March 9, 2017

Blockchain, which is the technology fueling digital currencies such as Bitcoin, has made its way into the agriculture sector, and industry participants ranging from major corporations to startups are embracing it.

Blockchain gets avocados and pork chops from the farm to the table with greater speed and security than has been possible until now. While the nascent technology appears to present an opportunity for agriculture, as well as for other sectors of the economy, a comprehensive blockchain solution for ag seemingly remains years away.

A recent article in The New York Times spotlights Frank Yiannas, the vice president for food safety at Walmart, as evidence that the agriculture and food chains are ready to embrace blockchain technology. Walmart’s inspiration for a more secure food tracking system was born out of a series of salmonella outbreaks, the source of which often took the giant retailer weeks to identify.

Tech behemoth IBM came to the big-box retailer’s rescue with a pilot blockchain solution. The pair formed a partnership, and Walmart is now using IBM’s blockchain to track pork making its way from China’s farms to the local grocer, as well as Latin American produce to the United States.

“I became increasingly convinced that maybe we were onto the Holy Grail,” Yiannas told The New York Times, adding he is hopeful that a finished product will surface within a few years.

Financial Review points to Aussie farmer David Whillock, who delivered “23 metric tonnes [sic] of wheat” to an export business using the blockchain, which he said enabled “fast and secure payment for the grain.”

Technology & Players

Blockchain was named after an electronic bookkeeping system that according to the Times “chains together entries” that are not easily alterable afterward, which ensures a level of trust among independent participants. Blockchain allows large groups, such as farmers, manufacturers, and retailers, to access, share, and maintain a “secure and reliable record” of their dealings, according to the Times, with each transaction identified as a separate block (hence the blockchain).

Through the blockchain the relevant parties can track specific characteristics of the product, such as the location and quality of the asset, as well as the owner of the item at any given time. Some of the potential benefits for consumers include preventing unfair pricing, and providing greater transparency on the origin of a product. Blockchain technology also removes the need for costly paperwork tied to commodity price fluctuations and unpredictable payment transactions, all of which place the burden of risk on the farmer, as pointed out by Financial Review.

“Consumer demand for ‘clean’ food, including organic, is skyrocketing, but producers and manufacturers are often struggling to verify the accuracy of data from farm to table. Blockchain can help,” according to Emma Watson, co-founder and CEO of Full Profile, cited in AgFunder News.

Critics of IBM’s solution in particular point to a lack of transparency on the ledger platform, which separates the product from the “universal” and transparent ledger approach used for digital currency. This makes blockchain technology for industries such as ag reportedly more vulnerable to hacks.

Meanwhile, IBM, which has hundreds of employees working on blockchain technology exclusively, is not the only game in town. Microsoft and JPMorgan have reportedly teamed up to develop blockchain technology based on the digital currency dubbed, Ethereum. Meanwhile, Samsung has reportedly backed a blockchain startup dubbed, Blocko.

Other startups focused on blockchain technology are also emerging, including Filament, whose headquarters span Reno, Nevada, Denver, and San Francisco, and which is a product of the Techstars accelerator program. Filament, which raised $5 million in Series A funding in 2015, developed a blockchain solution dubbed TAP, which can be used for the purpose of sharing soil data from a particular field among farmers, for instance.

Mountain View, Calif.-based Skuchain has similarly developed a blockchain technology comprised of bar codes and RFID tags for the supply chain designed to prevent counterfeiting. Skuchain’s solution is reportedly already being applied to the agriculture industry.

On the venture capital side, funding into bitcoin startups climbed 5 percent last year to $550  million, though the total number of deals fell to 132 from 161 in 2015, according to CB Insights data cited in Bloomberg. Blockchain Capital LLC, which supports the use of bitcoin, in recent weeks unveiled plans to raise $50 million that will reportedly include a portion of the firm’s own digital tokens.

Problem Solver?

Blockchain has been dubbed a “problem solver” by economist Carlo R.W. De Meijer for food and agriculture, however, the technology remains dependent on “viable business models” and more “successful use cases” that the innovators, including the startups and industry leaders mentioned above, are persistently trying to solve.

-Gerelyn Terzo

Gerelyn is a regular contributor to GAI News. She has been writing about institutional investing and asset management for the majority of her career and has developed a focus on agriculture given the global scale of the industry’s relevance and importance.