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“The valuation of the food supply chain and the agricultural blockchain in 2018 is $60.8 million, and by 2023 it is expected to reach $429.7 million.”
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Blockchain technology is still in its infancy compared to traditional global financial systems. However, if we put the issue of years of development aside, then the function of the blockchain can be applied not only in industrial and commercial fields, but also to bring disruptive solutions to all aspects of our daily lives.
Among the industries in which the blockchain can be subverted, little is known about agriculture. Agriculture currently accounts for 6.4% of the global economy, employing 40% of the world's total workforce, and its global GDP is about $5 trillion. If you have the opportunity to visit the farm, you will find that farmers are faced with complex ecosystems, seasonal financing structures, very cautious schedules and many uncertainties.
Now, imagine the journey that our food has gone through after leaving the farm – through multiple intermediates and multi-handed operations. So who will guarantee the quality? What is the credibility of the quality assurance process?
If you can check the quality of food before eating? The use of blockchains makes it possible to intelligently enforce contracts and transparently track information. Blockchain agriculture can make the process of growing and supplying food easier, providing a unidirectional and reliable source of information for all parties involved.
Current pain points and agricultural blockchain
In the agricultural sector, automated smart contracts and automatic payments will become the “game rules” changer. The role of smart contracts, especially in agricultural insurance, green bonds and traceability, will be prominent.
According to ReportLinker, the 2018 food supply chain and agricultural blockchain are valued at $60.8 million and are expected to reach $429.7 million by 2023. The Dutch Ministry of Agriculture, Nature and Food Quality funded the first research project “Blockchain” to explore the blockchain implications of agri-food. Pilot studies have shown that blockchain technology can track food from farm to grocery store in just a few seconds.
Blockchain also helps maintain control over a wide range of commodities and reduces cases such as “illegal logging” or “transport fraud”. According to the United Nations, fraud in the agricultural and food industry has caused about $40 billion in damage to the global economy each year.
"Agricultural + blockchain" feasible solution
1. Purchasing tracking
The challenge for the entire agricultural sector is to track and pay for food distribution. The current process relies on third parties to coordinate the delivery of goods – the seller usually has an agent to ensure the safe delivery of the goods, and the buyer has an agent to recommend payment and review. Delivery. The involvement of multiple agents drives up the cost and time costs of the entire process. Using a blockchain, you can simplify the entire process into a single distributed ledger.
2. Crop and food production
With intelligent agriculture, IoT sensors can capture important information such as soil temperature, water level, fertilizer and more, and send it to the blockchain. Based on the data stored in the blockchain, smart contracts can trigger and perform specific actions at precise points in time based on precise conditions, which will help improve the quality of the farming process and crops.
3. Weather crisis control
Farmers face unpredictable weather conditions throughout the year, and monitoring and predicting these factors is critical to improving crop survival. Crops are hard to bear due to excessive rainfall. Consumers never know when this crop will be subjected to bad weather and why the market is facing high price increases. Relevant members can track weather conditions through blockchain solutions, and farmers can quickly request and receive insurance claims through smart contracts.
4. Management of agricultural finance
The lack of transparency in credit records and agreements is a major issue for small farmers and inclusive finance. Today, financial services not only allow small farmers to invest in agriculture, but also help them break through the constraints of liquidity. Therefore, it becomes challenging for buyers to pay farmers, which limits small farmers to sell crops at relatively low prices. With the blockchain, the agricultural financing process becomes more transparent and fair, while sharing control is also possible.
In the area of food quality inspection, the agricultural industry needs to do a lot of work to maintain and build consumer trust. Blockchain-based agricultural solutions have the ability to bring transparency to the system and bring broad prospects to agribusiness.
5. Agricultural insurance
The scope of implementation of agricultural insurance has been extensive in the Asia-Pacific region, from major public sector programs in India and the Philippines to public-private partnerships in China and South Korea, to informal private mutual assistance and communities in Australia and New Zealand and non-Bangladesh, India and Nepal. Crop and livestock initiatives, etc.
Low-cost agricultural insurance schemes are increasingly seen as a mechanism to provide social protection to an increasing number of people affected by floods or droughts and to help mitigate the impact of such incidents.
However, despite multiple benefits, the rate of adoption of insurance products by the rural poor is still relatively low. The existing mechanisms for verifying claims and realizing expenditures are still time consuming, which is one reason why small farmers do not choose index-based insurance as their preferred strategy for risk mitigation.
Smart contract-based index insurance automates and greatly simplifies the process, making it easy to pay instantly to the insured in the event of a bad weather event. Automated data feeds provide continuous and reliable hyperlocal data for contracts, eliminating the need for on-site claims assessments after an incident.
