Blockchain in Agriculture

The blockchain is a ledger of accounts and transactions that are written and stored by all participants. It promises a reliable source of truth about the state of farms, inventories and contracts in agriculture, where the collection of such information is often incredibly costly. The blockchain technology can track the provenance of food and thus helps create trustworthy food supply chains and build trust between producers and consumers. As a trusted way of storing data, it facilitates the use of data-driven technologies to make farming smarter.

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In addition, jointly used with smart contracts, it allows timely payments between stakeholders that can be triggered by data changes appearing in the blockchain This article examines the applications of blockchain technology in food supply chains, agricultural insurance, smart farming, transactions of agricultural products for both theoretical and practical perspectives. We also discuss the challenges of recording transactions made by smallholder farmers and creating the ecosystem for utilizing the blockchain technology in the food and agriculture sector.

More than ever, consumers are taking an interest in the origins and contents of their food. Demand for organic products, sustainably raised meat and locally farmed produce has grown substantially in the past few years. But when shoppers throw an item in their basket, can they trust the label to tell them what they’re really getting? The evolution in consumer tastes has given rise to an important food fraud industry. Producers can easily sell mislabeled products, because the retailer or final buyer has no real way of verifying a product’s origin.

Enter blockchain. Given the fact that it can record unalterable information at every step in the food supply chain, blockchain technology can provide reliable information regarding the origins of food items and the exact journey it took from farm to table. It could enable consumers to verify from which certified farm their strawberries were picked from or in which field their grass-fed beef was raised with a single screen tap.

British company Provenance has successfully experimented with this type of application. Through the use of blockchain technology, the Provenance app successfully tracked sustainably-fished tuna from fishermen’s boats in Indonesia to restaurants in Japan. The fish were tagged and entered into a blockchain system after they were caught. Subsequently, a new entry was made every time the fish changed hands, allowing the final buyer to know exactly where the fish came from. And this is just the beginning. Apps like Provenance have the potential to allow consumers to trace not only the origin of a single piece of meat or vegetable, but of every ingredient contained in a product.

Optimizing the supply chain
In addition to helping consumers make informed purchases, the improved supply chain transparency could also greatly benefit farmers. The agricultural sector’s supply chain is notoriously complex and opaque, as shipments change hands multiple times before reaching their final destination. It is difficult for farmers to know where, for what price and how much of their products are ultimately sold. This lack of information leaves them vulnerable, and at the mercy of traders who can dictate order prices and quantities.

Blockchain technology can help rectify this imbalance by recording transactions in real time and providing up-to-date supply and demand information to participants. Having access to such information could allow farmers to properly set their own prices and optimize the quantities of products they put out on the market. Moreover, by keeping an ongoing record of participants’ transaction histories, blockchain can make it much easier for parties all over the world to due diligence each other and confidently conclude transactions without the need for middlemen and agents.

Better pricing and payment options
Finally, blockchain technology can provide lower cost and faster payment options to agri-commerce participants. In the current system, it often takes weeks for farmers to get paid for their goods, and traditional payment options such as wire transfers can be quite costly. Blockchain can address some of these inefficiencies. Many developers have already designed blockchain-based apps that provide for cheap, secure and near-instantaneous peer-to-peer fund transfers. Some are even making use of “smart contracts” that trigger payments automatically as soon as the fulfillment of a certain condition (e.g. delivery of goods) is confirmed by the buyer. Recently, an Australian farmer became the first person to settle an agricultural transaction using this type of technology and more will surely follow in his footsteps.