Russian company Nornickel recently announced that it has joined IBM’s Responsible Sourcing Blockchain Network (RSBN). According to its own information, the company, which is listed on the Nasdaq, contributes around 1.5 percent to Russia’s gross domestic product.

On January 14, 2021, Norilsk Nickel, or Nornickel for short, announced by means of a press release that the company would join the RSBN blockchain

The world’s largest producer of palladium further stated that it would use the RSBN blockchain to share mineral production data with other members. Originally, the blockchain was founded to improve the automotive, electronics, and aerospace industries. Nornickel is now the first mining company to join the blockchain . This would make the supply chain record from the mine to the market more transparent:

As one of the largest industrial groups worldwide and producer of the minerals that are essential for the transition to a carbon-free world, Nornickel is aware of its responsibility for the production of the metals supply chains in a sustainable and highly transparent manner .

Declared the Vice President Sales and Distribution at Nornickel, Anton Berlin

The blockchain would track the flow of goods almost in real time and replace „cumbersome paperwork“. After the company had developed its own strategy for recording the supply chain, it joined the RSBN. The RSBN platform is based on blockchain technology from International Business Machines Corporation (IBM). This in turn is based on the Hyperledger – a project of open source blockchains and related tools from the Linux Foundation’s Fabric. By joining the RSBN blockchain, Nornickel’s supply chains are now audited once a year by RCS Global. Manish Chawla, Global Managing Director, Chemistry, Petroleum and Industrial Products at IBM said he was confident that the two companies would work together:

Norilsk Nickel is an important addition to the Responsible Sourcing Blockchain Network, and we look forward to your contributions to ensure responsible sourcing and the Group’s sustainability goals, which have a direct impact on the successful and responsible development of entire industries.

The RSBN’s blockchain is growing steadily. In 2019, Glencore PLC, one of the largest cobalt producers ever entered the blockchain and thus set a milestone for the network.

Passive investment in the world of traditional finance is, well … passive. And it’s not just the fact that passive indices give investors access to stocks without having to do anything about the composition of the index. It is also true that holding shares is fundamentally a passive game.

No obligation as a shareholder

Having a share entitles the investor to economic and administrative rights within a company, but there are no performance obligations as a shareholder. As a shareholder, it is perfectly fine to simply hold a share forever, collect dividends and over time enjoy capital growth by holding shares in a company.

Even if a shareholder were to exercise his administrative rights, there are limits to what he can do. Of course, shareholders can do things like vote for new board members, adjust management remuneration and approve or reject important financial transactions, such as mergers and acquisitions.

Daily business

But shareholders do not manage companies directly. Apple shareholders do not set prices for Apple’s newest iPhones, nor do Amazon shareholders determine which new markets Amazon should enter. Usually, apart from activist situations, shareholders are absent when it comes to a company’s activities. And the same can be said for index funds which, although they own a significant proportion of most listed companies, cannot exercise power.

Crypto is another story.

Keeping tokens is active

Holding tokens like Ethereum Code is an active game. In many cases, token holders directly control the protocols and take the risks. In Synthetix, token holders actively store synthetic assets and manage the debt of the protocols. In Aave, token holders actively determine the risk parameters of their credit markets and insure the protocol in case of insolvency events.

And at Nexus Mutual, token holders arrange the transactions between them and determine which claims are paid out. To perform these activities, active token holders receive protocol rewards in the form of fees (tokens), while passive token holders often receive nothing.

Indexes compete

In general, indices are a game of collecting capital in which index providers compete for trillions of dollars of capital from investors. The way to attract investors is by offering them incentives that meet their needs in terms of asset exposure and diversification (i.e., what is in an index).

But the composition of an index is only half the game in the crypto world. The other half is what the tokens in an index do for an investor’s assets, because crypto assets are meant to be productive.

More Features

Most crypto projects acknowledge the fact that holding tokens is an active game. Many index products, such as those from PowerPool and PieDAO, are implemented as forks from Balancer liquidity pools, which means that assets in the pool are made available to trade against. But now protocols go a step further by adding features such as meta-governance and fund management strategies. The combined features provide index investors with a combination of board delegation and return strategies on their tokens, which form the basis to entice investors to buy these indices for reasons beyond the composition of the index.

This is just the beginning. The next development is when passive investment turns into passive participation. Ryan Watkins explains this well in the wire below.