Prodigi

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PRODIGI is a fintech startup with a strong focus on supply-chain management located in Kyiv, Ukraine. The PRODIGI team has a primary focus on developing an integrated management system for issuance, circulation, safekeeping, and settlement of electronic warehouse receipts on a blockchain network.

Background/History

PRODIGI formed in 2019 when Dmitry and Vlad, two colleagues from a blockchain development company Attic Lab, teamed up to pursuit a ripening opportunity on the Ukrainian commodities market. The team plans to validate the viability of the solution by making a successful case for PRODIGI locally and then showcase it during further expansion to other markets, with North America and MENA being top priorities.

Mission and Vision

Mission

Leverage fintech to grow and enhance underlying securities, derivatives, and commodity markets through their digitalization.

Mission

Become a pioneering leader in transforming financial markets by drawing on fully digital and seamless infrastructure.

Problem Statement

The presidential election and the subsequent parliamentary election of 2019 brought new people into power in Ukraine. Their support of Ukraine's National Securities and Stock Market Commission (NSSMC) efforts to introduce the much-needed and well-anticipated regulation to the financial and commodities markets facilitates the passage of the specialized legislation. Its adoption will lay a legal basis for the development of financial infrastructure as well as the introduction of new instruments. Although NSSMC develops technology-agnostic legislation, there is currently no technology that would bring its advancements to the market. PRODIGI draws on a favorable political and regulatory environment to bridge this gap with its integrated management system for electronic warehouse receipts.

The PRODIGI team initially focused on warehouse receipts over traditional financial instruments (e.g., securities, derivatives, or fixed income), because the commodities market of Ukraine is much more developed than its financial market. With base metals and grains accounting for 21% and 15% of the country's $47 billion exports, Ukraine continually ranks among the world's largest commodities producers and exporters. As reported by the World Steel Association, Ukraine was the 13th largest crude steel producer in 2018. Besides, the UN's Food and Agriculture Organization lists Ukraine among TOP-10 exporters of wheat (#5), maize (#4), barley (#3), soybeans (#7), rye (#9), and rapeseed (#3). Such robust production capacity results in a vast demand for energy, and, according to BP, the country is the world's 39th oil consumer, 31st natural gas consumer, and 28th producer of electricity.

PRODIGI prioritizes grain, leguminous, and industrial crops over other commodities not only because of their multi-billion dollar trading volumes but also since warehouse receipts circulate only on the agricultural market in Ukraine. While the market size is essential for achieving a break-even point in operations, the instrument's long-standing presence in a paper format on the market makes it familiar to the existing players, thus, simplifying their onboarding to PRODIGI. The current use of paper warehouse receipts proves to be inefficient because of:

  • excessive & bureaucratic documentary flow
  • lack of supervision
  • lower liquidity
  • noncompetitive price formation
  • low velocity of commodities in warehouses
  • fraud and forgery

Product

A warehouse receipt is a type of documentation that serves as evidence of title to the stored goods and specifies their essential characteristics. Generally, only approved or "eligible" storage facilities are allowed to issue them. Warehouse receipts are widely utilized in the commodities markets, and their primary uses encompass:

  • Trading. As a proof-of-ownership document, warehouse receipts enable traders to settle contracts without having to move commodities physically;
  • Financing. If issued in negotiable form, warehouse receipts are eligible as collateral for borrowing funds;
  • Futures Markets. Rather than moving an underlying asset, warehouse receipts are used to settle futures contracts for physical delivery.

The PRODIGI team does not invent a new financial or warehousing instrument. Instead, their solution rethinks how the technology can assemble different uses of something that has been on the market for over 50 years into a seamless user experience. For that, PRODIGI applies the blockchain technology to tokenize property and non-property rights on the underlying commodities in the form of electronic warehouse receipts that exist as tokens on the blockchain-based network. The PRODIGI team develops two primary products:

  1. financial infrastructure for issuance, circulation, safekeeping, and settlement of electronic warehouse receipts; and
  2. a custodian wallet for end-users, which serves a GUI of the system.

PRODIGI as Infrastructure

PRODIGI premises its infrastructure on a private blockchain network, which authorities and financial intermediaries join by passing a regular onboarding procedure. At this level, PRODIGI plays the role of the technology provider and charges authorities, CSDs, CCPs, brokers, custodians, and exchanges monthly maintenance fees for servicing their nodes and supporting the network. Their amount varies depending on the number of transactions and dollar value of held electronic warehouse receipts.

PRODIGI as a Custodian

PRODIGI operates its wallet as a custodian, thus, being a financial intermediary to farmers, traders, storage services providers, brokers, and other end-users. As a custodian, PRODIGI competes with other custodians that use PRODIGI infrastructure and charges transaction and safekeeping fees for its services.

