Blockchain has the potential to disrupt many facets of how the world does business, including the structure of global financial systems, the way data is shared and collected, and tracking how products get from point a to point b. However, when looking at the potential use cases of blockchain, the agricultural sector is seldom one of the first things to come to mind.

The use cases for blockchain in the agricultural sector are many, and in fact, there are already high-impact projects underway today that are disrupting the way the sector operates, leading to greater equity for marginalized communities who rely on agriculture for their livelihoods. For today’s blog post, we are going to highlight some of these use cases and make the case for why blockchain can and will be a great disruptor in the agricultural sector.

Supply Chain Efficiency and Accountability

Imagine going to the super market and grabbing a bag of coffee beans. On the bag, you will likely see a bunch of different certifications stating that it is organic, fair trade, sustainable, etc. However, as I discussed in a previous blog post titled Blockchain and Certification for Good, these certifications can be unreliable and based on self-reporting.

Alternatively, imagine scanning a QR code on the bag, and instantly gaining access to a complete record of the supply chain for the coffee, including where it was grown, how it was grown, if pesticides were used, employment practices of the grower, and more, all secured on the blockchain. Seems unrealistic? Well, there are blockchain-based projects underway today working on more reliable ways to track supply chains.

One of these projects by ReSea, an ocean clean-up non-profit, in partnership with VeChain, and DNV, created a seven-step tracking process to document the journey of the plastic waste from clean-up area to the waste bank. This ensures that secure, real-time data tracks the process from start to finish through the following steps:

Documenting the clean-up area
Removing the plastic debris from the ocean or river
Sorting the recovered plastic
Bagging and tagging the plastic
Weighing and documenting the impact
Transporting the plastic waste to a waste bank
The waste bank weighs the plastic and distributes it for recycling and waste handling purposes

To effectively track the journey through each of these steps, ReSea’s digital tracking system is made up of three components including a smartphone app used by the collectors to input data, a blockchain system that stores the data from the collectors in an immutable blockchain database, and an analysis tool that extracts the data from the blockchain for analysis by ReSea.

Now, you might be saying, “what does this have to do with farming?” Although this isn’t an agricultural project, the basic elements of this project could be duplicated in an agricultural setting, and be used to track where the food was grown, how it was grown, the amount of water used to grow it, any pesticides used, the wages of local farmers, and much more.

One study of the Indian Organic Food Market found that blockchain could be far superior to traditional technologies in not only ensuring fair trading, but also in supporting farmers to improve food quality. In the conclusion of this study, it was found that although blockchain wasn’t a necessity to achieve whole-chain traceability, it “could certainly make food traceability faster and prove to be a good solution for a complex food supply chain.” If fact, two of the four case studies used in this research study actually resulted in successful blockchain solutions that were operational at the time the study was published.

Overall, blockchain-based supply chain platforms can lead to greater accountability for large agricultural corporations, while also helping ensure equity for smallholder farmers. Having an accurate traceability system that provides information on sustainability and fair-trade practices can help ensure local farmers aren’t being taken advantage of, that large producers are held to account on sustainability practices, and that consumers are more informed.

Financial Inclusion

One of the challenges faced by smallholder farmers from rural communities, especially in the developing world, is a lack of access to financial instruments such as bank accounts, loans, and a means for efficiently transferring value. This can make it difficult for local smallholder farmers to compete with larger producers, to purchase supplies at the best cost, to secure funding for business expansion, and to protect their income from inflation through investment opportunities.

The use cases of blockchain and cryptocurrency as a way to provide access to financial services for the world’s unbanked is not a new concept, but the implications for smallholder farmers in remote areas are especially important.

One project looking to address the challenge of a lack of access to financial instruments for smallholder farmers is AgUnity, a project which “provides a means to reach remote users, establish reliable and efficient lines of trade or simply resolve transparency and provenance issues in food chains - through a remotely managed, secure and accountable online platform.”

Their platform contains many features to help users gain access to financial services, make secure digital transactions, gain access to up-to-date information to inform purchasing decisions, and to connect with other local farmers, among other things.

