Decentralized Agriculture: Applying Blockchain Technology in Agri-Food Markets

Abstract

Blockchain is a simple yet powerful innovation – a new record keeping mechanism that replaces centralized ledgers and double entry bookkeeping. The technology first arose as a backbone to cryptocurrencies such as bitcoin, but has quickly garnered attention for its other applications, such as those in the areas of government record keeping, supply chain tracking, land title management, and, as will be explored throughout this paper, agri-food markets. Blockchain’s potential applications to agri-food markets are wide ranging, and hinge on the technology’s ability to track a physical commodity throughout an entire supply chain and provide easy access to this information for multiple parties. The technology thus enables improvements in food safety programs, by allowing the provenance of a product to be discovered within seconds, tracing the source of a foodborne illness back to its source before it becomes a widespread issue. It will also give credibility to - and increase participation in - environmental certification programs due to its ability to reduce paperwork and simplify the auditing process. Finally, the technology has the potential to change the way farmers market their products, reducing counterparty risk and empowering smallholder farmers in the process. [vi] The technology holds immense promise for the Agri-food sector, and several start-up firms and even governments have initiated pilot programs and studies to further understand its many applications. These pilots are often in their early stages of implementation, but offer insights into the potential and limitations of the technology. This paper explores the potential applications of blockchain to the agri-food market, with a specific focus on food safety, environmental certifications, and commodity marketing. It finds that the technology holds immense potential, but that a number of obstacles must be overcome before this potential is reached. Chief among these obstacles is further integration of real-world links to the blockchain, be it RFID or NFC chips, or changes to precision agriculture equipment and other on-farm machinery. If these obstacles are overcome, however, blockchain could have profound impacts on international agri-food markets. Well thought out government policy and regulation will need to accompany the technological advancements being made in the sector. As such, regulators and legislators alike should maintain a loose regulatory framework that allows new and innovative applications of the technology to flourish. This can be achieved through regulatory sandboxes and an iterative, cautious approach to policy making. Finally, there are areas, such as food safety and environmental monitoring, where the government should become more involved in research and development, either through applied research funding or government run initiatives. Blockchain technology, if accompanied by sensible government policy, stands to improve the way food is sourced, tracked, and sold. The recommendations put forth in this paper serve as guidelines for unleashing the technology’s potential.