Professor Nir Kshetri has been studying the possible impacts of Blockchain in the Global South. Our editor asked him a few questions.
N. 002 MAY 2017
Blockchain, Food Industry & the Global South
Bext360 is a small company based out of Denver, focusing on the coffee supply chain. Noticing that the majority of people involved in the industry are from rural areas of emerging countries, Bext360 has started to use the Blockchain to process all payments and credits. This can guarantee that the farmers involved in the transactions receive payment in real time.
Bext360 offers an interesting example of how the application of the Blockchain in the food industry could entail an improvement for the life of millions of people who work and live in developing economies. I have reached Nir Ksherti, a University of North Carolina Professor and author of a recent paper called “Will blockchain emerge as a tool to break the poverty chain in the Global South?”, how much all of this is likely to happen in the next years.
Can you tell us a little bit more about the possible impact of the Blockchain on the Global South?
Poor people in the developing countries face a wide range of challenges - environmental conditions, access to the banking system, regulatory problems, contracting, fraud problems, and all kinds of political problems. The Blockchain can really help in addressing all these challenges.
In your paper, you talk about the way in which Walmart is using the Blockchain to track the movement of pork meat in the Chinese supply chain - at least in the proof of concept phase. Looking at this pilot, how do you think the Blockchain will affect the food industry in the Global South?
China is a special case because in the past they had problems with meat products. There has been a lot of infamous cases, such as when just a few years ago some companies were caught selling frozen chicken legs from the 1970s. Many of these cases were related with contaminated food.
Before the Blockchain, companies tried to address these problem using IoT-based products. A Chinese company developed smart chopsticks that know exactly if the food one is eating has some sort of contamination. The limit of this IoT approach is that it is based on a cloud model: the data are in the cloud computing, and only the tech company can have access to them.
Now, let’s imagine that this product is used in an emerging country, where it is common either to find a lot of corruption and unethical practices, or to see that laws and rules are not followed or not properly enforced. In this situation, the IoT can track what is going on, but the consumers do not necessarily get to know that. It is not a transparent system.
On the contrary, the Blockchain is likely to solve this problem precisely because everyone can have access to data as a consumer. A customer can know the entire history of that meat product: for instance, where it has grown and whether it was fed in a sustainable manner. A customer can verify all information to verify whether the "organic" label is accurate or whether the producing company pursued unethical labour practices. All those data are available to everyone, and this is exactly what the Blockchain is about.
I recently read more updates about the project developed by Walmart: they are more and more optimistic. They think that in the future they may be able to really implement that project commercially. Walmart also developed a similar project on the food industry outside of China. What they did was monitoring the food and vegetable that is imported from Central America to the United States. They tracked the food and were able to know where it was grown, which route it followed, what the temperatures were, etcetera. They tracked all these information with the Blockchain - and in the future, anyone can have access to them.
ANX Story : Walmart Tests the Blockchain to Tackle Food Safety | Video by: ANX International
Do you think that the Blockchain will open more possibilities for small vendors?
I think it can open possibilities for small vendors, especially if they are really growing their products in a sustainable way. Currently there are a lot of initiatives like fair trade, but the ultimate benefit is not going neither to the poor people, nor to the small farms. Fair trade act as an intermediate, and it takes all the benefits. One of the main rules of Blockchain is precisely to eliminate intermediates. The benefits directly go to the farmer and to the poor people who are working hard and who are growing the food. Now, let me give you an example about the coffee supply chain market. That is a market that employs 25 million people, mostly in rural areas of emerging countries. NGOs and other bodies that monitor the fair-trade use old-fashioned techniques. But now there's this company called Bext360, which is planning to use Stellar Blockchain. What will happen is that there will be real-time transactions record, timestamps and value. This will help to accurately process payments and credits. All parties in the transaction such as companies, farmers, and co-ops will make their data transparent. Farmers will be paid in real time.
Again, the idea of the Blockchain is to cut all intermediates and make the processes as transparent as possible, also leveraging IoT and other technologies.
Is this starting already?
It is not that easy. It may take a long time because the small farmers may not be technologically capable, or they may not have the access to all the informations. This is perhaps the main challenge. Theoretically, all the things can be done with a 20-dollar smartphone. But what if you have electricity problems or cannot access that kind of information? If the farmers will be able to access the information and will get capable of doing this themselves, then the potential for change can be very high.
At a more general level, how do you think the Blockchain will play in the dualism between globalisation and local businesses?
A lot of people think that the Blockchain technology will not change anything. Personally, I am very optimistic about its potential. Companies around the world have already developed about 400 of 500 proofs of concepts, and if just a few of them will actually become prototypes and be commercialised, we will see big changes in the society. I’m really optimistic that in the future both the farmers I mentioned before and SMEs in general will be empowered and will benefit from the new system.
Nir Kshetri | Professor of Management, University of North Carolina – Greensboro
If all of this is going to happen, what kind of social change do you envision in the Global South? What do you think it going to happen to a social level?
The most important political change is that people can access to information and manipulate data. This can produce benefits at an economic, social and political levels.
The World Bank says that 1.5 billion people in the world do not have IDs, and 2.5 billion people don’t have any access to banks. With the Blockchain we can create a digital identity - for instance that is what the start up Humaniq is doing - so that people can have a digital ID and own criptocash. This can happen without the control of a government. Giving that in many countries in the world - such as in Nepal, where I was born - the government is not doing anything for poor people, this can have a dramatic impact at a societal level.
So basically what you are saying is that the biggest challenge will be to provide access to information to all these people. If we are able to do that, we can potentially see huge social changes. But if we not, changes will be very limited.
Exactly. I think the Blockchain should have some local ambassadors, who can go and explain local people how they can take the most out of the Blockchain. Companies that are developing products using the Blockchain can collaborate with governments and with the disadvantaged groups in general, from farmers to the SMEs.
Further reading: “Much more than bitcoin: how blockchain can help the world's poorest people”, World Economic Forum 05 May 2017.
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