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#AgBlockchain: values and fallacies

Marieke de Ruyter de Wildt

In 2017, The Fork – an Amsterdam-based company working on blockchain for global food chain development – developed, reviewed and commented on about 20 applications of the blockchain in agriculture. After briefly explaining what it essentially is, we will summarise its value for agriculture – which is different to what is often communicated – as well as its limitations, and how you can start experimenting with it.

Open or public, decentralised or centralised?

The blockchain is basically a dataset of transactions, a ledger. It is a combination of ‘a database’ with ‘the network’, and an advancement on ‘cloud computing’. There are at least four new characteristics to this database that jointly explain why there is a hype about the blockchain.

First, it is essentially open, and public. Anyone who is authorised can read and write to the database. Second, it is auto-synchronised. All copies of the database are exactly identical and are synchronised immediately and simultaneously. Third, it is immutable. It requires some time to realise what impact this characteristic can have on supply chains. It is permanent. Once information is entered, it can never, ever be deleted, changed or tampered with. For supply chains in general, but specifically for agriculture, this is of immense value. Fourth, it is distributed across the network. This is why these types of technology are increasingly being referred to as distributed ledger technology.

The fact that it is a distributed technology suggests it is part of our next industrial revolution. We live in a society in which most business models are decentralised, such as Uber, Airbnb and Facebook. Technologies such as the blockchain enable distributed business models. This is why it has tremendous disruptive potential.

There is an important footnote to mention about the open character: there are public and private blockchains. Knowing the difference is key. Bitcoin is an example of a public one and it is the most open ledger. Hyperledger is a private one. They do different things very well. So before assuming that everything is open and transparent to everybody on a blockchain, find out about the blockchain’s specifics and governance structure. Who has access to what? Find out whether it belongs on the right or the left side of the picture above. 

A final key point about the blockchain that everybody should know is that it is only a part of a set of technologies. The blockchain is nothing on its own. The blockchain exists with old-school databases like Excel sheets and ERP systems, with application programming interfaces that allow exchange between different systems, and most importantly, user interfaces or apps, or decentralised apps. The last three refer to the kinds of apps that you would find on your devices. Their functionality makes or breaks the impact of the underlying technologies as they make it possible for you and me to use technology properly.

Why the blockchain?

The blockchain indicates a new generation of technology. In fact, it is less about the blockchain and much more about decades of research and breakthroughs in security that have culminated in the next level of database technology. It entails a different approach to storing information. Whereas we previously could only transfer information over the internet, we can now safely transfer value from one user to another. This implies a completely different dimension of databases.

There are three technical reasons why you should start experimenting with the blockchain:

  1. The truth: The blockchain encrypts information into code. This encryption cannot be removed, altered or omitted. This is essentially what establishes the truth, and hence trust between parties. It is this trait that makes it so vital for agriculture.
  2. Ownership: In our experience the blockchain solves the data ownership problem, a key limitation to digitisation in agriculture. It gives data ownership back to users, as users have full ownership, control and transparency over their data. Data is replicated across several unrelated points, and no single point can act as gatekeeper and blur ownership issues. Users who store information on the blockchain retain access to it through encryption keys that they alone own, independent of the service or application that generated it. 
  3. Scalable track and trace: The blockchain is a distributed system. It is about rules with no ruler. Read that again. Rules with no ruler. There is no central party in control. Everybody is in control. The rules are embedded in the system itself, into the code. This makes the blockchain very robust and scalable. Track and trace was already very doable, but with a decentralized blockchain it is much more scalable and reliable.

There are also three business reasons why it is a matter of when you start, rather than if:

  1. Risk management: because everybody in the network has the same information at the same time, and because you have accurate information, rather than information in hindsight, risk management will record unseen improvements.
  2. Operational efficiency: only in part due to auto-synced information, efficiency gains have recorded a staggering 80% improvement (in finance, where implementation is most mature). Efficiency is also attributed to smart contracts. Smart contracts are pieces of code that automate if-then causalities.
  3. Integrity or sustainability: with more decentralised structures, information travels faster and becomes more accessible to more people – ideally everybody – and transparency increases. It becomes much more visible who does what for which remuneration. Ownership is better organised, and it is far more difficult to hijack a system for individual purposes.

Blockchain has one of the strongest, if not the strongest, value propositions in the supply chain and more so in agricultural supply chains. Overall, supply chains have low levels of trust. The more complex they are, the less trust there is between parties, and the more expensive the transactions are. Agricultural supply chains are one of the most complex supply chain domains and suffer from very low levels of trust. Through the above mentioned reasons, the blockchain has the potential to impact this drastically in the next five years.

Why not the blockchain?

Of course, there are many concerns and limits regarding this new technology. The blockchain is still in its infancy. It is essentially what the internet was 20 years ago, meaning there is more we do not know than we do know. There are many misconceptions, ambiguity in definitions, mixing up of concepts and certainly many scams. For now, we can offer three disclaimers:

  1. Do not implement the blockchain at scale. You will have to re-do and transport to other, newer, better technologies.
  2. Do not use the blockchain for tracking and tracing only. We have better, more efficient solutions for that.
  3. Do not start if you cannot combine proven blockchain experience with business savvy. Do not be misled by so-called experts, there are many scammers out there. Certainly, do not let technology dominate or blind common business sense.

How to start with blockchain

There are three tastes currently. Either start with an existing product like steemit; a blockchain-driven social media platform. Buy and tweak a ready-made solution such as AgUnity, a mobile app that records and transacts incorruptible truth using blockchain technology. Or start with the technology from scratch. Choose your first experiment wisely though. We see four critical criteria here: complexity, high costs, information asymmetry and trust issues.

Copyright © 2016, CTA. Technical Centre for Rural and Agricultural Cooperation

CTA is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.