The impact of Blockchain in the food industry.
How will Blockchain impact the food industry? We have asked it to Jacob Boersma, a Blockchain expert working at Deloitte in the Netherlands
The book Blockchain, blueprint for a new economy by Melanie Swan starts with a powerful image - a diagram showing how, since the 1970s, every new decade has brought about a new computing paradigms which disrupted the previous market models and ultimately changed our everyday life in a dramatic way.
Melanie Swan 2015 Blockchain - Blueprint For A New Economy
The title of this issue of Method Pliant is “Managing food through design”. Looking at Swan’s diagram we can see how each and all of these three fields - food, management, and design - have been influenced by the emergence of a new paradigms. Now, how will Blockchain write the next chapter in this disruption story? I have asked Jacob Boersma, a blockchain expert working at Deloitte in the Netherlands, to answer some questions on the topic, trying to grasp a glimpse of what the future will look like.
You are a Blockchain expert working at Deloitte. What are you currently investigating from your position?
For the past years, we have been very active in creating prototype Blockchain applications with clients, mostly in the financial services industry.
The next step, that we already started since last year, is to go from prototype to actual production systems. We are seeing the first steps in highly information driven industries such as insurance and the public sector. But we are also working with our supply chain team to leverage the benefits of Blockchain technology there.
How can the Blockchain impact or even revolutionise the food industry?
In the agriculture business there are several use cases that can be interesting to implement with a Blockchain. Most straightforward would be the registration of farmland on the Blockchain. Several projects to create a Blockchain land registry are already underway, such as in Sweden. With many different parties involved and a demand for transparency, traceability of food in the supply chain is also an obvious choice. This will make it easier for consumers to track where their food comes from, and also improve food safety while reducing the potential for frauds.
But using the decentralised nature of the Blockchain could eventually disrupt the entire industry, making it possible to connect consumers with producers directly, for example by allowing for much easier crowd-funding and micro-financing initiatives. In this way the Blockchain infrastructure could make smaller scale farmers more competitive, providing the administrative infrastructure to support them and connect them to the market and their supply chain.
Do you think in the next few years there will be more space for small vendors in the food industry?
The first businesses to implement Blockchain technology in the food chain will likely be the larger organisations, that have sufficient research and development capacity and will benefit initially from the improved efficiency offered. A Blockchain to empower smaller, local vendors will probably take a bit longer to take off, because it will require more parties to join together and there may not be a directly obvious benefit at the start. However, all it takes is one really good idea by a savvy start-up to get the ball rolling, as we’ve seen with disruptor like AirBnB and Uber. In either case the technology of Blockchain itself will need to improve to handle much higher volumes of transactions. Right now it is usable for tracking high-value assets (such as diamonds, art, cars, bonds). If we want to track very large numbers of lower value transactions (as is the case in the food supply chain), the technology needs to be made more scalable. The solutions for this are on the horizon but need to be rolled out in the coming years.
How do you think that Blockchain will change the way we shop at the supermarket next door?
If food producers adopt traceability of their products via the Blockchain, it will become much easier at the supermarket for consumers to validate the provenance of their purchases. For certifications such as ‘organic’ or ‘fair-trade’ we will no longer need to trust certifying bodies but will be able to track the authenticity of such claims via our own interface with the Blockchain.
Can you give us a successful example of a pilot project or case study involving Blockchain and food?
FarmShare is a project to enable community supported agriculture, where consumers are rewarded with tokens on a Blockchain to support local farms. This is currently still in an experimental phase but the idea has a lot of potential. On the other end of the spectrum, retail giant Walmart has been experimenting since last year with traceability of foodstuffs in their own supply chain using Blockchain technology. The goal for Walmart is specifically aimed at improving the efficiency of their supply chain, reducing spoilage, making potential recalls of food faster and easier and potentially preventing them.
Do you see any relationship between Blockchain and circular economy?
Blockchain technology, with its verifiable registration of ownership, can certainly help in supporting a circular economy. Examples can be seen in real estate, where the materials and parts used in buildings can be registered, making it easier to assess their re-usability at the moment the building reaches the end of its economic life cycle. The same principles could be extended to other areas of the circular economy. For Blockchain technology to truly become a supporting infrastructure for sustainability, the technology needs to improve however. Current public Blockchains (such as the Bitcoin network) use very large amounts of computing power and thus are quite wasteful of energy. That doesn’t really match with a goal of improving sustainability.
At a more general level, do you think these changes will encourage globalisation or will we see an empowerment of local businesses? What kind of social repercussion can you envision?
The distributed and open source nature of Blockchain makes it possible to easily use it in grass-roots initiatives. The fact that the technology works natively on the Internet means that such initiatives need not be restricted to the local area but can easily go cross-border. This makes it possible for the Blockchain to empower ‘glocal’ initiatives, where the reach can easily become global even while the participants are small and local players. This of course is easier in cases where the entire supply chain is digital (such as when selling music files or computer code). For physical good such as food, the logistics required could make international commerce more difficult. The transparency offered by the Blockchain will make much more new business models possible that we can currently imagine.
Can Blockchain enable entrepreneurs in poor areas of the world? How?
Blockchain technology is already enabling entrepreneurs in un-banked areas of the world, because it allows them to receive digital payments in the form of Bitcoins despite not having access to a banking infrastructure. Besides the financial services possibilities of Blockchains (again, crowd-funding and micro-financing come to mind), other supporting services could be created for entrepreneurs. These include Blockchain based peer-to-peer insurance but also regulatory and public sector initiatives such as Blockchain based land registry, company registry and tax registry. Especially in countries where these registries are currently non-existent or plagued by corruption, an open source Blockchain-based solution could create trustworthy records at a fraction of the normal cost. Implementing this in countries with limited technical (internet) infrastructure will not be easy of course, and will require the next generation of Blockchain technology to become much more user friendly. But we are already seeing some great ideas being brought to fruition in these areas.
When one reads about Blockchain the word most used to describe its most important asset is “trust”. But how this works exactly?
The defining factor of a Blockchain transaction network is actually that it works without trust, or ‘trustless’. The computers in the network have no concept of trust, they rely on the mathematics of the Blockchain protocol to verify the truth of the transactions. Thus, Blockchains are able to take processes that currently require a lot of trust between humans and organisations and automate them, reducing the need for trusted institutions. But this does not mean that trust is taken completely out of the picture. There will still be humans required to verify the initial registration of a piece of land, or a quantity of food, or the identity of a farmer, on the Blockchain. And because the Blockchain is able to automate the tedious, time-consuming and fraud-prone parts of the administration and supply chain process, there is more time and money available for the human centric parts of the industry. In that sense, the Blockchain most certainly has the ability to improve life for large numbers of humans.
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Also on Method Pliant:
Jacob Boersma's description of the potential application of Blockchain resonates in a project recently developed by Carlo Ratti Associati (CRA) design office for Italy’s largest supermarket chain, Coop Italia - that is the “Supermarket of the Future” which opened in Milan in late 2016.
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