Research Bites: Blockchain potential for SA agriculture
— This article is part of a series in collaboration with the African Journal of Science, Technology, Innovation and Development
Africa's agricultural sector is facing numerous challenges including the steady growth of the population, climate change, the increasing number of catastrophes, the loss of biodiversity and the spread of parasites.
It is clear that innovation in agricultural processes is necessary to overcome these challenges and make agriculture more profitable for small and large farmers.
In particular, new technologies such as blockchain can provide the various players in the agriculture value chain with new tools and key technologies to improve production and distribution processes.
Through a research project in South Africa's grape industry, we found blockchain – as part of the e-agriculture system – has the potential to reshape the entire sector.
The birth of the blockchain is linked to the publication of the white paper entitled "Bitcoin: A Peer-to-Peer Electronic Cash System" in 2008 by Satoshi Nakamoto, whose identity is still unknown.
This paper describes a purely peer-to-peer version of electronic money known as Bitcoin. With this event, blockchain technology, literally a chain of blocks, made its public debut.
The blockchain is a type of distributed ledger technology (DLT), a distributed, shared, encrypted database that acts as an irreversible and incorruptible repository of information. It is a digital platform that stores and verifies the entire chronology of transactions between users through the network.
There is no unanimously accepted definition of blockchain. However, each block in the blockchain contains at least the following fields: the number of the block; the stored data (or transactions); the hash of the previous block; the hash of the current block.
Since data has entered into the blockchain, it cannot be altered. In fact, if anyone tries to tamper or corrupt the data of a block, changing the hash of this block, this will lead to a cryptographic link disruption and all the blocks after that will no longer be valid and it will no longer be connected to the blockchain.
Different studies and numerous pilot projects have been launched to evaluate the blockchain applications in the agricultural sector.
This trend is driven by the major concerns in several important aspects, for instance food contamination and fraud issues, data security and safety in smart farming and Internet of Things (IoT) based solutions, trust and efficiency in financial transactions in the agricultural supply chain and data transparency and integrity of agriculture.
What has been found is that the agricultural supply chains present substantial inefficiencies, which affect all the players in the chain.
Blockchain technology stores each recorded transaction, able to provide the actors in the agri-food supply chain with detailed records of their operations, financial service activities and more accurate and better-quality market information.
Efficient logistic systems in the food market is also critical to ensuring food safety, but the dynamic nature of information in the food or agricultural production chain makes it difficult to trace.
Blockchain provides a platform for traceability in agricultural supply chains and is able to keep track of the origin and guarantee the authenticity of agricultural products.
This solution will make regulatory control easier as the product can be traced along the entire supply chain and possible fraudulent behavior that is discouraged in this way can be identified.
Blockchain at work
Given the importance that wine production plays in the South African agricultural sector, we thought it was relevant to analyze the pilot project "Blockchain for Agrifood" for tracking grapes through the blockchain.
This project was launched in March 2017 by Wageningen Economic Research and TNO in collaboration with RVO, AgroConnect, VAA ICT Consultancy, NVWA, AgriPlace, OTC Holland, Floricode, BC3, GS1, Control Union, SKAL, and PPM Oost.
This project has built a system capable of tracing the different certificates involved in the supply chain of table grapes in South Africa, analyzing the following aspects in the grape supply chain:
The case study shows how it is possible, through the new technological tools, to mitigate risk in agricultural transactions – making secure payments and allowing the traceability and transparency that agricultural value chains need.
Opportunities and challenges
The agricultural sector will also benefit from the blockchain to reduce costs, risks for sellers and banks and bring greater efficiency gains to supply chains for commercial financing operations.
Other types of financial services, such as payment, insurance and credit services, can be carried out using blockchain, thus helping the actors in the agricultural supply chain to reduce cost, risk, manage liquidity and maximize returns.
Blockchain has the potential to positively impact the e-agriculture system and it can be implemented in various projects and initiatives, aiming to create trust within value chains and make them transparent and sustainable, integrating all the main stakeholders.
Despite this, there are still many aspects that need to be improved and problems to be solved, both technically and beyond.
For instance, there are at least three key lessons from COVID-19 related global food supply chain: the need of real-time accurate information for parties involved, a more efficient coordination among parties at a global level, and more efficient process in order to reduce time in bureaucracy procedures.
These key lessons can represent the starting point for improving existing blockchain solutions in this sector.
To read more about this research, you can access the full academic research paper titled: Blockchain for agricultural sector: The case of South Africa published in the African Journal of Science, Technology, Innovation and Development.
*Top image source: created by wirestock - www.freepik.com.