Introduction In preparation for the coming Abaxx RTO I’ve been doing additional research on BlockChain technology as it pertains to commodities. In the below post I want to share some thoughts and articles I’ve recently read that I think are helpful for understanding Abaxx’s business strategy in both the Exchange and the Technology businesses. Additionally, I think looking at two peers, VAKT out of Europe and Bakkt out of the US, should give some context as to where Abaxx could be headed. Note that Bakkt which is majority owned by ICE has over a $1 Billion valuation and has a bitcoin futures exchange and also utilizes blockchain to upend the giftcard industry. VAKT has some major oil industry backers and a blockchain project for crude oil in Europe, but hasn't been able to break into the lucrative Singapore exchange like Abaxx has. As you will see below, Abaxx and these other companies are at the forefront of an emerging technology that has the ability to disrupt a number of industries including commodity exchanges. The hope here is obviously that Abaxx in five to ten years time will wind up being Google and not Alta Vista. As Abaxx begins to derisk it's technology and prove out its business plan over the next year, I think this stock could really take off. Obviously this is all my opinion, please do your own due diligence before making any investment decisions.
What is Internet 3.0? In some of Abaxx’s literature the term Web 3.0 has popped up, and to be honest I had never really heard that referenced until encountering Abaxx. In short Internet 1.0 was a read only web where users could view a website, but not really interact with it—think Alta Vista or a website that you can just view content on. Internet 2.0 was the rise of the social web. Here users could input their own content and share with others. Others could then review that content and interact with it as well. Examples of these types of sites would be Facebook, Twitter, even Stockhouse . If Web 2.0 was the social web, than Web 3.0 will likely be known as the semantic web. Here applications collect data, aggregate like pieces of data together, and through deep learning or AI create future content based on previous interactions with a system or user—the internet of things (IOT) is another hallmark of web 3.0. Examples of Web 3.0 could be Google’s algorithms that produce search results near your GPS location or create suggested search items based on your previous search history. Web 3.0 works by allowing one database with say geographical information to connect to another database with all the restaurants in a given area, and use a third database to match up restaurants with user reviews—someone can then use a web 3.0 application to query all of those databases at the same time and through the applications AI use the users previous likes and dislikes to recommend a restaurant in the area for that user. Below is a good graphic that shows the differences between Web 1.0, Web 2.0, and Web 3.0. You can also read a more thorough description of what Web 3.0 is at the following link https://wiredelta.com/web-3-0-change-internet-future/.
[img]https://hackernoon.com/hn-images/1*0X5cHgW_CgElpM59sui1sQ.png[/img]
Source:
https://hackernoon.com/embracing-web-3-0-the-new-internet-era-will-begin-soon-630ff6c2e7b6 
Source: https://blockchainhub.net/web3-decentralized-web/
How Does Web 3.0 Fit in With BlockChains? Many web 3.0 applications are controlled by the Big Five oligopolistic tech firms (i.e., Apple, Amazon, Facebook, Google, and Microsoft) which own user data. The data is stored in server farms which can then be aggregated and sold off to the firms customers (i.e., advertisers or marketing firms). Servers can also be breached and user data stolen. BlockChains, also known as distributed ledgers allow all users on the blockchain to view all transactions at any point in time making it instantly auditable. If data on the block chain is sensitive it can be locked and only the user with the correct key/password will be able to access that block of information. That being said, no one person controls all the blocks of data, which makes block chain decentralized as opposed to the Big Five which are more centralized. Deloitte wrote up a good primer on BlockChain technology, which you can read here https://www2.deloitte.com/us/en/insights/topics/emerging-technologies/blockchain-technical-primer.html.
BlockChain along with new secure internet protocols can help expedite transactions and revolutionize a number of industries. Another good primer on BlockChain and Web3.0 can be found here:
https://blockchainhub.net/web3-decentralized-web/ BlockChain’s Use in Commodity Exchange’s BlockChain technology, along with Web 3.0 capabilities have the potential to revolutionize various industries by creating more efficient and more secure transactions that are decentrailized and not controlled by oligopolistic players. In 2018 S&P wrote an article (see link below) that illustrated the immense potential of leveraging blockchain technology for commodities trading. Below are a few excerpts from that article which I think are germane to Abaxx.
https://www.spglobal.com/en/research-insights/featured/blockchain-for-commodities-trading-opportunities-in-a-digital-age
Cutting post-trade processing costs is one of the main potential uses of blockchain in commodity trading, with savings of up to 40% across operations, accounting, settlements and IT, according to blockchain developers. Big energy traders are backing blockchain post-trade projects, like Vakt for oil and OneOffice for gas, that are expected to launch in the coming months.
Singapore is emerging as a strategic base for digital startups in Asia, with several of these developing blockchain platforms for energy and commodity businesses. With a digital-friendly government and regulator, Singapore is poised to show what’s possible under the right conditions....