6. Land registration
A blockchain based implementation can provide a reliable land record ledger. Especially for the rural poor, if they are effectively associated with a sovereign ID/digital ID, the protection of land records will not be a problem even during natural disasters or wars. India 's United Nations Development Programme (UNDP) is working with partners to make land registration in India more reliable, and the project will capture and permanently record every transaction in the entire property sales process.
This means near-real-time traceability and transparency can be achieved with regard to attribute states. The Swedish government’s land ownership agency, Lantmäteriet, has tried land registration and property transactions on the blockchain. They believe that this provides a safe and reliable way to obtain digital originals and can reduce the government's hundreds of millions of dollars in spending. The Republic of Georgia is trying to use the Bitcoin network to validate government transactions related to real estate.
7. Improve the transparency of the agricultural supply chain
Blockchain can help provide a record of tamper-proof from the source of the product to the retail store. This allows consumers to have more trust in the products they buy, which is an opportunity to reward producers who use good agricultural practices to grow their products, which will ultimately lead to sustainable farming practices and responsible consumption.
Italian pasta and pesto maker Barilla has partnered with IBM to increase transparency and traceability during its pestle production cycle. From on-site planting, processing and harvesting to transportation, storage, quality control to production, to customers, all details are tracked and delivered on the blockchain system, and customers can scan the QR code of the pesto verification.
8. Fishing industry
Blockchains can be used to track and block illegal, unreported and unregulated fishing, which poses the greatest threat to marine ecosystems. New Zealand ’s World Wildlife Fund (WWF) is conducting a pilot project to eliminate illegal fishing and human rights violations in the Pacific Island tuna industry. Working with other organizations to track fish from ships to supermarkets, the blockchain supply chain traceability program uses digital technology to strengthen supply chain management in the fresh and frozen tuna industry in the Western and Central Pacific regions.
Hangzhou Yishu Blockchain Technology Co., Ltd. is a company established by Sichuan Beichuan Yi Autonomous County and Beijing Xintai Group of China, aiming to use the blockchain for forestry economic development and rural poverty alleviation. The Spanish Ministry of Agriculture, Fisheries and Food also plans to use blockchain technology to develop the forestry industry. The ChainWood Operations Group aims to improve the traceability and efficiency of Spanish wood supply by implementing blockchain technology in industry logistics.
10. "Green Bonds"
The original intention of creating green bonds was to fund projects that had a positive impact on the environment and or the climate. As the value of bonds increases, it is necessary to establish effective tracking, traceability and verification mechanisms to help increase investor trust in climate intelligence initiatives. In addition, carbon credits and their transactions can also benefit from the trust provided by the blockchain.
IBM worked with Veridium to mark carbon credits, which were verified by third parties based on international standards. They are then used to motivate companies to be more environmentally friendly and offset their carbon footprint.
Contingent risk of “agriculture + blockchain”
As an immature technology, blockchain adoption will pose certain risks, it is important to understand these risks and mitigate them as much as possible before deployment. A good understanding of risk will help determine whether it is more appropriate to use decentralized ledger technology (DLT) or a centralized database, and to further select the appropriate DLT for a given scenario, because the risk is dependent on the type of blockchain being deployed. Different or different, that is, a private blockchain or a public blockchain.
1. Energy consumption may be high
The method of building consensus to enter new data blocks between participating nodes is a core feature of the blockchain. There are several possible ways to reach a consensus, each with its own advantages and disadvantages. Workload Proof (PoW) is a method used by Bitcoin and Ethereum (the most famous blockchain implementation), which works on the principle of “hard to create, easy to verify”, which means that nodes need a lot of energy to Get an incentive token. For large chains like Bitcoin, the data size exceeds 100 GB, and power demand exceeds Ireland. While this is true for the PoW approach, other alternatives (eg, Proof of Equity (PoS), Byzantine Fault Tolerance and Trusted Equity Proof) require less energy.
2. Policy and regulatory risks
The policy and regulatory framework surrounding the blockchain is still in its infancy and therefore carries a high level of risk. Fluctuations in bitcoin prices and reports of hacking of cryptocurrencies have led to increased regulation in many countries and have generated regulatory interest. These regulations range from the complete ban on holding cryptocurrencies (such as Bangladesh ), prohibiting or stipulated cryptocurrency transactions ( China, Saudi Arabia ) to prohibiting the holding of initial tokens (ICO). Many blockchain projects, especially those involving currency or cross-border transactions, are subject to KYC / AML , so it is important to understand the national policy framework before researching the project.
