Blockchain in agrifood: a great opportunity… disguised as a trend?

Editor’s note: Filippo Renga is director of the Smart AgriFood Observatory of the School of Management, Politecnico di Milano, Italy. The views expressed in this guest article are the author’s own, and do not necessarily represent those of AFN.

Blockchain is portrayed as a great opportunity for the agrifood sector, able to guarantee transparency and immutability to data produced throughout the supply chain. As a result, it’s also said to be able to generate higher revenues thanks to a renewed confidence on the part of the end consumer, who can get to know every detail of the product he is buying.

Many agricultural and agrifood companies are asking: Will it actually be like that? Or is blockchain technology just a fad? What are the benefits that may emerge? Is it really the remedy to solve all the critical problems that can occur during the traceability process?

The contribution of blockchain to the agrifood sector

Let’s try to provide some food for thought, starting with observations from research conducted over the last four years by the Smart AgriFood Observatory of Politecnico di Milano and summarized in the report, ‘Digital food traceability: the application of blockchain to agrifood.’

We can identify four main objectives that encourage agricultural and agrifood companies to adopt blockchain technology, listed in order of relevance.

1. Objectives linked to commercial and marketing opportunities

In 60% of the 82 worldwide projects we analyzed, blockchain is mainly chosen to exploit commercial and marketing opportunities. As a matter of fact, since this technology has been the subject of media hype, many companies use it to try to demonstrate their transparency towards the consumer – therefore offering the possibility to access traceability information about their product. Moreover, most of the time, some digital instruments able to increase the user experience (in particular, QR codes and NFC tags) are used with a communicative purpose.

2. Objectives linked to the effectiveness of the supply chain

Blockchain’s characteristics of immutability and transparency are used to improve coordination among supply chain players
by increasing the visibility of information and, as a consequence, the effectiveness of the whole supply chain (40% of projects analyzed.)

3. Objectives linked to sustainability

Environmental and social sustainability are becoming more relevant, according to 21% of the projects. In most of these cases, companies try to keep track and to give visibility to their sustainability practices.

4. Objectives linked to food safety and anti-counterfeiting

Another use of blockchain concerns food safety objectives, making the procedures of product recall more efficient and effective, especially in the large-scale distribution sector. There are also uses related to anti-counterfeiting; blockchain allows stakeholders to keep track of data and its modification over time, making overwrites particularly difficult.

How blockchain can benefit the agrifood value chain

Blockchain’s benefits for the agrifood sector are not always clear to users and there isn’t a unanimous opinion. According to a survey conducted during one of our workshops, approximately one third of respondents indicated transparency as the main benefit, while there wasn’t a clear dominance among the other suggested benefits such as data immutability, data security, data sharing, or the adoption of marketing strategies. It’s interesting to point out that one respondent indicated blatantly wrong options, providing a clear signal that there continues to be a lack of clarity on this matter.

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Transparency, immutability, and sharing of data throughout the whole supply chain are the main benefits of this technology, together with the speed in finding information about each product. On the one hand, all this is allowed by the specific consent mechanisms of each platform, which make it impossible — or at least very difficult — to modify the entered data. On the other hand, it’s enabled by the distributed ledger that makes data accessible on a continuous, real-time basis. These characteristics have a further effect of increasing consumer confidence or, more generally, the confidence of whoever can access the data; however, it still has to be clarified how much this can translate into an effective commercial benefit.

The contribution of smart contracts

Thanks to the application of smart contracts via blockchain, it is possible to program, automate, and simplify transactions which regulate relations within the supply chain without the need for further checks.

Another benefit resulting from the use of smart contracts is the possibility to regulate and guarantee the maintenance of product quality throughout the whole supply chain. For example, a product that exceeded the maximum temperature set during its transportation phases could be automatically prevented from being accepted and paid for by the end purchaser.

However, these benefits can’t be linked with certainty to blockchain technology because of the lack of an extensive literature and concrete case studies. To date, many use cases are proposed in literature, but evidence on actual applications are still lacking. In fact, it still needs to be clarified how many of these benefits may be achieved by using other digital technologies.

Does blockchain alone guarantee traceability?

Another important element that emerged from our research is that blockchain technology by itself cannot guarantee the traceability of a product. Instead, it must be placed in a wider context of technological solutions at the service of traceability.

Considering the phases characterizing the traceability process — identification, data acquisition, data recording, data management and processing, and finally transmission and communication – blockchain is mainly used, in different ways, in only the final phases (data recording, management, and transmission.)

Moreover, while guaranteeing that the entered data have not been modified, this technology does not attest that data are truthful and consistent with the reality they refer to. In order to solve this problem, more and more solutions integrate blockchain with other technologies such as the ‘internet of things’ (IoT), even though this is a field still in full exploration.

An ‘oracle’ at the heart of the agrifood traceability process

As such, another issue is raised by the identity and integrity of these solutions that must record, inside the blockchain, the information coming from the ‘real’ world. These solutions are commonly called ‘oracles.’

Within each project, it is therefore necessary to identify the weakest oracle and to implement the necessary technological remedies. In this context, IoT (sensors, RFID, NFC, etc) and mobile solutions are particularly relevant, since they help to reinforce the bond between the physical and the digital world. The failure of even just one oracle can invalidate the quality of the whole traceability process and — especially in case of smart contracts — it may automatically trigger negative repercussions along the entire supply chain.

Blockchain and agrifood

In order to exploit the full potential of blockchain with regard to traceability, we must therefore think of this technology as a tile to be integrated with other available solutions.

Mapping of traceability-focused technological solutions carried out by the Smart AgriFood Observatory in 2019 shows that 43% of 44 mapped solutions offered in Italy are enabled by blockchain, marking an increase of 111% compared to 2018. Furthermore, it is important to point out the growth of IoT (30% of solutions, +63% compared to 2018), in many cases used in combination with blockchain.

In conclusion, blockchain is gradually becoming a very important technology for traceability, in the food industry and elsewhere. But it is still in its very early days as a tool for the sector. It is therefore important that agrifood companies do not to rush into implementing blockchain solutions without nurturing the right skills in their teams, in order to avoid the ‘trend effect’ with a consequent dispersion of resources that in many cases is inefficient.