Cash may be king in recycling, but cryptocurrency advocates are betting that digital assets soon will make strides into commodities transactions. In what it says is a world first, commodity price reporting agency and ISRI member Davis Index has announced the launch of decentralized futures contracts for recycled steel. Contracts will list on Mettalex, a decentralized finance (DeFi) exchange for commodities trading, later this month.
DeFi is a concept where financial products are available on a public, decentralized blockchain (a decentralized, distributed ledger for digital assets) network. This makes those products open to anyone rather than going through banks or brokerages, eliminating the middleman.
In February, Mettalex launched its blockchain-agnostic exchange, open to decentralized apps (dapps) of any blockchain, and available on Ethereum and Binance Smart Chain. The exchange incorporates Fetch.ai, a decentralized machine-learning platform based on a distributed ledger, that enables secure sharing, connection and transactions based on any data globally. Mettalex enables traders to take leveraged long or short positions against a number of commodities including steel recyclables, zinc, iron ore, and spreads for digital currency.
“The ability to hedge the numerous recyclables’ grades and specialty finished products that make for most of the infrastructure around us has long been a need in our industry,” said Sean Davidson, CEO of Davis Index. “The current system provides the industry with less than a handful of instruments, and the basis risk and costs are just unworkable for most companies. Mettalex is finally answering the call for a decentralized exchange that can list any commodity.”
Davis Index will launch exchange-settled daily contracts for bulk exports of ferrous scrap to Turkey and for containerized shredded scrap to India. The contracts will launch May 31 on Mettalex. Turkey is the world’s largest importer of ferrous scrap shipping in bulk vessels, and sources most of its supply from Canada, Europe, Russia, the U.K., Ukraine, and the U.S. The Indian subcontinent is the world’s largest importer of containerized ferrous scrap, and sources its supply globally.
Fetch.ai CEO Humayun Sheikh says Mettalex will bring transparency to the pricing data around the world’s most valuable commodities. “With Mettalex, we aim to align the incentives of traders, stablecoin liquidity providers, and physical commodity holders to create a one-of-the-kind tool that is accessible to anyone on this planet,” he says.
A stablecoin is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the price. Examples include Centre, Diem, and Tether.