Jason Schenker has been ranked a top forecaster of crude oil prices, industrial metals, foreign exchange rates, and economic indicators by Bloomberg News. As the President of Prestige Economics, Jason is one of a handful economists that advises industrial companies and firms with significant exposures to commodities and the global supply chain. Jason is also the Chairman of The Futurist Institute, which helps train executives, analysts, and professionals to become certified futurists. Jason often speaks on commodity market, economic, and futurist topics, and he spoke as part of the World Rubber Summit at the Singapore Exchange in March 2017. Jason has frequently appeared on Bloomberg Television and CNBC. He is the author of nine books, including Commodity Prices 101 and The Promise of Blockchain.
IRSG: You wrote a book called The Promise of Blockchain: Hope and Hype for an Emerging Disruptive Technology. Tell me, what is blockchain?
Jason Schenker: Blockchain is a kind of database technology. Think of it as highly-permissioned accounting software that can be used between counterparties for various transactions.
IRSG: In the title of your book, you mention hype. What do you see as the hype around blockchain?
Jason Schenker: The biggest hype component of the blockchain story is tied to the financial returns people have seen — especially in late 2017 and early 2018 — in cryptocurrencies that operate on blockchain technology. This is a field that has come increasing regulatory, tax, and legal pressures. That’s the hype: The world of people who ask, “When moon? When Lambo? Because they want to know when a digitial currency will yield 10,000% percent returns so they can buy a Lamborghini.
IRSG: So if crypto is the hype, what’s the hope?
Jason Schenker: The hope the is underlying technology on which cryptocurrencies like Bitcoin operate. It’s the distributed digital permanent ledger technology that is blockchain.
IRSG: Why is that a source of hope?
Jason Schenker: Blockchain has the potential to reduce what economists call “transaction friction,” which includes costs and time delays in transporting goods through the supply chain. This could be anything from legal documentation, chain of custody record requirements, bills of lading, and approvals of goods transfers. In other words, it could make the shipment of goods more cost effective, saving money for the parties involved. And it could prove valuable for a distributed network of trusted counterparties.
IRSG: Are there any other big positives with using blockchain?
Jason Schenker: Yes, it could help companies reduce central point of failure risk, by distributing their records. This means that there is a digital record redundancy built into the blockchain database technology, that if maintained correctly can serve as a safeguard to data loss.
IRSG: So what are the industries with the highest value use cases?
Jason Schenker: Blockchain has tremendous value propositions for supply chain, transport, logistics, and commodity businesses.
IRSG: So for rubber, it could be important?
Jason Schenker: Yes, absolutely. Blockchain could be very important for the rubber business globally.
I see two high-value blockchain use cases for natural rubber:
1.) First, blockchain could increase the ease of transactions with natural rubber in the supply chain. This means that blockchain could increase the speed of movement of rubber and the transfer between parties in the supply chain, while also reducing costs. Of course, this works best if there is a private blockchain with limited permission in a trusted network. That could provide for some of the greatest ease of goods movement and transfer, by reducing transactional friction and creating permanent digital records. This would be a financial value add, by making the supply chain run more smoothly.
2.) Second, blockchain can be used as a record of natural rubber possession. This could be important for tracing the origin of finished rubber goods all the way back to the field where the natural rubber originated. And anyone in the blockchain – in the trusted group of vendors that approves and records shipments – could be granted detailed access in a customized way. While this can be important for goods safety and product consistency, it could also be very important for proving natural rubber’s chain of custody for tax, legal, or environmental regulations.
IRSG: And what about for synthetic rubber? Could blockchain be impactful there as well?
Jason Schenker: Yes. It could allow for the same benefits as natural rubber. Of course, you wouldn’t need to necessarily know about the field-level origin of the crude oil that goes into synthetic rubber in the same way that you might need to know about natural rubber or other agricultural products. But blockchain technology could be important for synthetic rubber, inasmuch as blockchain could help reduce transactional friction, facilitate ownership transfer, and create permanent chain of custody records as it does for natural rubber.
IRSG: And are there limitations to blockchain that people need to know about?
Jason Schenker: Some people refer to blockchain as a way to create “trustless trust.” But just because you have a full record of custody and exhaustive distributed transaction data, it does not mean that the people in the system will behave ethically. The additional record data is only a safeguard in case there are issues. But blockchain cannot prevent individual acts of malfeasance, fraud, theft, etc. There are limits to blockchain technology. It is a kind of accounting software after all. People are a critical part of the system where moral hazard and risk will remain important elements in any transaction, even if blockchain technology is in use.