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Blockchain Technology revolutionises the global cotton market

"Blockchain technology is paving its path into the cotton market. This technology makes transactions and contracts simpler and tracing more accurate. But, the questions of reliability, scalability and governance of this revolutionary technology need to be answered before it is at a bigger scale. In October 2016, the Wells Fargo and Commonwealth Bank of Australia used blockchain technology to process and execute a cotton shipment worth $35,000 from Texas to Qingdao, China."

 

Trendspotting 2019 Blockchain Technology revolutionises the global cotton market 001Blockchain technology is paving its path into the cotton market. This technology makes transactions and contracts simpler and tracing more accurate. But, the questions of reliability, scalability and governance of this revolutionary technology need to be answered before it is at a bigger scale.

In October 2016, the Wells Fargo and Commonwealth Bank of Australia used blockchain technology to process and execute a cotton shipment worth $35,000 from Texas to Qingdao, China. This transaction – driven by smart contracts – eliminated a lot of paperwork which was otherwise needed to ensure that all the information is up-to-date and the same in both party’s records.

Blockchain to save transaction time

Blockchain technology reduces physical documentation and saves exponential time in receiving payments. It also saves time for the merchant to receive payment from the banks for the sale transaction, as the bill of lading and other supporting documents need not to be mailed physically to the Letter of Credit (LC) opening bank by the seller. The availability of authenticated documents linked in blockchain technology reduces the working capital cycle and the cost, which could be an advantage to all the parties to the trade.

Tracing the authenticity of cotton origin

The complex supply chain of cotton products involves many transactions, which makes it difficult to trace the origin, especiallyTrendspotting 2019 Blockchain Technology revolutionises the global cotton market 002 in case of organic cotton and BCI cotton. This transformational technology helps us maintain and check the authenticity of the origin by tracing it from field using GPS technology to fabric and fabric to field.

The technology uses the decentralisation concept, as every user has access to non-restricted data. Private information on a public platform requires a well-designed and secured platform to avoid it from being used for wrong purposes. This questions the reliability and the confidentiality of the information shared on this platform. It would be reliable and trustworthy if this technology is decentralized and yet maintained by an international regulatory, which sets the standards and legalities to ensure smooth functioning for transactions.

Maintaining records for reliable estimates

Blockchain technology also maintains data and records. The records provide reliable estimates every year for cotton for its opening stock, consumption and closing stock in every country. USDA could use this as a platform to source the data for cotton growth, consumption and ending stocks, allowing them to update the estimates based on current available information. This could help avoid unnecessary volatility in the market, and the market price would include all real market information which factors and defines the actual market data.

The International Cotton Association needs to promote this technology and start implementing it with their members. The challenges of security and reliability also need to be addressed for successful implementation in the market. The traceability of data and maintaining records analyses the competency of the parties in the trade and brings transparency to the availability of market data. The blockchain technology is thus beneficial and would revolutionise the cotton market.

 
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