Blockchain technology opens efficiencies and transparency to agriculture, making blockchain in Agriculture solutions available to transform supply chains improve traceability and facilitate fair transactions.
In this article, we cover the role of blockchain technology as transformative in agriculture focusing on supply chain transparency, traceability, and efficiency improvement.
We briefly discussed how the blockchain system operates with a practical coffee farming example.
Table of Contents
Supply Chain Transparency
Blockchain is a secure and transparent record that tells the product’s story from the farm to the consumer.
Recording every supply chain step from harvest, transportation, and storage allows consumers and businesses to learn where their food comes from and increases trust and accountability.
Each part of the chain is documented and verifiable so that it’s impossible for issues, such as fraud, counterfeit products, and food safety concerns.
Traceability and Food Safety
Blockchain helps in tracing affected batches quickly in the case of affected products and provides details related to the problem.
Example: Let’s say that a certain lot of produce has contamination issues that need to be addressed — the blockchain can tell you where that produce started and ended up so that you minimize waste from spoilage and can keep from causing a health risk.
Consumers have high transparency to data on origin and food handling so that consumers can be better informed on how their food is done and food safety as a function.
Efficient Transactions with Smart Contracts
Crypto and blockchain ecosystems require the development of Smart Contracts that allow for powerful tradable and easily composable smart contracts and related processes.
These “smart contracts” are self-executing, self-enacting contracts that will execute if and only if certain conditions are met. There are also practical examples of smart contracts in agriculture, where smart contracts can assure that payment to farmers comes in time after products have been delivered and are checked.
It allows smaller farmers, who can find it difficult within traditional finance systems for example to achieve more predictable income and replace the need for intermediaries.
Reducing Fraud and Improving Trust
Inauthentic seeds, pesticides, and fertilizers can be a big problem in agriculture. Using blockchain to confirm the authenticity of the agricultural products that are being purchased by farmers ensures they are buying goods of the right quality.
This technology blocks so-called ‘double spending’ in markets (e.g. selling the same bunch of produce to several buyers) and thus is an anti-fraud technology too.
Carbon Credits and Sustainability
Recording sustainable farming practices opens the door for farmers to earn carbon credits if they do so based on certain environmental standards, something that is made possible thanks to blockchain technology.
It could also lure in more eco-conscious consumers and maybe give them some incentive to farm a little greener as well—monetizing their sustainable action.
Access to Financing
Small farmers are often limited to traditional financing because they lack a credit history. Small-scale farmers can be tracked, their production, transactions, and practice can be verified by blockchain, and they can get a digital identity that lenders can trust, making them lucrative for loans.
Current Challenges Adoption
- Costs: For small or medium-sized farms, blockchain can be too costly and inconvenient to implement.
- Digital Literacy: Farmers need training to understand blockchain technology and how to use it well for digital literacy.
- Interoperability: Integrating blockchain within existing agriculture software and agriculture practices is a difficult thing to do.
Blockchain system in agriculture? Flows and working
- Decentralized Ledger: In blockchain, multiple copies of a record are stored on different nodes (computers) in a network, which is otherwise known as a distributed ledger system. This setup also keeps it from having single points of failure and makes it generally more secure.
- Data Input: The blockchain can be logged through every step in the agricultural process (production to sale). It covers information including planting dates, harvest, quantity of harvest, quality data, transportation details, storage conditions as well as sales records.
Verification with Consensus Mechanism
- Data Validation: Before adding any new data to the blockchain, the network participants must verify the new data using a consensus mechanism. These participants in agriculture could be farmers, distributors, retailers, or regulators.
- Immutable Records: The data is validated, and then it’s entered into the blockchain, and can never be changed or deleted again. That makes the entire supply chain etched in stone, permanently and uneasily.
Traceability and Transparency
- Tracking Food from Farm to Fork: With each transaction (the sale or transfer of goods), there will be a clear chain of custody. This allows track and trace of products from their source to the last one consumer.
- Transparency for Stakeholders: Using blockchain, anyone with permission can see where a product was grown, when it was grown under what conditions, and how long it took to get from the farm to the retail shelf.
Automation Using Smart Contracts
- Automated Agreements: One of the things that blockchain enables is smart contracts, or self-executing contracts, in which the terms are coded into the blockchain itself. Smart contracts can automatically pay for things when they happen (like crop delivery confirmation).
- Efficiency and Fairness: By reducing the need for intermediaries, smart contracts also speed up transactions and guarantee timely and fair payment to farmers, most importantly smallholders who need income quickly.
Quality and Safety Control
- Sensor data (temperature, humidity, etc.) can be stored in real-time and products are guaranteed to be kept in the optimum condition. An alert mechanism can also be set which alarms when conditions fall beyond the pre-defined range.
- Recall Efficiency: If there’s a contamination issue, blockchain can quickly trace which lots are involved and accelerate the target, and an efficient recall process.
Enhanced Supply Chain Financing
- Credibility and Digital Identity: On the blockchain, small-scale farmers can record their production, transaction history, and certifications and build up a digital credit history. If they can get a history of that, they may get loans, insurance, or other sorts of financial services.
- Tokenization of Assets: Farmers can tokenize crops or livestock (convert them to digital assets on the blockchain) so farmers can use them as collateral for loans or sell portions of produce in advance.
Proof of Sustainability
- Certification Tracking: The right to list sustainable practices, organic certifications, carbon credits, and more on the blockchain means that they’re credible and traceable.
- Incentives for Green Practices: Sustainable agriculture practices by farmers can be monetized by them through carbon credits, which can be traded in an open web-based marketplace using blockchain.
Example Use Case in Agriculture: A Coffee Supply Chain
- Production: On the blockchain, coffee farmers record planting, growing conditions, and harvesting data.
- Processing: When they arrive at a processing facility the data is logged already (time, transport conditions).
- Certification: The coffee includes information guaranteed to be authentic if it is certified organic or fair trade — this information is verified and added to the blockchain.
- Distribution: Each movement of the beans, shipped from roasters and retailers and all other fulfillment activities, is logged.
- Consumer Access: To accompany the sale, a consumer can scan a QR code to verify the quality, origin, and sustainability of their coffee.