Value Proposition

Today, three types of players engage in transactions with paper warehouse receipts on the Ukrainian agricultural market: storage services operators, farmers, and traders. PRODIGI accounts for their characteristics and pain points to cater to each group relevant value:

  1. Storage services operators. The regulation obliges storage services operators to keep copies of paper warehouse receipts for at least three years after their issuance, thus, adding bookkeeping overheads. Besides, paper format deteriorates the ability to analyze performance. Another distinguishing feature of a typical storage facility lies in its business model - although storage is the core service, it is not the core revenue stream. Storage facilities generate the majority of their revenue on transshipment by charging separate fees for uploading and unloading grains. Therefore, the management of warehouses sets the goal to maintain high velocity (i.e., turnover of stored grains) rather than provide long-term storage services. PRODIGI tackles the first pain point by issuing warehouse receipts on the blockchain network to make their storage convenient, organized, and suitable for analysis, thus cutting the bookkeeping cost and enhancing audibility. Simultaneously, the circulation of receipts in electronic format on the same network helps buyers and sellers find each other faster, thus, accelerating trades. Swift trades boost velocity as they result in a substantial decrease in time needed for grains to find their way into the hands of a buyer that eventually unloads them from the warehouse for export or consumption purposes.
  2. Farmers. Crop producers enjoy economies of scale. As a result, agricultural holdings can afford to have their storage facilities and sell their crops to large exporters directly. In contrast, medium- and small-sized farmers rely heavily on third-party infrastructure in their distribution activity and traders in their sales activity. According to the consensus assumption, it is economically infeasible for a farmer in Ukraine to build and maintain a storage facility for less than 7 thousand hectares of land, which corresponds to the size of an above-average producer. Regardless of the scale, crop producers pursue the same goals: they want to sell crops instantly at the moment they assume to be favorable and ensure that the quality of uploaded and unloaded grains corresponds to one another. By providing a single platform for issuing, storing, and transferring electronic warehouse receipts, PRODIGI aggregates liquidity and accelerates trades. In this way, farmers can sell their crops quicker at prices they consider fair. Additionally, PRODIGI provides tamper-resistant proof of goods quality that can serve evidence in legal disputes.
  3. Traders. Regardless of their size, specialization, or operations area, traders do their business primarily on the OTC market and share common risks and pain points. With no other means than telephone and email, they usually spent days negotiating prices and terms with their counterparts. Lengthy negotiations convert into the risk of not fulfilling trading contracts with wholesale buyers, exporters, or overseas consumers. Moreover, the failure to make a timely shipment is subject to penalties. PRODIGI puts owners of grain, leguminous, and industrial crops onto the same network and provides an OTC desk to traders, thus, decreasing the time needed to fulfill contracts.

Besides market players that already use warehouse receipts in paper format, PRODIGI aims at bringing electronic warehouse receipts to the financial market, availing themselves of the upcoming changes in legislation. A developed PRODIGI ecosystem would bring new clients to CSDs, CCPs, brokers, custodians, and exchanges.

Team

PRODIGI team members come from financial and engineering backgrounds and have experience in business and software development. They have been actively engaged in the EOS ecosystem since the pre-mainnet times (Spring, 2018). Besides EOS Block Producer, PRODIGI team members have participated in the development of a staking service Everstake.

Dmitriy Chernobay, CEO

Dmitry has extensive experience in corporate finance, IB, and industry. He holds two MBA degrees in International Banking & Finance (Birmingham, UK) and International Business (Bled, Slovenia). He held senior positions both in the Government and private sector: Bank Société Générale as Head of Corporate Banking, UkrGasBank as Deputy Chairman, the largest automotive producer/distributor Eurocar Group as Board member in charge of strategy & alliances, and FPP Asset Management (London, UK) as independent Board Director.

Vladyslav Makarov, COO

Vlad studied computer science and software engineering at School 42 (Fremont, CA) and took the Blockchain Fundamentals DeCal at UC Berkeley (Berkeley, CA) in 2017. His previous experience in consulting and research yielded an in-depth knowledge of both the business and technical sides of the blockchain technology. At PRODIGI, Vlad is in charge of product development and operations.

Max Gavriuk, CTO

With over 15 years of experience in software development and management, Max is an entrepreneur with a strong technical background in fintech, blockchain, AI/ML, and hands-on expertise in SCM, automotive, educational, and medical industries. Throughout his professional career, Max has had significant engagements as CEO of Midgard Technologies (technology development & integration), Engineering Manager in Klën Inc (AI/ML & data science provider), and CIO of OmniSynapse (software development).


Competitive Landscape

Many projects have been actively exploring the uses of blockchain in agriculture since the nascence of the technology. The main focus has been on IoT, post-trade execution of deals, and supply chain management, which puts PRODIGI's primarily trading solution out of the direct competition. However, given the number of resources that some companies possess coupled with their expertise, PRODIGI may face fierce direct competition in the future. PRODIGI's most notable competitors are listed in the table below.