“The question of whether blockchain will change the way we do business is already answered for BP,” Iain Lawson, BP’s head of structured products for the Eastern Hemisphere, said at the S&P Global Platts Digital Commodities Summit in Singapore in July 2018.
“There’s a full acceptance in the front office of any trading room in Singapore that blockchain will change not just how we trade, but potentially what we trade and who we trade with,” he said.
Another firm, Boston Consulting Group, wrote an article in 2018 called “A Reality Check for BlockChain in Commodity Trading (link below) that discussed several of the hurdles that would need to be overcome for a successful role out of BlockChain in commodity trading. This particular article goes over many of the potential pitfalls that could hold back BlockChain from being widely adopted. The good news in my opinion is that it appears that the Abaxx Exchange has addressed most of these issues. As an example, getting regulator buy in is cited as a major hurdle, and clearly Abaxx has the approval and backing of the Singapore government already. On the negative side though, the article points out that price transparency through blockchain may potentially discourage trading of contracts since there will be fewer price dislocations for traders to exploit.
https://www.bcg.com/en-us/publications/2018/reality-check-blockchain-commodity-trading Two of Abaxx’s Peers VAKT and Bakkt As mentioned in the introduction above, two relevant peers for Abaxx are Bakkt and VAKT. Bakkt is predominantly owned by Intercontinental Exchange (ICE) and already has above a $1 Billion USD valuation (last funding round was done in March, 2020) based on the fact that it provides an exchange for trading Bitcoin futures. Bakkt recently acquired a gift card operator in hopes that they can create some synergy between bitcoin and gift cards, but Bakkt has not really moved on to other exchanges or markets with its concept yet.
VAKT, was started in 2018 as a fintech company to provide technology resources including blockchain to Norther European Oil Markets with the hope of moving into Singapore. I couldn’t find a valuation on VAKT, but many of the world’s largest oil players have a small investment with them, including Saudi Aramco which invested in VAKT’s most recent funding round in January, 2020. VAKT has mentioned that they want to move into Singapore, but it appears that Abaxx Exchange beat them to the punch.
In a recent interview the VAKT CEO Etienne Amic mentioned that he felt as if VAKT could become the next ICE as they feel like they could disrupt commodity exchanges the same way that ICE disrupted exchanges in 2000 by leveraging the internet (see quote and article link below).
https://hcinsider.global/in-conversation-with-etienne-amic/ “Some commentators have drawn comparisons between VAKT and the launch in 2000 of Intercontinental Exchange (ICE), which brought a more transparent, efficient, internet-based platform to the OTC energy trading markets and was also consortium-led.
VAKT’s business model is to simplify post commodity trade activities after the trade has settled. The overall idea is that commodity businesses are heavily decentralized and have been slow to adopt new technology thus creating a huge amount of inefficiencies all along the business chain from the point of sale to the point of receiving the physical commodity. Below is a quote from the VAKT CEO (same article posted above).
“There are currently no plans to deviate from the post-trade elements of the deal lifecycle, handling everything from the confirmation of the trade through to invoicing, and smoothing access to trade finance. Etienne says: “There is so much to do in that space. Physical oil trading is very decentralised so to crystallise the value of trade, you may need the contributions of the brokers, inspection companies, terminal or pipeline operators, ship owners and port agents.”
The last point is particularly important to Abaxx, as I believe the groups that VAKT names in the final sentence (i.e., brokers, inspection companies, terminal or pipeline operators, ship owners and port agents) will be targeted for Abaxx’s Tech’s Docusign application initially. This makes sense as Abaxx will attempt to bring together all the participants on the value chain, and have them all use the same SaaS applications.
Conclusion Abaxx is on the vanguard of a new emerging industry that leverages BlockChain and other Web3.0 technologies to disrupt inefficient industries such as commodity trading. Various industry sources like S&P and Boston Consulting Group have noted the potential for these technologies to create a paradigm shift in commodity trading, and it appears that several firms (including Abaxx) are at the precipice of realizing the potential. Two major players that have emerged to date are Bakkt, which has a bitcoin futures exchange and sports a $1 Billion + USD valuation, and VAKT which has an established blockchain crude oil exchange in Europe but not Singapore. Both of these peers have a considerable amount of buzz, and high valuations given their potential to disrupt their respective markets. That being said neither VAKT or Bakkt will have an approved Singapore exchange that is highly sought after. If successful Abaxx could potentially emerge as the dominant player in the blockchain exchange, similar to how ICE started with crude oil futures in 2000 and eventually grew to be a $50 billion dollar company. Obviously there is a long way to go for Abaxx to prove out it’s Exchange and Technologies, but all the ingredients seem to be coming together nicely for a company that could one day have a multi-billion dollar market cap.