Blockchain in Agriculture: Synopsis of the Benefits and Challenges in Its Appropriation

• By Jayasuriyan.k
• 22-01-2024
• Blockchain

Introduction:

Historically, technological advances have been an important driver for the growth and evolution of modern society, opening new learning opportunities and improving access to information. In the case of online platforms, digital solutions were created such as mobile applications that provide access to information, process optimization, and improvements in communication and connectivity, which have allowed us to boost economic development and transform key sectors.

This century has been characterized as a revolutionary period in terms of technology, therefore, most of the day we interact with advanced digital processes. One of these technologies is the blockchain and Nakamoto (2008), in the book A Peer-to-peer Electronic Cash System, presents the blockchain development services as a fast and reliable technological platform for the validation of transactions that works under the peer-to-peer communications network. (P2P). It is mainly known for being the basis of cryptocurrencies, including Ethereum and Finance, a currency equivalent to the US dollar. A variety of concepts can be found, from very technical to the simplest ones that seek the understanding of people who do not understand the matter. This is the definition made by Caballero (2022):

Blockchain is presented as a set of technologies (P2P, cryptography, time stamping, etc.) that allow computers and other devices to manage their information and share a record. This record is characterized by being unalterable (thanks to cryptography), replicated across all participants (thanks to a standard communications protocol) and accessible to all participants (which eliminates the need for acknowledgments and reconciliations), offering the maximum security and privacy. (para. 4)

For its part, the FAO (2021) describes it as a combination of technologies whose function is similar to an accounting book where shared and synchronized information from different destinations is recorded. Currently, blockchain is transforming marketing chains in agriculture, facilitating payments, financing and tracking the origin of food from its origin to the final consumer, among others.

Considering that blockchain technology has been part of the great innovations of the main industries in the world, where agri-food production has not escaped this reality, the purpose of this work is to present synoptically the basic concepts, characteristics, application and importance in the Agriculture; as well as approach the advances and limitations that arise for its appropriation in Venezuelan agriculture.

 

Benefits of blockchain in agriculture

For FAO (2021), blockchain technology benefits agriculture and food systems because transactions in these sectors often face information management and trust problems. Thanks to its integrated control mechanisms, the integrity of data recording and transparency during the exchange of information are guaranteed.

With adoption in the agricultural sector, the aim is to eliminate processes that do not add value to the products, accelerate payment to producers, incorporate contracts that value quality throughout the marketing process, and integrate services in the marketing and export processes. (Inter-American Institute for Cooperation on Agriculture [IICA], 2019).

Other benefits would be the following:

1. As support in agricultural disaster management

According to Sylvester (2019):

In the agricultural space, self-executing smart contracts along with automated payments would be the most important change in this sector. The role of smart contracts, especially in agricultural insurance, green bonds and traceability could be very effective. An example of this is agricultural insurance, built on blockchain with key weather incidents and related payments drawn up in a smart contract, linked to mobile wallets with weather data regularly provided by sensors in the field and correlated by data from nearby weather stations would facilitate immediate payment in the event of a drought or flood in the countryside. (p.7)

2. Food traceability and public health

Through its food code, the FAO (2003) defines traceability as the ability to follow the movement of food through specific stages of production, transformation, and distribution. From this definition, it can be understood that traceability is the ability to track all production processes, ranging from the acquisition of raw materials, and production to final consumption. In short, it allows us to know when, where, and who produced it, becoming a kind of life story for each food.

This concept inherently carries the need to be able to identify any food product from the acquisition of raw materials or input merchandise throughout the production, transformation, and/or distribution activities until the moment the operator delivers it to the next link. in the agri-food chain; as well as the verification of the respective certifications.

The use of a blockchain development company in food traceability allows you to track products from primary production, review where and when they were distributed, and remove the merchandise if necessary (Figure 1). This shows the benefit of traceability in the need to prevent diseases and, consequently, save lives. It is clear that this aspect is of utmost importance, especially due to what was stated by the World Health Organization ([WHO], 2020):

It is estimated that each year around 600 million people in the world – almost 1 in 10 inhabitants – get sick from eating contaminated food and that 420,000 die from this same cause, with the consequent loss of 33 million adjusted life years. of disability.
Blockchain applications in the food industry. Traceability, quality and product management.Blockchain has the potential to transform various aspects of the agricultural industry by providing transparency, traceability and security in supply chain and data management processes. Some possible applications in agriculture include:

1. Food Traceability: Allows every stage of the food production process to be tracked and verified, from planting to distribution, allowing consumers to access detailed information on the origin, agricultural practices and processing methods of food products .
2. Certifications and labels: register and verify certifications and labels related to sustainable, organic, fair trade, and other agricultural practices. This helps in verifying claims and allows consumers to make informed decisions.
3. Agricultural Financing: It can facilitate agricultural financing by enabling the tokenization of agricultural assets. This allows farmers to access loans and financing directly through smart contracts, without traditional financial intermediaries.
4. Trade and payments: simplifies and streamlines commercial transactions in the agricultural sector, allowing fast and secure payments, eliminating intermediaries and reducing costs.

