The rise of blockchain technology in agriculture

Date:09-11-2018


Author: Andreas Kamilaris, Francesc Xavier Prenafeta-Boldú and Agusti Fonts, Institute of Agrifood Research and Technology (IRTA)

Blockchain appeared in our lives as a modern technology that promises ubiquitous financial transactions among distributed untrusted parties, without the need of intermediaries such as banks. Several ongoing projects and initiatives now illustrate the impact blockchain technology is having on agriculture and suggest it has great potential for the future.

As blockchain technology gains success and proves its functionality in many cryptocurrencies, various organisations are attempting to harness its transparency and fault tolerance to solve problems in scenarios where numerous untrusted actors get involved in the distribution of resources. Two important areas are agriculture and the food supply chain.

Blockchain for agriculture

In December 2016, the company AgriDigital successfully executed the world’s first sale of 23.46 tons of grain on a blockchain. Since then, over 1,300 users have been involved in the sale of more than 1.6 million tons of grain over the cloud-based system, involving US$360 million in grower payments.

The success of AgriDigital has served as an inspiration for the potential use of this technology in the agricultural supply chain. Agriculture and the food supply chain are closely linked, since agricultural products are used as inputs in multi-actor distributed food supply chains. Indeed, the global food chain is complex, bringing together farmers, warehousing, shipping companies, distributors and grocers.

Not only is the system inefficient, it is also imprecise. When you buy a vegetable at your local grocery store, the brand listed on the sticker may have no idea which farm the vegetable came from. The initiatives where blockchain technology could be used to solve real-life practical problems fall into two categories: supporting small-scale farmers, and food safety and integrity.

Supporting small-scale farmers

Supporting small-scale farmers and small cooperatives is currently by far the best way to improve efficiency in developing countries. There are several initiatives pursuing this path, three of which stand out in particular. AgriLedger describes itself as ‘a Mobile App that records and transacts incorruptible truth using blockchain technology’. It uses distributed cryptoledger and mobile apps to create a circle of trust for small farmer cooperatives in Africa.

The American organisation FarmShare focuses on creating new forms of property ownership, community cooperation, and locally self-sufficient economies. It aims to use the blockchain to ‘tokenize shares, incentivize volunteers, optimize resource sharing and minimize food waste’. OlivaCoin is a platform for the trade of olive oil. With its own cryptocurrency and traceability system, it aims to support olive oil producers by reducing overall financial costs, increasing transparency and giving them easier access to global markets.

Food safety and integrity

Food safety is about handling, preparing and storing food in ways that prevent food-borne illnesses. Food integrity refers to the fairness and authenticity of food in food value chains both at the physical level and the digital level. The digital level should provide reliable and trustworthy information on the origin and provenance of food products at the physical level. Food safety and integrity can be enhanced through higher traceability. Using the blockchain, food companies can quickly trace outbreaks back to specific sources, which could mitigate food fraud.

There is an impressive list of companies that have started to use the blockchain to safeguard food safety and integrity. Cargill uses it to let shoppers trace their turkeys from the store to the farm that raised them. Walmart, Kroger and other companies have partnered with IBM to integrate blockchain technology into their supply chains. Coca-Cola has employed it to identify cases of forced labour in the sugarcane supply chain. Carrefour is using blockchain to verify standards and trace food origins.

Other examples include Downstream beer, which calls itself the world’s first blockchain beer. It uses blockchain technology to reveal production information. ‘Paddock to plate’ is a project designed to track beef and protect Australia’s reputation for quality production, using BeefLedger as a payment platform. JD.com traces the production and delivery of beef raised in Inner Mongolia. GoGo Chicken is tracking chickens with an ankle bracelet, putting the information collected online. The Grass Roots Farmers’ Cooperative uses blockchain to trace how animals are raised. Intel has released a demonstration case study showing how Hyperledger Sawtooth, a platform for managing blockchains, could facilitate seafood supply chain traceability.

In January 2018, the World Wildlife Foundation announced the Blockchain Supply Chain Traceability Project to crack down on illegal tuna fishing. Ripe.io harnesses quality food data to create the Blockchain of Food. Consumers can use BreadTrail to inform themselves of a product’s origin. Finally, the ‘blockchain for agrifood’ project has developed a proof of concept application targeting table grapes from South Africa.

Benefits and challenges

Blockchain technology offers many benefits, providing a secure way to perform transactions among untrusted parties. To improve traceability in value chains, a decentralized ledger helps to connect inputs, suppliers, producers and buyers. In particular, blockchain is suitable for the developing world, where it can support small farmers by providing them with finance and insurance and facilitate transactions. Although small farmers supply 80% of food in developing countries, they rarely have access to insurance, banking or basic financial services.

There are various barriers and challenges for the wider adoption of blockchain technology. A case study in the Netherlands revealed that small and medium-sized businesses are too small or lack the expertise to invest in the blockchain by themselves. Current uncertainties are preventing individual parties from developing a convincing business case. With respect to education, there is a lack of awareness about the blockchain, and training platforms are non-existent.

Moreover, an important barrier is regulation. The current experience of cryptocurrencies indicates that they are vulnerable to speculators and massive price fluctuations. So without some form of regulation, cryptocurrency is not a trusted means yet for use in food supply chains as a comprehensive solution. And there is still a lack of consensus among policymakers and technical experts on how to use blockchain technology and carry out transactions based on cryptocurrency.

In the meantime, it is hopeful that blockchain technology is being used by so many projects and initiatives. Together they aim to establish a proven and trusted environment to build a transparent food supply chain, integrating key stakeholders into the supply chain. Of course, as with any relatively new technology, there are still many issues and challenges that need to be solved. Blockchain technology must become simpler to understand and use. A number of start-ups have been working in this space, such as 1000 EcoFarms, which developed an entire platform to make it easier for farmers to use the blockchain.

We also need to address various issues on the public research agendas, while governments should invest more in research and innovation to develop evidence for the added value of the technology and design a clear regulatory framework for blockchain implementations. The near future will show if and how these challenges can be addressed by governmental and private efforts, in order to establish blockchain technology as a secure, reliable and transparent way to ensure food safety and integrity.