By now most everyone has heard the term “blockchain” and likely read something about the electronic currency or cryptocurrency Bitcoin that blockchain technology has enabled. Articles have started appearing online, in newspapers and in agri-food magazines claiming that blockchain technology could solve a multiplicity of problems in the agri-food industry, ranging from accelerating payment for goods and services to streamlining the supply chain, reducing waste and improving food traceability.
What is blockchain technology?
One easy-to-understand definition of blockchain technology comes from Dr. Sylvain Charlebois, dean, Faculty of Management, Dalhousie University, in an article published in the Globe and Mail on Dec. 12, 2017. In “How blockchain could revolutionize the food industry,” Charlebois states “…blockchain technology is a way of storing and sharing information across a network of users in an open virtual space.” This said, it helps to have a basic understanding of how it all works to help one decide if this technology really has potential to improve food traceability and deliver on other claims, now or in the future.
The blockchain can be either an unstructured or structured network of computers (“nodes” in techno-speak) linked together in either an “open/public” network for anyone on the internet to see. Or it can be linked together in a “structured/controlled/private” network accessible only to invited or approved users. Users can be identified either anonymously or openly and each has a “key” or password to access their account. In an open arrangement, communications or transactions can occur between two individuals and/or firms (P2P) in the network without going through a central server in a format that is called “an open ledger” or “distributed ledger.” Every ledger entry is time stamped and encrypted, making it secure. A group of these transactions is called a “block.” In Bitcoin, blocks are added and updated every 10 minutes. The major blockchain technology providers are today’s major software companies – including Microsoft, Oracle and IBM among others – and each provides their own brand of blockchain technology.
Benefits to agri-food
Blockchain technology offers several advantages for the agri-food industry:
- Traceability – Every detail in the life cycle of a product can be provided in an open blockchain, making the entire supply chain for a product traceable by anyone with a computer in just seconds compared to the hours, days and weeks it takes the CFIA to do the same today. Walmart and IBM are currently collaborating on two blockchain trials to verify the effectiveness of blockchain technology on U.S.-grown mangos and Chinese-produced pork.
- Full disclosure – With the possible exception of producers, food processors will be extremely reluctant to fully disclose every detail about the products they produce for a variety of reasons. Just as GFSI programs have evolved to accommodate different interests, I am confident that retailers, processors and producers can develop protocols that they will be comfortable using and that will still provide effective, full supply chain traceability.
- Payment – Although promoters of cryptocurrencies will tell you that it is a safe and efficient way to conduct business, many cryptocurrency providers and users have been hacked, and in some cases have lost millions.
- Streamlining the supply chain – Blockchain connects the seller directly to the buyer (P2P), thereby eliminating intermediaries which, in theory, should streamline the supply chain and reduce cost. I believe the impact of the blockchain will be limited in this case because economies-of-scale or volume buying will keep distributors competitive.
- Waste reduction – Walmart claims that blockchain technology will help the company better track expiration dates on products and thus reduce waste in its stores. I think a bigger win will be to reduce the amount of product sometimes needlessly destroyed in recalls.
Blockchain and cryptocurrency are technologies that are rapidly evolving. Oversight in many cases is limited, although some will argue this point. Proceed with extreme caution when applying blockchain and cryptocurrency technology to your business.
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