By now, we have all heard of Cryptocurrency. However, the real power of this emerging currency lies in the underlying Blockchain technology. This has the potential to revolutionise the agriculture industry, mitigating risk and supply chain issues in a number of ways.
What is blockchain?
The central concept of Blockchain is that it is a distributed database or ledger, replicated across a network of computers, providing both transparency and security. Blockchain's other key element is that it's cryptographically validated, linking one set (or "block") of transactions to the other. This means once a transaction has been completed, it's impossible for that to be changed because all computers on the network have exactly the same copy.
The other key concept is known as a Smart Contract, which in simple terms is a way to digitally create, verify, and execute the negotiation and performance of a contract between parties, with the transaction recorded on the Blockchain.
How does Blockchain apply to Agriculture?
Industries where there are intermediaries along a supply chain are prime candidates for the application of Blockchain and Smart Contract technologies. Historically, intermediaries have been required to manage the multiple steps involved in the Agricultural supply chain because there has been no effective mechanism for parties at each end to trade effectively.
The combination of Blockchain and Smart Contracts creates new markets where buyers can purchase directly from producers, because the technology provides market transparency and creates trust through transactions executed via Smart Contracts. This mitigates the risks for both parties, reducing the need for a third party.
Integration of the logistical supply chain, not only the financial one, is also possible. The use of Internet Connected Sensors can provide the buyer with visibility into their shipment logistics. Tracking a range of information such as location, shipping providers and temperature ensures the ability to monitor quality, and to directly link issues to a point or supplier in the logistical supply chain.
The data collected by sensors will ensure that the conditions in the Smart Contract, such as delivery times and temperature ranges, are met before automatically releasing funds to the supplier when the Smart Contract conditions are met.
When will blockchain be widespread?
We are still a few years from these concepts achieving mass market adoption, however trials are underway and many start-ups have successfully raised capital to build the required technologies. Australian agriculture has been at the forefront of this technological adoption. BlockGrain is just one example of a program that has improved supply chain management in grain production, and T-Provenance has been used by mango producers to monitor temperature and location data throughout the Mango logistics supply chain.
It's not just Australia that will benefit from Blockchain. In developing countries, this type of technology will stop people from manipulating the system, meaning consumers can check whether their food is genuinely ethically sourced or not.
For more information on the potential applications of Blockchain, and how you can prepare your agri-business for technological disruption, contact BDO today.