contracts but also included a nutritional label for each commodity bought or sold? This would allow you to track its provenance. These labels are already in place for food that we eat. What if every commodity that is bought or sold had a label for CO2 emission, female participation, data about whether it was involved in modern slavery and water pollution? It sounds impossible to create such an ecosystem, but blockchain-based smart contract might be the solution.
It is a huge task. A 50-page container can contain at most 30 people. The tokenized approach and Smart Contract would be a great way to speed up the process and possibly unblock the slowing global trade system.
The commodity trader would not buy a contract if it didn't comply with sustainability requirements. It might be purchased at a premium if it meets additional requirements, which would create live price signals for producers upstream, saying: "This one is one".
Also, a 'nutrition label" on commodities would de-politicize the options. Fairtrade operations are not decentralized. They are centralized. A more equal playing field would be created if commodities traders could trade according to whatever company's precepts - whether they be human rights, fair trade or CO2 emission. Consumers would be able see more about the origins of the products they purchase.
Some early efforts to use blockchain technology to commodity trading have been made. Covantis for agriculture and Minehub for metals are just two examples.
Watr Foundation, a Swiss-registered Foundation, is now open. Its purpose is to digitize supply chains and increase transparency around sustainability.
The first move it made was a partnership with Algorand. Algorand is a blockchain platform created by Silvio Micali, a Turing Award-winning cryptograph. It claims that Algorand's blockchain infrastructure, which is designed to DeFi for financial institutions, governments and other organizations, is used by 700 worldwide organizations.
TrustToken, which is the creator of the TUSD stablecoin worth billions, also invested in Watr. However, terms were not disclosed.
Watr will launch using Fiat currency as well as some 'compliant cryptocurrencies', including stablecoins.
Algorand and the Watr Foundation today launched the Watr Ecosystem, a KYC/AML-screened Layer 1 open-blockchain ecosystem with verified identities. It is designed to bring Decentralized Finance (DeFi), technology to commodities.
They claim that the idea is to make commodities transparent in terms of Environmental, Social, Governance (ESG), "empower consumers in purchasing and investment decisions, as well as democratize financing at the end of commodity supply chains."
Watr expects to launch its platform in 2022.
Maryam Ayati is President of the Watr Foundation Council. She stated that this was the turning point for digital and transparency in commodity markets. Watr has clear compliance guidelines and an innovative cross-section industry at its table. This allows it to achieve financial inclusion, transparency and customer choice. This next iteration of resource models should be co-created under mutually-owned profit models. It is an honor and a comfort to work with the pioneers in decentralized technology, blockchain, business, and environmental products to bring this blockchain ecosystem to fruition.
Watr has the "chops" to pull it off.
Ayati, a highly skilled energy and commodities professional, has led the creation of many multi-billion-dollar ventures such as Royal Dutch Shell's LNG To Downstream and Marine businesses. Ayati was most recently the Origination and Investments Manager for Shell Trading's Global Crude & Oil Products Businesses. Ayati is also cofounder of KomGo and Vakt enterprise Blockchains, as well as the Chairperson of the Board for the former.
Clint Nelsen, cofounder, founded Startup Weekend, the largest grassroots community of 2M+ developers, entrepreneurs, and graphic designers in the world. Later, the team was selected to lead President Obama's White House initiative "Startup America", which aims to increase entrepreneurship in the US. Nelsen also created programs for developer and startup engagement at Google, Microsoft, Amazon, and Facebook. Blockstack was a Layer 2 DeFi platform for Bitcoin that he led in ecosystem development and ICO. It raised $82M in seed capital in 2017. Blockstack now has a market capitalization of $500M.
The Watr ecosystem is the Algorand MainNet's first sovereign public instance. It aims to eventually become a destination of sustainable commodities and applications for all supply chains, shippers and buyers as well as financiers, producers, and financiers.
Algorand's COO Sean Ford stated: "Watr has a vision to create a commodities market that is transparent, environmentally responsible, and active by all participants. This aligns with Algorand’s leadership as carbon-negative network."
Smart digital contract modules on Watr will regulate the pricing, trade and financing of commodities. This includes metals and energy as well as agriculture. They also control the shipping and financing that support these industries. Watr's identity module allows consumers and financiers to specify the footprint that their consumption will finance.
TrustToken CEO Rafael Cosman stated that "What Watr does is tremendously exciting. It brings the efficiency and transparency associated with blockchain to the $5 trillion commodities market."
Neo Holdings will become the Watr Foundation's first ecosystem developer. Through a partnership with HC Group it has been creating a cross-industry alliance to bring together blockchain and commodity players to build and trade on Watr.
While the jury is still out on whether Watr can achieve its ambitious goals, its vision is big and it is arguably the right thing for climate-focused times.