3. Trading speed
Trading speed is an important factor because some public blockchains are not trading at a high speed. On the Bitcoin blockchain, a new block appears every ten minutes on average, but there is no guarantee; the block time for each blockchain is different. For scalability, it is important to understand the speed (TPS) requirements of the application before choosing a solution. In theory, the Visa network can reach about 50,000 TPS, which is much more than what is provided by most of today's mature blockchains.
“Agriculture + Blockchain” case
FARMS: Financial and Agricultural Risk Management for Small Farmers
FARMS provides formal financial risk management with low barriers and increases farmers' financial knowledge. Studies have shown that farmers who do not have agricultural insurance have to spend four more years to recover from the time of poor harvest compared to insured farmers. At the same time, as mentioned earlier, insurance spending is very low.
The concept of FARMS is achieved through a blockchain-based virtual currency platform that integrates remote sensing (satellite) data and mobile money solutions. The platform ensures transparent "secured use" of secure transactions and funds, automatic payments and information records.
Farmers save money by buying virtual currency called “ drought coins ” or “ drought vouchers ”, which are kept in their personal mobile wallet accounts. When farmers want to withdraw funds, they will exchange their drought coins/vouchers. The value of these virtual currencies mimics the local legal currency. For example, 5000 Kenyan shillings represent 5,000 coins.
All transactions must be communicated to farmers, and participants can view their balances at any time via a common SMS. The actual funds flow into a trusted bank account (risk pool), and all transactions are real-time through complete system integration.
AgriDigital: blockchain for agricultural supply chains
AgriDigital provides a cloud-based merchandise management solution for the global food industry. It connects grain farmers, buyers, website operators and financial practitioners through a single platform, enabling them to sign, deliver and pay in a secure, real-time manner.
Building blocks: Cash-based transfers using blockchains
The World Food Program (WFP) is testing blockchain technology as part of its “Building blocks” experiment to make cash transfers more efficient, secure and transparent. This can save millions of dollars. In particular, WFP is using the blockchain to more effectively provide food assistance to approximately 100,000 Syrian refugees in Jordan. The goal is to benefit all 500,000 refugees living in Jordanian refugee camps and host communities in 2018.
AgUnity: A blockchain dedicated to providing broader benefits
AgUnity has developed a solution that provides the world's poorest farmers with access to inclusive finance. AgUnity is a simple mobile service that helps small farmers plan, trade and track daily transactions. This is a way for farmers to collaborate, preserve, save money, and easily purchase products and services. The application ensures that everyone gets paid by creating a secure record, as small farmers give their crops to a cooperative or rent equipment from other farmers.
The world's largest publicly accessible, farm-to-table food tracking solution. Serving more than 6,000 business customers every day, handling 400,000 business transactions. TE-FOOD provides solutions for object recognition and product serialization activities, capturing data through interfaces or B2B mobile applications (or both), storing data on blockchains, and data processing follows custom protocols and tools. Presenting the source and production process of the food to the consumer.
Farm-to-table traceability enables supply chain companies to submit their event data to TE-FOOD, register them on the blockchain, and link to the identification code (ID) to maintain data integrity. The blockchain ledger contains proof of information entered by different supply chain participants. The transparent, unmodifiable and unmanageable features of blockchain technology ensure that consumer data is not forged by food companies.
Technology giant IBM has teamed up with Nigerian agricultural technology startup Hello Tractor to launch a new blockchain agricultural application that is currently being piloted in Kenya. Hello Tractor is an agricultural technology company that connects tractor owners with small farmers who need tractor services through IoT technology. Their technology creates a win-win situation for tractor owners and farmers, as tractor owners are able to operate their tractor rental business more profitably, while farmers have access to fair and timely tractor services.
The company has begun testing a mobile phone solution based on blockchain technology to provide market prices for small farmers and transparency for Kenyan intermediaries. This will provide farmers and suppliers with many benefits, including greater efficiency and traceability, but these are currently lacking and causing serious problems in the current ecosystem. And this will greatly contribute to the safety of food safety.
BanQu: Blockchain based on Ethereum
Farmers are allowed to use their mobile phones to record their personal information and transaction history, and to verify it through a network of friends, family, agricultural partners, etc. This is a pilot project in the Democratic Republic of the Congo. These digital identities can be used to apply for credit and open the door to financial services to the industry that lacks banking services.
Kenyan agricultural technology startup Shamba Records has built a blockchain-based platform that uses artificial intelligence (AI) and big data to collect farmers' harvest records, process payments and issue credit. The platform provides users with features such as data collection and mapping, payment aggregation, smart contracts and bulk messaging to increase farm efficiency and gather information to enable them to access financial services.
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