What effects does Blockchain have on food trade?

Blockchain is one of the most up-to-date and promising technological developments of our time. So far, it has been large companies in particular with pilot projects and specialist journals from various sectors that are pushing the topic forward. Since the project IBM Food Trust, the blockchain is now also relevant for the fruit and vegetable trade – read more on that later in this article.

How the blockchain works

The block chain is a continuously expandable list of data records in which individual information blocks are interconnected. Imagine a spreadsheet accessible through a network of many computers, always up-to-date, and documenting all changes. At the beginning of the chain is a “creation block”. All other blocks are added chronologically.

The principle is familiar to many people from web-based collaboration tools that allow, for example, multiple parties to work together on documents. Unlike online services, the blockchain is not a central instance. The data management takes place on each computer of the network and not just in one place. This significantly reduces the risk of manipulation or damage.

The Bafin (Federal Financial Supervisory Authority) describes the blockchain as follows:

Blockchains are tamper-proof distributed data structures in which transactions are recorded in chronological order and mapped in an understandable and unalterable form without any centralised control. Blockchain technology makes it possible to save and manage ownership more directly and efficiently than before because it works on the basis of uninterrupted and unalterable data recording.“  (Bafin)

In practice, this means that a status which is distributed to multiple participants, can be changed by each of them. For example, through the transfer of funds, which leads to a changed account balance. This is similar to a cash book into which entries are added by specific actions.

The information is not limited to financial transactions. Think of the aviation industry: Spare parts for aircrafts can be registered after their manufacture. Once these parts are installed, this information can be saved in another block and made available. Even later repairs to the respective parts can be stored in this way. All companies working together in our example of spare parts could thus benefit from the same level of information.

How does Blockchain work?

What does Blockchain have to do with Bitcoin?

Bitcoin is a payment system first described in November 2008 by someone with the pseudonym Satoshi Nakamoto. Bitcoin was the first decentralized and digital currency – a cryptocurrency. The blockchain is the technical framework Bitcoin transactions. As with Blockchain, Bitcoin also requires Internet access; there are no geographical restrictions.

How does Blockchain affect food trade and agriculture?

Networking and transparency are two key factors when it comes to the potential benefits of the new technology for agriculture and the food trade. Within the blockchain, information about processes can be traced at any time. From the production of a raw material to the transport up to the packaging history, all data relating to a product can be stored. This creates enormous potential for the food industry.

By increased transparency of the entire supply chain – from the producer to the retail chain – companies expect to see improvements in food safety and freshness as well as reduced packaging volumes. Another potential benefit is that blockchain makes data accessible to network subscribers, always up-to-date and in one place. This also increases precision and efficiency in everyday work.

Projects in practice

What sounds still a long way off to many companies is already put into practice in pilot projects like IBM Food Trust. IBM has partnered with several international food companies – including Dole, Nestlé, Unilever and Walmart – to launch a blockchain cooperation. The shared information of this network is only accessible to its participants. All data is encrypted and can only be viewed after authorization.

According to Marie Wieck, general manager of IBM Blockchain, Blockchain is changing the way co-operation of like-minded organizations works. As stated in this press release, Blockchain provides a “single view of truth,” which enhances the mutual trust of those involved in a supply chain.

While it may take weeks to find the source of food contamination today, only a few minutes or seconds could be needed in the future.

For example, Frank Yiannas, Walmart’s vice president of food safety, spoke at an MIT conference earlier this year about how the blockchain reduced the source of a mango packet from one week to 2.2 seconds.

„We really weren’t chasing blockchain, we were trying to solve a business problem.” (Frank Yiannis)

Blockchain & Food Supply Chain

Precisely because the food industry is complex and distributed, Yiannis sees opportunities in the blockchain (ibid.). On the one hand, this is due to the decentralized structure of the blockchain itself. On the other hand, the technology is based on a consensus mechanism that, together with the immutability of data, increases the trust among participants in the supply chain.

Outlook: What lies ahead?

All trends and new developments are exposed to criticism. Of course, this also applies to the Blockchain. For companies not only the technical and entrepreneurial potential is crucial, but also the legal framework. There are many questions unanswered, which are likely to prevent small and medium-sized companies from investing in blockchain.

Nevertheless, it is expected that the blockchain will change the industry. This is also shown by a new study entitled “Does blockchain hold the key to a new age of supply chain transparency and trust?” by the Capgemini Research Institute. The result: Already by the year 2025, the blockchain could become ubiquitous and mass-compatible and affect global supply chains.

Topics such as traceability, transparency and data availability are already today highly relevant for almost all companies in the food industry. For this, ERP systems and database solutions are among the key instruments for making product information accessible and trustworthy.

Do you want to learn more about how you can get more control over your supply chain today? Contact us!

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