Revolutionizing the food system thanks to Blockchain

Blockchain can revolutionize our current food system and offers potential for large and small players in agri-food, throughout the chain. The first practical examples show that potential. At the same time, since its birth 10 years ago, blockchain has not yet delivered what its supporters promised. A realistic view of the possibilities and limitations is needed.

In traditional administration systems, data is stored in one place. The trust we have in that data is therefore also largely determined by the source. Blockchain ensures that the same data is shared and stored in thousands of places, without being able to change it. Such a shared, non-manipulable record makes the chance of fraud or loss much smaller. Thanks to blockchain, digital trust is growing and that is going to change the entire food system dramatically, specialists predict.

1: Fairer prices for all parties in the chain

Moyee Coffee, a Dutch coffee brand, wants to use blockchain to revolutionize the coffee market. Consumers can see exactly what a link in the chain gets paid, whether you are a coffee farmer, roaster or distributor. Normally, the price of roasted beans is about 6 to 7 times higher than that of green beans. However, the value added by roasting is not commensurate with that price. Moyee Coffee wants to make that transparent to consumers and thus introduce social capitalism: each one a fair share of the profits. In the future, a consumer can even tip the coffee farmer via the blockchain instead of the local barista.
Large monopolies that are not open and transparent will have to adapt or will become extinct.

2: Greater food security

Same transparency provides the benefit of food security. More and more consumers want more certainty about things like the sustainability of production methods, animal welfare and working conditions of producers. China is leading the way when it comes to the application of blockchain in agri-food, because Chinese consumers consider it very important to know what they are eating, more so than in the US, for example.

Want to be sure that your product has been produced organically, for example? Blockchain protects the data, so fraud with origin can be reduced to a minimum. The consumer only has to scan a QR code to see the entire process and the source.

Research has shown that consumers are prepared to pay more for products which are produced fairly, sustainably and in a way which is healthy for people and the environment. In that case, the food security also provides the producer with a higher return.

It is also important to know that the food is produced in a sustainable way.

3: The sharing economy is coming

Thanks to blockchain, we are going to see more shared ownership (pay per use). Instead of each person purchasing certain machines or robots on their own, you pay according to use, with both registration and payment being a lot easier. This can greatly reduce investments and gives entrepreneurs room to use the available resources in a smarter way.

4: Small parties are going to cooperate more

Say for example: you want to introduce a vegetable box with farmers in the neighborhood or organize a monthly regional market. A cooperative trade organization has to be started with complex administration to distribute the revenues fairly.
With blockchain, this is no longer necessary. Instead, food collectives emerge, where regional producers can exchange digital tokens among themselves, making payments easier and faster.

5: Unknown parties start collaborating

In traditional commerce, you prefer to work only with known parties you trust. You want to be able to count on delivery of goods in the agreed quality and not run the risk of having paid.

Thanks to blockchain, trading platforms can emerge where you will work with completely unknown parties because the participating bank guarantees delivery or else the money paid will be refunded.

6: Funding goes faster

The blockchain builds in additional security for all links involved.

If blockchain technology allows banks to hedge risks better, they will be more willing to finance.

7: Logistics is getting smarter

With blockchain, logistics can be organized even better, because it is known exactly who has which products where and when. This offers opportunities for further efficiency gains and better collaboration with logistics partners.

How secure is the future?

The technology is promising, the experts agree. It offers advantages for large and small companies in agri-food. But blockchain is also still young, applications are still expensive and there are still many practical questions to be answered. For larger, more complex chains it will take years before blockchain will play a significant role, is the expectation. Nevertheless, it is worth keeping an eye on the developments, Rabobank advises. Depending on the expected impact on its own business model, the bank lists 3 options:

• Do nothing and wait, if the impact is limited
• Examine, if similar parties in the chain are already active with blockchain
• Experiment on a small scale, if the expected impact is large.

What is blockchain?

Blockchain is often associated with bitcoin because that is where its origins lie. Blockchain was originally the data structure behind the bitcoin network. It is now much more than that, with many more applications.
Central to it is the reliable storage and exchange of data, without the intervention of an administrator.

Blockchain is like a universal ledger: everyone is always looking at the same list of data. Anywhere in the world, at any time. Instead of a central authority checking whether changes to the log are legitimate, the network of computers does it. Groups of Internet users can exchange information according to strict agreements and formulas.

You no longer have to put your trust in a bank, a notary or a government, because these links will fall away.

Compare it to a spreadsheet in Excel: blockchain is a list of rows of rules. It is NOT possible to change previous rows, but only to add rows. Added rows must be traceable to previous rows. Digital information is therefore not falsifiable.

Blockchain in agri-food practice, 4 examples

1: First blockchain transaction agriculture

The first blockchain transaction involving an agricultural product was realized in early 2018. A cargo of soybeans from the US to China via blockchains reduced transaction time by three times. In terms of cost, blockchain proved five times cheaper than traditional paper trading. When blockchain technology is used, all digitized documents are checked automatically. This eliminated the need for manual checks and avoided unnecessary duplication of checks.

2: Frievar

Frisian pig farmers work together on an honest piece of meat, by keeping pigs in a secured, healthy, conscious and sustainable way with an eye for the animal and the environment. Frievar wants to be able to offer a complete meat passport to consumers and is setting up a blockchain platform to do so. Complete transparency in the process is the credo: insemination date, weaning date, transport of pigs and the slaughter moment of pigs. Data from different links can only be complementary, which makes fraud impossible. For example, the moment of slaughter can never be the same as the moment of transport of the meat. Deviations are above water for everyone within 30 seconds with blockchain.

3: Carrefour: transparent chicken Belchick'n

Since March 2018, Carrefour consumers can follow the entire process from broiler parent through hatchery, broiler to slaughterhouse and processor with a QR code on packaging. An expansion to eight other product groups at Carrefour is expected soon, including honey, dairy products and burgers.

4: Fairfood Coconut

Fairfood allows you to follow the journey of a coconut from Indonesia to Paul in Amsterdam. You see who the producer is and that a fair income is guaranteed.

Criticism of blockchain

Not everyone is blazingly enthusiastic about blockchain. 10 years after its birth, it is clear that there are also drawbacks. We list 6 common criticisms.

1: Blockchain is not THE solution. Blockchain is often presented as a solution to all sorts of problems, while it can be part of the solution, but often requires much more than just deployment of the technology.

2: Data chiseled in stone. Blockchain is designed to be non-customizable and to be completely public. If certain incorrect (personal) data is stored, that data will still be preserved.

3: Difficult to protect privacy. Storing confidential data decentrally poses problems with ensuring privacy.

4: Blockchain slurps energy. The computing power required and the constant tracking of data in thousands of places requires a lot of power. Not exactly environmentally friendly, in other words.

5: Applying blockchain is complex and costly.You need specialist knowledge and time and financial scope to be able to invest in the development of sector- and organisation-specific applications. Progress is sometimes very slow and scaling up proves difficult.

6: Blockchain is a hype. Hundreds of organizations in the Netherlands claim to be working with it, but it is estimated that at most 5 to 10% after the exploration phase are actually developed.

Despite this, supporters believe in the potential and expect that after this "shake-out" the serious initiatives will remain and the technology will mature, similar to the development of mobile telephony and the Internet.

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