Name Year founded Industry targeted Product Company's goal(s) Technology applied Partners Status Notes
Covantis 2018 (October) Commodities trading and shipping industry Covantis is a post-trade execution platform for agricultural shipping transactions
  • Long-term: Replace outdated, inefficient post-trade processes with modern solutions. Digitalise the entire execution process for international agriculture bulk commodities, from contract management to vessel finalization.
  • Short-term: Digitalise six core processes: vessel nomination, documentary instructions, the appointment of third-party providers, generating draft documents, final documents, and document presentation.
Quorum, an enterprise version of Ethereum. ConsenSys will use its technology to develop the solution: Codify, PegaSys Orchestrate, Kaleido, and MythX. Archer Daniels Midland (ADM), Bunge, Cargill, COFCO, Dreyfus.
  • Launched a legal entity.
  • Developed a prototype.
  • Plan to go live in 2020.
  • Initially, the focus is on grains and oilseeds post-trade execution processes.
  • Covantis is a Global Agribusiness Blockchain Consortium with combined revenue of its participants being $274 bln.
  • ConsenSys is a technological partner.
  • The company has launched a legal entity in Geneva, Switzerland.
Contour (ex Voltron) 2016 Trade finance industry Contour is a platform for creating, exchanging, approving, and issuing the letter of credit.

