With COP26 negotiations in full throw this week, the climate is probably the highest up the global agenda it’s ever been. And as the world slowly emerges from the global pandemic, more people are talking about re-writing the rules of trade, not just to unblock the clear inefficiencies made manifest by the Evergreen Suez-blocking debacle, but also to help the planet escape the disaster of an increasingly warming world.
A large part of the solutions could lie in how commodities are traded. What would happen, for instance, if you created digital contracts for trade, but included a sort of "nutrition label" for every commodity that's been bought and sold, so you can track the provenance? We already have these labels for the food we eat. What if every commodity bought and sold had a label for CO2 emissions, female participation, data on whether is was involved in modern slavery, water pollution, recycled content… the list goes on. Creating such an ecosystem sounds almost impossible, but blockchain-based smart contracts might just hold the answer.
The task is enormous. One container requires typically 50 pages of documents, involves at least 30 people and 15 other axes’. A Smart Contract and tokenized approach would speed things up immeasurably and potentially unblock the stuttering global trade system.
If a contract didn’t meet requirements on, say, sustainability, the commodity trader simply wouldn’t buy it. If it meets additional ones, it might be bought at a premium, creating live price signals to producers upstream that said: “This is one”.
A "nutrition label" on commodities would also de-politicize the choices. Operations like Fairtrade are centralized, not de-centralized. Allowing commodities traders to trade on whatever their company’s precepts were -- be it be human rights or fair trade or CO2 emissions -- would create a more level playing field. And consumers would also then be able to see much more of the provenance of the things they buy.
There have been some early attempts to apply blockchain technologies to commodities trading. Covantis for agriculture, MineHub for metals, to name two.
Watr Foundation is a new Swiss-registered foundation launching today. Its idea is to use its Watr Protocol to digitize supply chains, increase transparency around sustainability and encourage and sponsor the development of new business models and dApps that achieve this.
Its first move is a partnership with Algorand, a blockchain platform founded by Turing Award-winning cryptographer Silvio Micali. Algorand’s blockchain infrastructure is tailored to DeFi for financial institutions and governments, and is already used by 700 global organizations, it claims.
Furthermore, TrustToken, the creator of the billion-dollar TUSD stablecoin, has also invested in Watr, but terms were not disclosed.
Watr will launch with fiat currency, as well as some "compliant" cryptocurrencies, including stablecoins.
The Watr Foundation, in partnership with Algorand, today launches the Watr Ecosystem: a KYC-AML-screened Layer 1 open blockchain ecosystem with verified identities designed, they say, to bring decentralized finance (DeFi) technology to commodities.
The idea, they say, is to bring Environmental, Social, Governance (ESG) transparency to commodities, “empower consumer choice in procurement and investment decisions, and democratize financing in the end-to-end of commodity supply chains.”
Set to go live in early 2022, Watr says its ecosystem is more likely to create a “race-to-the-top” in the creation of new commodity contracts and products, because of the "nutrition label" that will be able to attach to all the trades on its platform.
Maryam Ayati, president of the Watr Foundation Council said: “This is the inflection point to digital and transparency for commodity markets. With clear compliance guardrails and a pioneering cross-section of industries at the table, Watr’s mission is to drive financial inclusion, transparency and customer choice. We believe this next iteration on resource models should be co-created in mutually-owned profit models. It is a privilege and comfort to be collaborating with the pioneers of decentralized technology, blockchain, industry, and environmental products in bringing this blockchain ecosystem to life.”
Watr certainly has the "chops" to pull this off.
Ayati is a highly experienced energy and commodities professional who led creation of several multibillion-dollar ventures, including Royal Dutch Shell’s LNG to Downstream and Marine businesses. Most recently, Ayati led Origination and Investments for Shell Trading’s Global Crude & Oil Products businesses. She is also co-founder for both KomGo and Vakt enterprise blockchains (founding board chairperson for the latter).
Co-founder Clint Nelsen co-founded Startup Weekend, the world’s largest grassroots community of more than 2 million entrepreneurs, developers and graphic designers. The team was later tapped to run President Obama's White House initiative "Startup America", scaling entrepreneurship across the U.S. Nelsen also developed startup and developer engagement programs for Google, Microsoft, Amazon and Facebook. He also led ecosystem development and ICO for Blockstack, a Layer 2 DeFi platform on Bitcoin bringing in $82 million of seed capital in 2017. Blockstack is now a $500 million market cap company.
The Watr ecosystem will be the first public and sovereign instance of the Algorand MainNet, aiming ultimately to become a destination for sustainable commodities and applications across supply chains, shippers, buyers, financiers and producers.
Sean Ford, COO of Algorand, said: “Watr’s vision to enable a commodities market that is grounded in transparency, environmental responsibility and activism by all participants is aligned with Algorand’s leadership as a carbon-negative network.”
On Watr, smart digital contract modules will govern the pricing, trade and financing of commodities, including metals, energy and agriculture to the shipping and financing that underpins these industries. The identity module built into Watr enables consumers (and financiers) to define the specific footprint they want their consumption to finance.
Rafael Cosman, CEO of TrustToken said: “What Watr is doing is tremendously exciting -- bringing the efficiency and transparency of blockchain to the $5 trillion commodities industry.”
Finally, Neo Holdings will be the first ecosystem developer for the Watr Foundation. It's been convening a cross-industry coalition through a partnership with HC Group, to bring together commodities and blockchain players to build and to trade on Watr.
The jury is of course out whether Watr will succeed in its grand aims, but its vision is certainly big, and arguably right for these climate-focused times.