How blockchain can create more transparency in the food chain
Decentralized blockchain technology in the agrifood business
If you follow the news on innovations in technology, it’s very likely that you will have heard about blockchain. Though mostly talked about in the context of Fintech, blockchain (the technology behind Bitcoin) is rapidly gaining interest from other industries, as the promise of disruption of entire business models arises. During the Food Valley Expo in October, the potential and possibilities of blockchain for agrifood were presented, using this technology as a tool to create trust, transparency and empower digital compliance.
Jacob Boersma - 27 October 2016
Challenging the agrifood business
The agrifood business is a complex environment, with many different stakeholders, perishable goods that need to be transported across the world and low margins. Not only is the demand for food growing, but also the desire to have ‘any’ food, ’any’ time, ’any’ where. This means supply chains have necessarily gone global. While margins for farmers remain marginal, they are under pressure to produce high quality food as consumers become more demanding. Companies engage in fierce competition, and not always for the better. We have witnessed the strangest food scandals, from exploding watermelons and fake eggs in China to glowing meat in Australia, and horsemeat at our favorite steakhouse in the Netherlands. Lan Ge, researcher at Wageningen University and Research raised the question ‘who should we trust?’ at the FoodValley Expo after an anecdote of sending milk powder to friends in China, who have lost trust in local sellers.
Trust and lack of transparency are issues that are prevalent in many industries in the face of increasing demand by consumers for better and more trustworthy information, especially in food. Fairtrade, eco-labels and ‘honest’ products have popped up like mushrooms, with brands like Tony Chocolonely, Innocent and numerous startups gaining popularity by addressing societal issues through transparency. Although cynics might call it a marketing tool, there appears to be a real desire for provenance.
Blockchain in the food chain
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Under the hood
The trust, transparency and traceability that is desired is hard to achieve in the current infrastructural environment with silo-like back offices. Each company along the supply chain has their own systems, where all transactions are handled in separate databases. This is not only costly in terms of IT systems, but because finances are ‘decoupled’ from the delivered goods the financial flows can be inefficient and can cause delays in payments down the line for farmers and other local producers.
This is where blockchain comes in. If properly implemented, blockchain can indeed provide the desired transparency, trust and traceability. Besides a shared ‘source of truth’, it can also provide the basis for highly efficient financial flows, tightly coupled to all links of the supply chain
As with any new technology, when you hear it the first time it all sounds rather complicated. For more information on how blockchain works and where it is being used you can check the blockchain technology website.
The place of blockchain in the chain
The blockchain is a distributed ledger. In its most basic form it is an infrastructure that makes it possible to exchange value with one another without a middleman involved, so theoretically any bank, notary, or other third trusted party wouldn’t be necessary. Compare it to one (huge) excel sheet that everyone can access without one person being the owner. Every transaction - of value - gets added to the ledger (this large excel sheet) and can be viewed by anyone, but not edited. Integrity and immutability are guaranteed by the cryptographic protocols of the technology, rather than by a central regulator or database administrator.
When new transactions are made, the computers (nodes) in the network verify all previous transaction by checking their respective ‘fingerprints’, validating that what you intend to spend is indeed owned by you. These transactions are processed in blocks which are added over time and linked to each previous block of transactions, hence there is the creation of the chain of blocks - the blockchain.
The food chain on the block chain
In the agriculture business there are several use cases that can be interesting to implement with a blockchain. Because there are many different parties involved and there is a demand for transparency in the industry, the London based start-up Provenance is registering agricultural products on the blockchain, so their origins can be traced. They are currently experimenting with tracking tuna from Indonesia on the blockchain. Other start-ups focus on creating ‘smart farms’ by connecting IoT devices to improve efficiency (Filament) or crowdfund livestock (Farmshare). By coupling the financial flow to the supply chain inefficiencies in payments can be overcome, while creating more transparency and trust at the same time.
Proof of work
Amid all these promises the reality is that this technology is still in its infancy. At Deloitte we have done over 20 projects with clients in different industries and different countries, and are actively working on proofs-of-concept and pilots. Many clients are still in the phase of finding the right use cases, viable business models and selecting the best technical infrastructure on which to build. This is the time where we need to continue to try out ideas, learn more and facilitate the disruption.
More information on Blockchain in the food chain?
Do you want to know more on blockchain in the food chain? Please contact Jacob Boersma at +31 (0)88 2882069. You can request the presentation Jacob Boersma gave at FoodValley Expo 'Blockchain in the food chain'.
You can check out one of the reports or join us in one of our deep-dive training sessions on our blockchain technology website. If you feel there is potential for you or your clients, or you have a good use-case, don’t hesitate to contact us.