This Blog Post is a follow-up to the successful GODAN/CTA Webinar, held in January 2019 on Unlocking the Potential of Blockchain for Agriculture. Watch the full Webinar HERE.
Six Ways Blockchain and Open Data Aid Agricultural Development
Blockchain is an emerging digital technology with the potential to transform global agricultural sectors through a wide-ranging and growing list of applications. A number of benefits have already been observed in the technology’s application to various agricultural markets, including safeguarding against data corruption, evenly distributing governance, and reducing operating costs.
In the examples we have analysed so far there are six applications of blockchain that lend themselves to agriculture and supporting value chains.
Tracking and Tracing
Blockchain is a data structure consisting of blocks of data that are linked together, just like a chain. Before a block of data can be added to the chain, it needs to be verified by one of the nodes in the system. Once the data block has been verified and added to the chain, it cannot be altered or tampered with. This allows systems or processes utilising blockchain to provide an accurate history – or chain – of uncorrupted data. Clear examples of this are found in food value chains, where an organisation wants to trace a particular product (the ‘data block’ in this instance) back through its transportation, storage and processing, and to its original source. Tracking the movement of a product through the value chain is not new, but it is difficult for consumers or stakeholders along the way to verify the product’s source, prior location or any processing the product has undergone. Blockchain technology builds on existing tracking systems, but can provide more certainty about the accuracy and integrity of the information accompanying goods.
Preventing tampering with data is particularly useful for certification processes in value chains which have proven to be inconsistent. With blockchain technology a ‘digital twin’ is accompanied with proofs that move through the blockchain tracking the object digitally, while the object physically moves through the value chain. The producer can choose how the consumer can check the certification of a product e.g. a combination of an app and a QR code. WWF is involved in a pilot for a transparent and traceable chain for tuna in the Pacific where they allow for buyers and consumers in the chain to make well-informed decisions based on data that is verifiable, from ‘bait to plate’. From this pilot, producers benefit from greater control of their product and better understanding of their processes. Buyers gain from the increased security and confidence of buying from producers who can confirm the legality, sustainability and ethical nature of the product. They are better informed and can exclude products below these standards (hear more in the Webinar).
Fairfood traces agricultural value chains and aims to tackle issues that farmers face. They want to ensure fair prices to farmers where consumers are provided with tools to make better informed choices with regards to their groceries. They see blockchain as a way to engage all stakeholders in the value chain (webinar timestamp).
In some developing countries, proving who you are and what you own might be a challenging endeavour. For example, in India matters related to land and property make up about two-thirds of all civil cases in the country. Countries all over the world – including India, Honduras, Ghana, and Rwanda – are looking into blockchain-based land ownership title systems. Information about the title is stored in immutable data registries, which can be validated (asserting that person A is indeed the owner of the land) by a distributed network for example. Land LayBy is a pioneering organisation for land acquisition solutions. In our interview they explain their solution of recording land ownership using blockchain technology to make land more transparent and affordable. We talk more about Land LayBy in our webinar.
Immutability of data in the chain was the first feature of blockchains. But a second layer was added; for taking an action based on an event recorded in the blockchain. A smart contract is an automated, self-executing agreement between parties. Through these contracts it is possible to create requirements a small program executes. With a smart contract, parties would only execute a transaction when all conditions are met. An example is the automatic transfer of an insurance payment made as a result of rainfall conditions measured from satellite imagery analysis by a software algorithm. Large partnerships such as Maersk with IBM are looking at the added value of blockchain of logistics. For agriculture these examples are still scarce. However, Binkabi offers a marketplace for commodities where they link SMEs with warehouses, banks and buyers. Through the use of smart contracts, SMEs are paid out faster. They can opt for a sell of their produce or storage of the commodity in a warehouse. The warehouse receipt subsequently acts as a collateral, enabling them to obtain a bank loan, we will shortly publish a blogpost about Binkabi. It does not directly improve logistics itself but provides for more efficient chains. Emergency and disaster areas might also benefit from improved logistics. An example is deliverance of emergency food-packages to refugee camps, a possible link between agricultural development and humanitarian help. The World Food Program goes as far as stating blockchain will help step up the fight against hunger.