Contour is a consortium and business network.
Contour strives to achieve end-to-end digitization of letters of credit. R3 Corda Bangkok Bank, BNP Paribas, CTBC Holding, HSBC, ING, NatWest, SEB, Standard Chartered. Currently, Contour has only two employees: Wegner and Aaron Seabrook, R3's project manager for Voltron, and now Contour's COO, both based in Singapore.
  • Had a successful pilot transaction with Cargill and ING (a shipment from Argentina to Malaysia).
  • Over 50 corporations and banks are currently participating in Voltron.
  • The platform is available to the customers of existing banks.
  • CryptoBLK from Hong Kong is a developer of the platform. Bain & Company consulted Contour on the development.
  • Countour is set up in Singapore for the commercial launch.
BONDI 2018 Capital markets (fixed-income) Blockchain Offered New Debt Instrument BOND-I Issue blockchain-based bond and facilitate the launch, book building, allocation, and the management of bond holdings throughout the bond lifecycle. Ethereum (private) Commonwealth Bank, The World Bank. There were no announcements on any further developments on the Bond-i platform.
  • Innovation Lab's Blockchain Centre for Excellence of Commonwealth Bank of Australia developed a blockchain-based bond for the World Bank. The department had previously tested a prototype bond on blockchain in 2017 in partnership with the Queensland Treasury.
  • The A$100 million ($73.16 million) deal entails two-year bonds that will settle August 28, 2020, and have been priced to yield a 2.251% return.
Marco Polo 2017 Trade finance industry Marco Polo is a trade and working capital finance network Gather together the entire trade ecosystem R3 Corda Alfa Bank, Anglo-Gulf, Bangkok Bank, Bank of America, Bayern LB, BNP Paribas, BNY Mellon, Bradesco, Commerzbank, Credit Agricole, Danske Bank, DNB, Helaba, ING,Intesa San Paolo, LB BW, nab, National Bank of Fujairah, Natixis, Nat West, Raiffeisen Bank International, SMBC, Standard Bank, Standard Chartered, Turkiye Bankasi. There are two services available on the platform:
  1. payment commitment solutions (guarantees), and
  2. open account trade finance (receivable discounting and factoring).
  • Marco Polo is an open enterprise software platform for trade and working capital finance to banks and corporates and a distributed, blockchain-powered solution that allows for the seamless and secure exchange of data and assets between participants.
  • TradeIX and R3 are developing the network. Marco Polo is a collaboration rather than a legal entity. Instead, banks enter into agreements with R3 and TradeIX.
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we.trade (ex Digital Trade Chain aka DTC consortium) 2017 (January) Trade finance industry we.trade offers invoice financing and bank payment undertaking
  • Help European SME to find trusted trade partners, get financing from banks, make payments, and track the delivery.
  • The platform directly addresses the exporter's risk of cross-border trade. It helps connect sellers, buyers, banks, insurance companies, and logistics organizations in a cohesive network that intends to simplify and facilitate cross-border trading.
Hyperledger Fabric Rabobank, Deutsche Bank, HSBC, KBC, Natixis, Societé Generale, UniCredit, Nordea and Santander. we.trade extends services to many new banks and clients throughout Europe, and then it will expand the network internationally, beginning with Asia.
  • we.trade is a trade finance blockchain application that targets exporters, while importers can purchase guarantees that they will pay the seller. Belgian bank KBC was the project instigator.
  • Tracks the supply chain process, so upon the delivery of goods, the payment is triggered automatically.
  • IBM has a 7% stake in the company.
  • Swiss bank UBS uses we.trade for its transactions.
komgo 2018 Commodity trade finance A platform has two products:
  1. a digital letter of credit, and
  2. a trusted decentralized network to exchange documents on a secure and private basis.
komgo sets a goal to build a secure, global network of trust for trade that delivers value by providing efficiencies to all industry players, reducing manual touch-points and reliance on paper documents, mitigating fraud risk, creating auditable records, and providing the best user experience. Quorum, an enterprise version of Ethereum. ABN-AMRO, BNP Paribas, Credit Agricole, Citi, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, SGS, Shell, Societe Generale.
  • komgo supports close to 1 billion USD of financing channeled by network members.
  • komgo is fully operational.
  • komgo is connected to VAKT, post-trade processing platform for commodities.
  • komgo has a proprietary document transfer system called Kite that allows secure transfer without revealing the contents to komgo.
  • komgo partnered with ConsenSys and Kaleido to carry out platform development.
  • Based in Geneva.
GrainChain 2013 Grain trading The blockchain and IoT-based suite of products allowing producers, buyers, and storage operators to accurately, efficiently, and reliably buy, sell and track commodities throughout the supply chain, from farm to market. Facilitate prompt payment to suppliers and farmers, and the immediate availability of tradable commodities to buyers. Moved from Hyperledger Fabric to Symbiont (Medici invested in Symbiont) Investors: Medici Ventures, Eden Block, and others
  • Currently, 24 different dry grain commodities are being traded on the platform with 1,284 members in the US, 870 in Mexico, and 800 in Honduras.
  • Twelve thousand new members are subscribed and are waiting to be onboarded in 2020 to the system from emerging economies.
  • The platform targets Mexico, Honduras, and the United States primarily.
  • GrainChain is a Texas-based blockchain platform that uses smart contracts to secure funds during the transaction process and provides traceability—raised $2.5 mln for 10% from Medici.
  • In 2020 Medici, together with other funds, invested an additional $8.2 million in Series A.
  • During the pilot run, GrainChain completed 350,000 executed transactions and has processed over 13 billion pounds of dry grain.
National Grain and Feed Digital Solutions (NGFDS) 2020 (July) Barge trade NGFDS is a platform for electronic barge bills of lading
  • Long-term: NGFDS digitalizes the current time-consuming, inefficient, and costly paperwork-intensive processes standard in the barge trade.
  • Mid-term: Expand to other regions, such as the Columbia and Snake River System in the Pacific Northwest.
  • Short-term: NGFDS digitalizes barge bills of lading on southbound traffic for corn, wheat, soybeans, DDGS, and soybean meal on the Mississippi River System.
essDOCS' CargoDocs DocEx platform American Commercial Barge Line, Archer Daniels Midland Company, Bunge North America, Cargill, CGB Enterprises, CHS, The Gavilon Group, Ingram Marine Group, Louis Dreyfus Company, Zen-Noh Grain Corporation. User testing is underway as of July 2020, with the product deployment scheduled for the end of summer 2020.
  • Project scoping, design, and development of a prototype began in October 2018. In October 2019, essDOCS joined as a technology partner and started developing the CargoDocs DocEx platform.
  • NGFDS was formed and officially certified as a Washington, D.C.-based 501(c)(6) non-profit corporation.
  • CargoDocs is a web-based platform that digitizes the creation & approval (via DocHub) as well as exchange & legal transfer (via DocEx) of electronic original documents required for global trade. The platform covers the following documents: bills of lading, warehouse warrants, certificates of origin, commercial invoices, inspectors certificates, and others.

Less significant competitors include TradeShift Cash, DLT Ledgers, Agriledger, Agrichain, Whrrl, Agridigital.

SWOT

Strengths Weaknesses
  • Established relations with local authorities and some of the largest storage services providers, traders, and farmers
  • Experience with the blockchain technology as a Block Producer on the EOS network
  • Strong product vision and focus
  • First-mover advantage
  • The absence of a prototype
  • Outsourced MVP developers
  • Negative experience of market players with legacy system of paper warehouse receipts imposes additional burden on client acquisition as market players do not trust warehouse receipts in any form
Opportunities Threats
  • The favorable political environment that facilitates the adoption of the required legislation
  • Large and highly integrated into the world trade commodities market
  • High competition on the agricultural market between existing players with the low power and presence of oligarchs
  • The ongoing conflict with Russia in the eastern part of the country
  • The process of legislation adoption is still in progress
  • The pivot of existing projects that target the post-trade execution of deals to building electronic warehouse receipts system

Milestones/Results

Goal Set Goal Target Date Result
August 9, 2020 PoC development and active business development with warehouses (onboarding 1 terminal warehouse at the port and 2-3 elevators in the mainland) June 30, 2021 Pending

External Links