Another example of a blockchain-based project providing access to financial services for traditionally unbanked or marginalized communities is Kotani Pay. Whereas most mobile financial apps require a smartphone with access to data or Wi-Fi, Kotani Pay makes use of Unstructured Supplementary Service Data (USSD), the primary mobile interface in the developing world, to provide users access to their blockchain-based platform. USSD can be used with basic feature phones and does not require access to the internet. This makes it a great fit for those living and working in remote communities. Furthermore, as this technology is already widely used in the developing world, it is very easy for users to learn how to use the Kotani Pay platform, where as other more complex platforms may require greater training and education efforts.

Essentially, by dialing a short code in their phone, users will be given access to a menu through which they can easily convert crypto to fiat, and vice-versa. Users can use this to move funds between their blockchain and mobile wallet, without the need for public or private keys, simplifying the process for transacting with cryptocurrency.

Kotani Pay makes use of Celo dollars (cUSD), a stablecoin pegged to the U.S. dollar, which is located on the Celo Platform, to protect users against the volatility of traditionally cryptocurrencies. Users can change their cUSD for mobile money in local currencies using Kotani Pay’s digital wallet.

In developing countries, smallholder farmers in remote regions have long suffered from a lack-of-access to traditional financial services and global markets, making it difficult, if not impossible, to compete with larger producers. Blockchain can help address this by providing easy to access, low cost solutions to help even the playing field.

Crop Insurance

Crop insurance, or agricultural insurance, is an essential tool for farmers looking to mitigate the impacts of unpredictable weather events and climate change, and helps insure them against losses in crop yield due to environmental causes. Despite the value of agricultural insurance as a risk management tool, only 3% of smallholder farmers in Sub-Saharan Africa use it.

There are many reasons why this number is as low as it is including expensive premiums, issues with trust, and a lack of transparency among insurance providers. It is clear that traditional insurance isn’t working for this population, and that an alternative is needed. Blockchain-based insurance platforms can help address this by providing decentralized insurance that cuts out the need for an intermediary, thus greatly reducing costs. One project that is doing this today, is Etherisc, an innovative, blockchain-based platform for crop insurance.

Etherisc is an “innovative parametric crop insurance built on top of our “Generic Insurance Framework” (GIF) on Ethereum and indexed to local weather parameters.” Etherisc makes use of Chainlink’s oracle network which provides a reliable connection to external weather data sources. In the event of an extreme weather event, insurance policies are triggered automatically and payout the insurance to the policy holder.

Simply put, the blockchain, which is built on the Ethereum network, uses smart contracts to automatically make insurance payouts during extreme weather events that are tied in to the blockchain via Chainlink’s oracle network. The end result is a fair, transparent, and tamper proof process, where payouts are made in a timely manner.

In addition to the obvious benefits that come with an objective, tamper-proof payout system, this project could also save farmers a substantial amount of money in insurance premiums. In fact, one study found that the use of this technology will reduce the costs required to issue a policy by a massive 41%, bringing down premium costs for the farmers. The end result is insurance premiums in small installments as low as 50 cents, ensuring access to those who previously couldn’t afford insurance.

Projects such as this could help even the playing field for smallholder farmers by providing them with a cost-effective means to access this essential risk management tool. Whereas larger producers have traditionally enjoyed the benefits of crop insurance, smallholder farmers have often had to fend for themselves as drought, extreme weather events, and flooding impacts their crop yields. This can lead to greater inequality in the sector as larger producers can cope with disruptions, whereas smallholder farmers may go out of business or have to use their own capital to bridge the gap, impacting their ability to grow their businesses

Conclusion

Blockchain alone won’t solve all the problems and inequities that exist in the agricultural sector. However, it can be an important part of the solution, and can offer innovative approaches to even the playing field and ensure smallholder farmers have access to the same services, tools, and benefits as larger food producers.

Whether it’s through the creation of more transparent and efficient supply chains, providing access to financial services for unbanked populations, or providing cost-effective crop insurance to smallholder farmers, there is huge potential for blockchain to help build a more equitable and sustainable agricultural sector.

What are some other ways that blockchain will disrupt the agricultural sector? Tweet us at @Crypto_Altruism, we’d love to hear from you!

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