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What Challenges Can Bitcoin and Blockchain Resolve in The Oil Industry?

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Crude oil and natural gas are commodities that are delivered via various means around the world. Go https://oil-profits.com/ if you want to start bitcoin trading in only three steps, you will also get the best liquidity, and the platform is immune to volatility risk. The supply chain of this industry is made up of a maze of interdependencies between suppliers, contractors, operators, service companies, and end-users. Blockchain and bitcoin have the potential to change that by providing all involved parties with an immutable record of transactions. With blockchain, each party can know whom they’re dealing with at any moment and what has been agreed to in a transaction.

Blockchain and bitcoin will not only be able to reduce fraud but also lead to greater cooperation between parties as every party will be aware of when supplies or services have been delivered or rendered by another party as well as when cash for those goods is paid or transferred. The advantages of introducing blockchain to the supply chain of the oil and gas industry include the ability to handle higher message throughput, increased security, provenance management, and automated billing.

In addition, a distributed ledger can enable all participants to view real-time end-to-end transaction visibility as well as track product from the point of origin to the final destination. Maersk Oil is an excellent example of a company that has already implemented blockchain into its oil and gas supply chain. In 2015, Maersk Oil signed up for a pilot project with IBM for energy trading in India. Let’s discuss the challenges that bitcoin and blockchain can resolve in the oil industry.

#1 Digitalization of Crude Oil Transactions:

The costs of oil changed tremendously over the past 10 years. While crude oil costs were previously calculated in US dollars, most are considered crude oil futures priced in euros or other currencies today. In 2015, Maersk already realized a USD 22 million in savings due to the digitalization of the contracts, reducing workload and manual data entry, and boosting productivity by 30 percent.

Digitalization of oil industry contracts allows for a much faster way to process transactions and make them immutable on an electronic ledger instead of cumbersome paper documents. Blockchain brings about a revolution as it enables every single transaction to be tracked on an electronic ledger, providing complete transparency for all parties involved in the transaction. By using blockchain and bitcoin, it’s possible to record purchases, delivery, and service rendered by another party.

#2 Connect Trade Partners for Better Collaboration:

Some companies have successfully integrated blockchain technology into their supply chain. For example, a Swedish-based cargo transportation provider signed up with IBM in 2015 to implement distributed ledger technology across its entire supply chain. This collaboration aimed to develop an Internet of Things-enabled platform that allows the client and supplier companies’ systems to communicate with each other and review contract terms.

#3 Data Storage & Management:

A distributed ledger is a shared, replicated, peer-to-peer network of computers that maintains a continuously updated ledger. All transactional data is recorded on this ledger. Therefore, the oil industry can have complete transparency across all processes.

By using blockchain and bitcoin for storing oil industry data, it becomes possible to track fuel deliveries from point of origin to end-user. It will enable better collaboration between oil companies, suppliers, and contractors employed in the supply chain. Each party will know when supplies or services have been delivered or rendered by another party and when cash for those goods has been paid or transferred.

#4 Asset Management:

Oil and gas assets are often depleting, so the industry must track and report the value of its assets to account for this loss in value. Blockchain’s distributed ledger controls this data and asset exchange and transfer throughout the production cycle. It means a company can know its reserves and how much cash it will generate at any moment. It is a crucial step in the oil and gas industry as it enables organizations to keep their assets on the ledger and track them at all stages of production.

#5 Efficiency:

Blockchain can improve efficiency within the oil industry by cutting out intermediaries such as banks. It also can help improve transparency about the services that are being rendered. Current processes often go through multiple intermediaries, which slow down how quickly a transaction is completed due to added costs involved with employing underwriters or brokerages, making blockchain essential for this type of industry.

#6 Supply Chain Transparency:

Blockchain and bitcoin enable complete supply chain transparency, making it possible for companies to replace intermediaries with a simple system that allows suppliers, contractors, and operators to reach an agreement on terms. In addition, blockchain provides all involved parties with an immutable record of transactions that users can track through the supply chain.

Blockchain implementation challenges in oil production include the low speed of transactions and higher costs which can be attributed to slower implementation times and a lack of understanding surrounding the technology. However, by implementing blockchain into the industry, companies could significantly boost efficiency while reducing costs.

 

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