Understanding The Implications Of Blockchain Technology In Agriculture
The rise of cryptocurrencies like Bitcoin and Ethereum has taken the financial industry by storm. However, irrespective of what the future holds for bitcoin and its peers. The underlying technology blockchain will most certainly survive and is bound to make inroads in every sector. Even though the blockchain revolution started from banking and finance industry, other industries like healthcare, energy, retail, governance, supply chain and agriculture are going to be disrupted by blockchain application.
What is blockchain and why is it unique?
The blockchain is a distributed ledger technology that allows all members to record transactions in a decentralised data log maintained on a network of computers, rather than a physical ledger or a single database. Transactions must be approved through consensus, and everything is secured through cryptography.
In simpler terms think of blockchain as google sheets versus excel sheet sent through emails. In google sheets, all members have live access to the data being entered into the sheets and can independently record/track the updates of every entry being made. Add another layer on top of this, where entry once made is recorded permanently and cannot be edited or erased by any member.
What makes blockchain so unique is that data stored on its networks is transparent and incorruptible. Data is embedded on the network as a whole, by definition it is public and data once stored cannot be corrupted by altering any information on the blockchain.
Blockchain In Agriculture
One of the most logical applications of blockchain is in agriculture which is plagued with several challenges (I prefer to call them opportunities). With rising consumer consciousness towards food safety, blockchain application can play a vital role in solving many agriculture-related problems.
Some of its practical applications in agriculture are listed below:
Food safety – What is the source of my food?
Consumers have grown suspicious of the food they are consuming. Food fraud costs the global food industry an estimated $30-40 Bn annually. Food allergies and food food-relatedess are much more common now than 25 years ago and consumers are beginning to demand the information related to the food they are consuming.
As this trend continues to rise, big food chains will have no choice but to use blockchain for ensuring accountability, traceability and quality of the food. Blockchain will in fact become competitive edge for brands competing in the competitive FMCG space.
Food supply chain – Who is making the most profit?
Food supply chains in most developing nations are inefficient due to information asymmetry. This directly results in low farmer income as farmers do not receive their due share, even though they are the most important part of the chain (the food producers). With blockchain the food supply chain gets simplified as the data management across a complex network that includes farmers, brokers, distributors, processors, retailers, regulators, and consumers gets simplified and transparent.
Improved data sharing can also help reduce the $1 trillion problems of food waste. Farmers and all members of the supply chain can access all the information throughout the chain. This will make the entire supply chain more democratic and efficient resulting in lesser food wastage and higher remuneration being paid to the stakeholder adding the greater amount of value.
Agri Inputs – Are the inputs authentic?
Farmers are often unaware if the inputs they are buying are authentic. Local level retailers are selling fake products to farmers to increase their profit margins. At times even the retailers are unaware if the products supplied to them are authentic. Big agriculture-input players are also losing millions of dollars due to pilferage or duplication which also impacts their brand image.
Blockchain application will solve this problem by increasing the traceability of each product sold, from manufacturer to end buyer. Retailers and farmers can simply scan the blockchain barcode on each product via their smartphone and get to know about the authenticity and source of the products they are buying.
Land title registering – Is the land I am buying or leasing litigation free?
Land registeration for sale and purchase of land is a very cumbersome process and is most susceptible to fraud. Blockchain can make all kinds of land recording more efficient and accessible as the data recorded is publically available bringing complete transparency in the system.
Andhra Pradesh is the first movers in this space and has partnered with Swedish startup ChromaWay to build blockchain solution for land registration and recordkeeping. This will result in huge cost savings for the government as recordkeeping is a costly and labour intensive process. This partnership shows promise and progression of the AP government vision for the state. Many states will follow suit once the pilot is successful in AP.
Smart contracting between corporate farming firms and farmers can result in easier contracting for leasing of land. Ethereum is an open source blockchain project that was build specifically to realize the possibility of smart contracting.
Disbursement of subsidies – Is the benefit really reaching the farmer?
Across the globe, farm sector is heavily dependent on government subsidies. For example, in India 2017-18 budget, $4.9 Bn (INR 32,000 Cr) were allocated for agriculture-related subsidies to farmers. How much of this amount actually reaches the farmers is always in question.
However, with blockchain the distribution and delivery of subsidies can become more transparent resulting in targeted disbursement of subsidies plugging pilferages in the existing system. Even though the process to establish this network will be very complexed as multiple stakeholders would need to come together, it is no longer impossible.
The days of blockchain application have just begun and as with any new technology, blockchain will hit a few roadblocks especially with the government’s regulators across the globe. As the true essence of blockchain application is to take the power away from the hands of the powerful by decentralising information and handing it over to the people, democracy in the true sense.
Nonetheless as with any movement, if people see value the technology brings into their lives they will rally behind it and blockchain application will become mainstream in most industries including agriculture in the coming years.