The aforementioned materialized when important food companies in the world integrated blockchain into their supply chains as a result of the Escherichia coli epidemic outbreak that occurred in Germany during 2011, after determining that its origin could be related to transportation or food storage (Thomson Reuters Corporation [ROUTERS], 2011).

Simultaneously, “the need for investments in innovative solutions in agriculture and food systems are becoming even more important as we address the consequences of COVID-19” (FAO, 2021; para. 9). This means that, from the point of view of the traceability of agricultural products, its importance increased considerably after the health crisis triggered by the aforementioned pandemic, therefore, there are many international projects that seek to achieve traceability. and agri-food transparency, seeking to generate detailed information on the entire agricultural production chain.

3. Contribution to sustainable development

Blockchain can help track relevant indicators for sustainable development, this technology can lay the foundation to generate a data community that allows better monitoring and evaluation of climate change mitigation activities and support the development of the carbon market. This is especially useful for monitoring the Sustainable Development Goals (SDG) indicators linked to agriculture (Van Wassenaer et al. , 2021, p. xii).

Furthermore, the consensus mechanism of a blockchain is a determining factor for a chain's energy consumption patterns. The consensus mechanism is responsible for making decisions in the blockchain network. Bitcoin uses the Proof of Work (PoW) consensus mechanism , which is energy intensive. Proof of Stake (PoS) has lower energy consumption and will be part of the next version of Ethereum (Eth2) (Van Wassenaer et al. , 2021, p. xii).

On the other hand, there are blockchain applications aimed at climate adaptation and mitigation in agriculture. The issue of energy consumption of the various consensus algorithms is the subject of intense development and research. New blockchains such as Hedera HashGraph13 and Zilliq 14 emerge on the horizon that use alternative consensus algorithms such as the hash graph or Practical Byzantine Fault Tolerance (pBFT) (Van Wassenaer et al., 2021, p. xii).

In this context, agriculture is increasingly recognized as part of the solution to climate problems and research into applications for blockchain technology aimed at climate change adaptation and mitigation in agriculture has intensified (Van Wassenaer et al . , 2021, p. 16).

Blockchain, limitations and risks in its implementation

As it is a technology that has not yet reached maturity, it brings with it certain implementation risks that must be understood and, whenever possible, reduced before implementation. “Its risks vary depending on its type of implementation, in other words, whether it is private or public” (Sylvester, 2019, p. 14).

According to Sylvester (2019), the risks include:

Standards are underdeveloped and not yet mature: Being in a stage of rapid technological evolution of development, there are still no mature standards, the absence of international standards carries risks related to client lock-in, lack of interoperability, privacy and security .

The energy requirement can be high: The most famous during implementations, the well-known proof of work, works on the principle of “hard to create, easy to verify”, which means that the node must spend a lot of energy to earn tokens. incentive.
Trust in blockchain developers and administrators: A very high level of trust is placed in blockchain developers and administrators. It is a new technology where a large number of entities are innovating to create solutions, therefore, the focuses, owners and software in the implementations vary.

Increased responsibility for the user: By its very design, blockchain implementations do not have a central authority, at least in the case of public blockchains like Bitcoin, which imposes additional responsibility on the user. There is no entity to turn to in case people lose private keys (or incur losses as a result of revealing a private key). Also, there is no feature to restore forgotten passwords and usernames that people use. Therefore, users should be extremely careful, just like on the Internet, before posting anything. The importance of entering the correct data is also very important since it is very difficult to make corrections later. (p. 14)

In this order of ideas, the tendency to excess in the application of technology also predominates, that is, the blockchain is used even if it is not really required, the low availability of people with technical knowledge specialized in said technology, even more professionals than at at the same time know the logistics business; and finally, the high financial cost of implementation, including not only the hardware and storage capacity, but above all, the consulting services to generate and provide subsequent support to the applications that use the blockchain (Economic Commission for Latin America and the Caribbean [ECLAC], 2021, p. 7).

Overall, it is valuable to recognize that blockchain is not yet a “plug and play” technology, so like any disruptive technology, it requires careful risk/benefit analysis, technical expertise, and resources. This will avoid initial disappointments when implementing it.

Some experiences in the use of blockchain

The use of blockchain in the local and global agri-food industry opens the door to digital markets. Buyers, farmers and investors connect directly, eliminating intermediation within the marketing chains and increasing the amount of benefits for those involved.

In Latin America, Kaipper Ceratti (2019) reviews the experience of family farmers from the Agua Fría Youth Cooperative in Bahía (Brazil), facilitating the acquisition of goods, services and works by family agricultural associations and cooperatives in the states. Brazilians from Bahia and Rio Grande do Norte, while helping small farmers gain access to suppliers throughout Brazil; as well as storing all the processes and data necessary for the transaction.

Conclusion:

The role played by the process of appropriation of all knowledge is prevalent, and especially in the technological field, in this case by producers located in rural areas.