Tom Trowhill considers what blockchain can do for the food supply industry
Historically, blockchain technology has been associated with cryptocurrencies, such as Bitcoin and Ethereum. However, blockchain offers great opportunities for the food supply industry – in particular by increasing efficiency and transparency.
In essence, blockchain is a means of storing data on a ledger with a variety of features, depending on the architecture. Blockchain utilises distributed ledger technology. These distributed ledgers are held by peers across a network and used to record, share and synchronise transactions (instead of keeping data centralised as in a traditional ledger). Ultimately, as the data is shared in this way, there is no need for a third party ‘intermediary’ to keep the records.
Transfers are grouped into ‘blocks’, once the validation process is complete. A block can be added to the blockchain’s ledger of previously-validated transfers after being subjected to a method which determines the accuracy of each transfer within that block. Each user within a blockchain’s network can maintain a copy of the ledger and will be aware of the addition of new blocks. This keeps each copy of the ledger identical and up-to-date.
Whilst many blockchains are decentralised (anyone within its network can update the ledger) and public (anyone can view the ledger), they may also be configured in such a way as to grant central control to a specified party/parties and/or make the ledger private.
Every member of the network keeps a copy of the data ledger. No single copy of it is seen as more or less definitive than any other (this is known as ‘immutability’). Data can only be changed with the agreement of the majority.
Blockchain as a store of information has several noted benefits:
- Scale – blockchain has the ability to store vastly more data than traditional models in the past (albeit that this can make some blockchain unwieldy in size).
- Efficiency – blockchain data allows for a wide range of data to be accessed at a faster speed. The need to consult various data sources on different sources should be reduced.
- Real time – the decentralised nature of blockchain means that data can be updated and be more real-time than traditional databases controlled by a centralised source.
- Accuracy & Permanence – a key feature of blockchain is that it will allow users to have an accurate and permanent data record.
- Immutability – once data has been added to a blockchain, it cannot easily be altered or removed. This rigidity is strengthened further as more and more blocks are added to the blockchain.
- Privacy – provided a user keeps their private key safe, no one else can access the data protected by that key.
Blockchain, whilst having significant advantages, does have some challenges to overcome:
- Reputation – blockchain’s perceived association with the dark web, crime and money laundering activities, may be enough to put off investors and other vital stakeholders.
- Investment – at its heart blockchain is a software solution, and software development can require substantial investment (of both financial resources and management time).
- Data – as the blockchain ledger of recorded information increase in size, each user’s computer must process more and more data to validate transfer and store a copy of the ledger. This can result in the vast use of resources such as electricity which has a financial cost to the user and a wider environmental cost.
- Standardisation – the food supply chain includes all sizes of business (from small distributors to huge multi-nationals) operating all across the world. Ensuring each party follows the same protocol and data formats for a blockchain will be imperative for its integrity and on- going success.
- Regulation – the speed of technological change invariably outpaces regulatory change. For example, not all jurisdictions will have the same rules on electronic documentation (e.g. bills of lading or letters of credit).
What can blockchain do for the food supply industry?
Blockchain presents great opportunities for the food industry in respect of key challenges around traceability and sustainability.
For example, blockchain, when combined with other technologies, can have the following benefits:
- Consumer Confidence – consumers to trace and verify the country of origin of their fruit, vegetables and meat in seconds on their mobile phones.
- Distribution Efficiencies – distributors to monitor whether they are utilising the full benefit of their delivery capacity before orders are shipped.
- Tracking Delivery – food’s progress through the supply chain can be monitored, which currently can be time consuming due to the involvement of multiples parties and various jurisdictions. Blockchain will allow pinch-points and causes of delay to be more readily identified.
- Food Safety – with the food safety scares over the last decade, blockchain provides an opportunity to have greater information accessible regarding the origin and safety of food.
- Sustainability & Compliance – retailers can use the immutability of blockchain to more easily audit and verify sustainability, regulatory compliance, freshness and ethical farming.
- Disputes – the greater data available should facilitate quicker resolution of disputes, with it being easier to identify which party in the food supply chain was responsible for an issue arising.
- Paperwork Reduction – paperwork can be reduced as the data is held on the blockchain, so the number of physical letters of credit, customs clearances and other documentation could be reduced.
Is Blockchain here for the long-haul?
Blockchain’s significant technological advantages (including immutability, accuracy and data sharing) make it ideal for solving some of a food supply chain’s biggest challenges. Whilst the advantages are there, blockchain does have hurdles to overcome regarding cost in terms of investment (both initial and on-going) and public perception, which may limit its adoption on a more widespread basis in the immediate future.
Tom Trowhill is legal director at Cripps Pemberton Greenish, one of the country’s leading legal practices serving corporate, real estate and private clients. With offices in Kent and London, the firm offers a flexible team of more than 450 people focused on delivering exceptional service to its clients.