Blockchain in Food Safety and Quality Assurance - II

Why Blockchain?

The World Health Organization estimates that almost 1 in 10 people become ill every year from eating contaminated food, with 420,000 dying as a result, because the global food supply has grown so complex that it has become almost impossible for food producers and retailers to guarantee the provenance of their products. However in any industry there are opportunities that will inevitably be those who take advantage. Individuals tampering with foods are nothing new, even in the 17th Century fraudsters would water down milk and add chalk to bread in order to squeeze out as much profit as possible. While technology may have improved in the 21st Century, similar methods used in food industry today give the same phrase “you are what you eat” an unsettling connotation. According to Racheal Botsman, it all begins with a progression in our understanding of trust, where consumers are beginning to move from an institutional system of trust to a distributed system, a natural progression in consumer’s eye since institutional trust is not designed for the digital age. One such example of a distributed trust system is the technology underpinning which has huge potential for the food industry, the blockchain.

The blockchain was developed as a decentralized ledger which records transactions and stores this information on a global network in a manner which prevents it being changed at a future point. While initially adopted for it’s financial implications, the blockchains’ decentralized system has huge potential for the traceability of supply chains where blockchain provides a neutral open platform, which needs no third party to authorize transactions, but rather a set of rules all participants, both users and the operators of the system, must abide by. Such a system is invaluable in complex supply chains were trust is low and compliance difficult to assess. Blockchain technology is a way of storing and sharing information across a network of users in an open virtual space, where technology allows for its users to look at all transactions simultaneously and in real-time. For example, a retailer would know with whom his supplier has had dealings regards to a specific food product he sold to any specific consumer and it is fraud free since transactions are not stored in any single location, which is almost impossible to hack the information. Thus, blockchain technology can make a difference for consumer confidence. The technology is so simple that, by reading a simple QR code with a smartphone, data such as an animal’s date of birth, use of antibiotics, vaccinations, and location where the livestock was harvested can easily be conveyed to the consumer.

Food Safety

Blockchain makes a supply chain more transparent at an all-new level, which also empowers the entire chain to be more responsive to any food safety disasters. That is one of the reasons where massive multinational corporations such as Nestlé, Unilever, Walmart, Tesco etc., are considering blockchain technologies for that reason. Walmart, which sells 20 per cent of all food in the U.S., has just completed two blockchain pilot projects. Prior to using blockchain, Walmart conducted a trace back test on mangoes in one of its stores. It took six days, 18 hours, and 26 minutes to trace mangoes back to its original farm, but by using blockchain, Walmart can provide all the information the consumer wants in 2.2 seconds. This is really important because during an outbreak of disease or contamination, six days is an eternity, where company can save thousands of lives by using blockchain technologies. Blockchain also allows specific products to be traced at any given time, which would help to reduce food waste. For instance, contaminated products can be traced easily and quickly, while safe foods would remain on the shelves and not be sent to landfills.

Fraud Prevention

However, the blockchain will work only if the data provided at the source is accurate, as current practices in the industry are much more open to human error, where most of the compliance data is audited by trusted third parties and stored either on paper or in a centralized database. These databases are highly vulnerable to informational inaccuracies, hacking, high operating costs, and intentional errors motivated by corruption and fraudulent behaviour, in which blockchain operates anonymously, so mistakes would be traceable to individual culprits. Considering recent food-fraud scandals in many parts of the world, this feature is not trivial where blockchain technology provides a method with records that are kept permanently which facilitates data-sharing between disparate actors in a food supply chain. In past and present, many retailers have sold fraudulent food products unknowingly, where those days could come to an end with the use of blockchain technology.

On-time Payments

Blockchain will allow everyone to be paid more quickly, from farm to plate, where farmers could sell more quickly, and be properly compensated as market data would be readily available and validated. Blockchain technology could represent a legitimate option for farmers who feel compelled to rely on marketing boards to sell their commodities. The use of blockchain could prevent price coercion and retroactive payments, both of which are obvious across the food supply chain. Blockchain technologies could expedite the agri-food sector by eliminating middlemen and lowering transaction fees, which can lead to fairer pricing and even help smaller scale manufacturers or producers to get more market attention.

Advantages of Blockchains

Smart contract enforces contractual terms and accountability among parties involved.

Efficiencies resulting from distributed leger technology (DLT) can add up to some serious cost savings, because DLT systems make it possible for businesses and banks to streamline internal operations, dramatically reducing the expense, mistakes, and delays caused by traditional methods for reconciliation of records. 
The widespread adoption of DLT will bring enormous cost savings in three areas. Electronic ledgers are much cheaper to maintain than traditional accounting systems, because the employee headcount in back offices can be greatly reduced. Nearly fully automated DLT systems result in far fewer errors and the elimination of repetitive confirmation steps. Minimizing the processing delay also means less capital being held against the risks of pending transactions.

In addition, some smaller number of millions will be saved by shrinking the amount of capital that broker/dealers are required to put up to back unsettled, outstanding trades. Greater transparency and ease of auditing should lead to savings in anti-money laundering regulatory compliance costs, too.

Blockchain's removal of almost all human involvement in processing is particularly beneficial in cross-border trades, which usually take much longer because of time-zone issues and the fact that all parties must confirm payment processing.

Blockchain systems can set up smart contracts or payments triggered when certain conditions are met.

Creates an audit trail of transactions from farmers and food processing firms to consumers.

Provide transparency and visibility in the farming, handling and distribution process.

Collect previously untapped data to carry out analytics to improve farming methods.

Barriers to Blockchain

The roadblocks to DLT today are not just technical, since real challenge is politics, regulatory approval, and the many thousands of hours of custom software design and front and back-end programming still required to link up the new blockchain ledgers to current business networks.

Nonetheless, DLT must interface with other parts of the operational processes seamlessly.

Blockchain should enable more rapid setup, training, and reduce problem resolution time, while achieving efficiency gains which must be easy enough/cheap enough for all parties involved to grasp and leverage.

Security is still remains as concern, since several central banks, including the Federal Reserve, the Bank of Canada and the Bank of England, have launched investigations into digital currencies to find the ability to control its currency and secure the system against systemic attack.

Banks are not interested in an open-source model for identity. Both banks and regulators want to maintain close control. The development of a single digital identity passport authorizer is a critical next step.

Regulation is also critical in creating an open digital environment for commerce and financial transactions. Current physical certificates must be digitized to gain the full benefits of a fully electronic system.

Like any other transformative technology, there are barriers to overcome, where blockchain to be effective, it needs to be accessible to all the players in the food supply chain from beginning to end. 

The cost of data entry needs to be low to make the use of blockchain accessible for all food workers, even in disadvantaged areas.

The farm workers will need to routinely use smart phones/tablets and access the internet to be able to input the data, where these practices are familiar to farmers who use precision agriculture, but all the famers including rural farmers worldwide would need to adopt the use of technology for blockchain to be successful.