Blockchain technology enables new financial instruments, decentralised finance and lending, and conditional forms of payment. Remittances (the transfer of money by a migrant to his or her country of origin) for example, are considered an important investment vehicle for achieving the sustainable development goals. It is suggested that blockchain can have major impact in the process of money transfers, by creating, for example, a direct transfer without the need of conventional intermediary parties such as money transfer agencies, or banks. A monetary transaction using blockchain can typically be executed within 10 minutes. Furthermore, a system without intermediary parties allows anyone with an internet connection to engage in banking activities. Some platforms such as EthicHub enable peer-to-peer lending. Anyone looking for a project to invest in, can use this platform to send money towards unbanked or marginalised smallholders. The investors are able to find projects with low risk, while farmers gain access to finance (learn more at this webinar: timestamp). SunExchange does the same where investors can choose to invest in microgrids in rural areas in Africa for example against interest (both examples will be featured in our blogpost series).
Tokenisation can also unlock capital for farmers. Agri-wallet is a digital wallet, a mobile finance tool where Kenyan farmers receive a business account that they can use to save, buy and earn. Farmers receive the app for free and when they sell their produce thei can opt to be paid out in M-Pesa (mobile payment system) or partly in tokens for their wallet. These tokens are then earmarked for purchasing input supplies from merchants that have been vetted by the founders of Agri-Wallet. When farmers choose to save tokens, banks can consider this collateral so that farmers gain access to finance. Banks and farmers are ensured that farmers have access to verified inputs which minimises their risks.
More efficient cooperation
Many organisations working with blockchain technology have mentioned that working on the topic it in itself enhances cooperation among stakeholders along the value chain. But applications of blockchain can also facilitate cooperation where current distrust hampers development. AgUnity has used the charcteristic of immutability for this purpose. They noticed that cooperatives play an important role in allowing for better market prices, access to equipment and inputs, and benefitting form economies of scale. However a majority of these cooperatives rely on paper-based record keeping. AgUnity has developed a ‘digital handshake’; a blockchain bases smartphone app which lets farmers schedule activities such as sharing equipment, managing income, and recording transactions. Read more in our interview, or watch the webinar (timestamp).
Within blockchain technology several choices can be made with regards to its application. For example whether to use a token, to build on a permissioned versus a permissionless ledger, to consider the consensus protocol, to involve all stakeholders or to start building fast and small etc.. From the interviews we learn initiatives do consider the characteristics of blockchain itself in its application. Initiatives looking to include or empower local communities are more often than not looking for decentralised blockchains. It supports the concept of democratising existing frameworks and seems more likely to benefit smallholders in the long run. Some initiatives are worried about the current energy use, scalability or privacy of existing blockchains, this also informs their decisions for technologies to work with. The objectivity and accuracy of data that is used to inform the application remains vital, therefore management of data and information should be in order before starting with a blockchain application.
About the Authors: This Article was co-authored by Chris Addison and Jaclyn Bolt.
Chris Addison is Senior Programme Coordinator for Data4Ag at CTA. The Data for Agriculture (Data4Ag) project focuses on data use to benefit smallholder farmers. Chris has worked in the ICT and knowledge management (KM) for development sector for the last 18 years and as director of the nonprofit One World Europe. He contributed to the OpenAire Open Data report as joint author of the Agriculture chapter. Whilst at IFPRI, he commissioned the conversion of the Global Hunger Index data to linked open data and is currently working on a project to publish the CTA archive as a linked open dataset.
Jaclyn Bolt is a Business Innovator at Wageningen University & Research and has broad experience in business development from a governmental and private sector perspective. Her work is centered on the development and implementation of (innovative) sustainable business models and financial mechanisms. She is based at Wageningen UR where she is engaged in national and international settings and has worked in projects in the Caribbean, South America, Africa and South Asia. In the Netherlands, she organises workshops to help organisations in the development of business models for ecological impact.
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