Based on weather indexes, index-based insurance is an interesting use case.
More and more food consumer goods are produced, transformed, and distributed by an ever-increasing number of players, spread across the globe. This complexity of the global food system is making supply chains more opaque and more fragile.
In this context, players of the agri-food sector and of mass distribution share the need to modernise their supply chain. Precisely, “tomorrow, blockchain could be the dominating infrastructure of digital supply chains”, claim the authors of the “Supply chain, Traçabilité & Blockchain” study (Supply chain, Traceability, & Blockchain), carried out by Blockchain Partner.
For Frank Yiannas, vice president of food safety at American mass distribution giant Walmart, it could even be “the Holy Grail” of the supply chain. Indeed, food blockchain projects are being developed the world over. Everywhere, the target benefit is the same: the blockchain enables storage of information relating to food throughout its production, transformation, and distribution – from farm to fork.
In practice, the different stakeholders of the supply chain inscribe into the blockchain (manually or automatically, with the help of smart sensors) information relating to a food product at each stage of its production. The entire value chain is concerned: the grower or stockbreeder, the vet when applicable, the wholesaler, the transporter, the distributer.
Each inscription generates a new block that, once validated, is timestamped and added to the chain of blocks. From then on it can no longer be modified or deleted, and the transactions it contains are visible by all users who have received authorisation to access the blockchain.
Robustness of the supply chain
The promise of the food blockchain is to make supply chains more secure, transparent, and efficient in order to improve product traceability. For the agri-food industry, the stakes are high.
On the one side it’s about combatting fraud, and on the other it’s about increasing food security (faster identification of the source of any potential contamination) and restoring consumer confidence, which has been shaken by food scandals. As is demonstrated by the success of applications such as Yuka, consumers want more visibility on the origin, journey, and composition of the food that ends up on their plates.
Another issue is that of the digitalisation of the agri-food supply chain. With blockchain, we go from paper documents and Excel files to sophisticated and coherent ERP (Enterprise Resource Planning) systems.
Virtually real-time tracking with the possibility to easily trace the origin of products, better management of data, higher efficiency of the supply chain, confidence building, etc. The use of blockchain technology within the scope of supply chain modernisation offers many benefits.
And this is only a start! Blockchain makes it possible to set up smart contracts, programs that run automatically once predefined conditions are fulfilled. Thanks to these, suppliers could be paid on delivery, which would reduce cash flow problems.
Smart farm
Combined with the Internet of things, blockchain and smart contracts are bringing about a small revolution in the agri-food industry and the agricultural sector. Based on weather indexes, index-based insurance is an interesting use case.
Thus, a smart contract signed in the blockchain between a farmer and an insurer, stipulating that an indemnity will be paid according to such or such a weather event on the basis of data provided by sensors, enables immediate payment, without the intervention of an insurance expert, in the case of a drought or a flood for example.
What is developing here is a coherent ecosystem, at the service of the smart supply chain and of the “smart farm” of tomorrow.
Towards a world standard?
Aware of the potential of this technology, several major groups decided to contribute to the IBM Food trust initiative. Created in 2016, the IBM Food Trust is a collaborative food traceability platform based on the blockchain built on the Hyperledger protocol, an open source blockchain development framework initiated by the Linux Foundation.
It enables the different participants – growers and stock farmers, manufacturers, distributors, etc. – to share the details of a product within the frame of a type of “permissioned” blockchain, i.e. where access to and sharing of information require prior authorisation.
Co-constructed with agri-food industry stakeholders including Walmart, Carrefour, and Nestlé, the IBM Food Trust platform is based on the common definition of governance rules. The aim of this alliance is to mutualise food traceability tools on the blockchain and establish a world standard.
Among other benefits, the project has access to IBM’s network of partners, thanks to the company’s collaboration with many service and technology providers likely to develop tools – software and hardware – that could be added to the ecosystem to ease and improve data collection, inscription, and analysis.
IBM is not the only one imagining the future of the food blockchain. Many specialist startups have taken the plunge. Let’s mention the Provenance platform, which provides businesses with the possibility to build food blockchains enabling their end customers to retrace the history of a product and check that it meets certain requirements, such as animal welfare.
