The Missing Link in the Food Chain: Blockchain. By Janette Barnard, Sales & Marketing Director

Transcription

1 The Missing Link in the Food Chain: Blockchain By Janette Barnard, Sales & Marketing Director

2 Where could an investor find a 750% return in 2017? (One of) the only legal way(s): Bitcoin. The digital currency bitcoin is currently valued around $41 billion. Which sounds decent until you consider that there are 1.5 Trillion US dollars in circulation right now. Despite its 750% growth this year, bitcoin is still in its infancy. Financial pundits are still arguing about the future of bitcoin and similar cryptocurrencies. Unsurprisingly some claim cryptocurrencies will be a trillion dollar space in the next decade while others, like JP Morgan CEO Jamie Dimon, call bitcoin stupid. (That s economic jargon for we aren t sure what to do with this new thing so we re going to downplay it. See Steve Ballmer s comments on the iphone circa 2003 for more details.) But this isn t a white paper on cryptocurrencies. 2

3 This is a white paper on the underlying technology that enables cryptocurrencies and is likely to enable significant changes in the meat supply chain: blockchain. Find answers (let s be honest, it s speculation) to the following questions: What problems could blockchain solve for the meat supply chain? What are the advantages & limitations of blockchain? How is blockchain used today? What is blockchain? Critical Takeaways: Blockchain is a nascent technology and in the infantile stages for use in food. Blockchain holds great promise to help the food industry solve some of its some most vexing challenges. It will take time for the industry to evolve to find the highest and best use of blockchain technology and then drive adoption. The meat industry of the future will be tech enabled which means leaders will need new skill sets on their team, an open mindset, and growth oriented cultures in order to succeed. 3

4 What problems can blockchain solve? 1. Traceability 1. Traceability The ability to track product through the typically multi-staged, complex supply chain that most meat travels before ending up on a consumer s plate is something that s had much of the meat industry salivating for years. The missing link was not the will, it was the way. Enter blockchain. Blockchain could enable the tracking of any number of characteristics about meat as it moves through the supply chain. Characteristics like: Where was this animal produced? How was it raised? Where/when/how was it processed? What path has this product taken to end up in a tray pack at the grocery store? 4

5 What problems can blockchain solve? 2. Food Safety The worst nightmare of a food manufacturer/retailer is a food safety issue. One challenge is expediently tracking down the source of the problem and then determining the scope. This is further complicated due to the severe urgency of a recall to prevent illness and with significant liability and oversight by the government. 2. Food Safety Enter blockchain. Because of its ability to improve traceability, blockchain also lends itself to improving food safety both from a preventative standpoint as well as drastically reducing reaction time in the case of a recall. 5

6 What problems can blockchain solve? 3. Price Discovery 3. Price Discovery Price reporting varies by protein. In beef and pork, price reporting to USDA is mandatory by law. But within the definitions of what is required to be reported, there s gray area that gives packers room to flex on what prices get reported and what prices are kept out of the published market. The lines get even more blurred in the poultry industry. The problem is both with accuracy of reporting and thinness of trading. If 70% of volume is tied to prices for 2% of volume, that could be problematic. Enter blockchain. If enough participants throughout the supply chain decided that price transparency is critical to the market, then blockchain could serve as an ideal mechanism for capturing accurate prices, storing them, and providing price transparency to appropriate participating parties. 6

7 What problems can blockchain solve? 4. Food Waste Reduction $72 billion of food is wasted in America each year from the farm to the retailer or restaurant. One contributing factor to food waste is that each step in the value chain must estimate demand For the portion that is wasted at stops in the supply chain post-farm but preconsumer, enter blockchain. 4. Food Waste Reduction The increased visibility of blockchain could be leveraged to shorten the information distance from one step in the supply chain to the next. By streamlining supply chains and increasing accurate information sharing, food waste can be reduced. A win for everyone from producers to consumers. 7

8 How is blockchain used today? Well, it s not.but it will be soon. Cargill is a leader in the broader animal protein industry with blockchain technology. The Wall Street Journal recently covered Cargill s aggressive initiative to bring the digital supply chain to life from turkey farm to retail consumer. Can you imagine picking out a turkey for Thanksgiving dinner by accessing information about that specific bird in that specific plastic bag all the way back to the farm where the bird was raised? The mind boggles. And yet, this will be reality. 8

9 How is blockchain used today? IBM recently announced a consortium of food companies to explore how blockchain could help food companies improve food safety and track waste. This consortium brings innovative companies from each phase in the supply chain to the table along with vast technical resources. Will this consortium find the right answers and path forward for blockchain in food? That remains to be seen, but there s a high likelihood this group will at least ask the right questions. 9

10 Why blockchain? Blockchain will have a massive impact across many industries. New technologies to disrupt entire industries are being built as we speak. Pros: Security. Because of the distributed ledger, information captured via blockchain is not housed in one single place where it would be susceptible. Accuracy. Also because of the distributed ledger and multiple accounts of a single transaction or data point, it s virtually impossible for a fat finger mistaken entry. This means accurate data capture. Visibility. Those with access to the distributed ledger have visibility into the transaction data captured, imagine the market friction that can be eliminated or the costs of information asymmetry that can be reduced. Cons: Requires collaboration. If blockchain is to be used to track transaction data across the supply chain, then by definition all stages of the supply chain must be willing participants. Will suppliers be open to collaborate with customers? Will customers want to collaborate with suppliers? What about competitors? Blockchain could take coopetition to a whole new level. Adoption. Let s face it. Most of the meat industry isn t known for being open armed when it comes to new technology, especially a technology that can seem complicated and vague. Its unlikely the bottom feeders of meat companies choose to adopt blockchain until they re forced to do so by their largest customers. The real question is how will the typical early adopting companies - and the middle majority - react to blockchain? 10

11 What is blockchain? This section is last because frankly, it s likely unimportant for you to know how blockchain works beyond the main idea that blockchain is a method of digital storage and transfer, whether it be data about a brisket or a virtual currency coin. If you need more, here s a (kinda) simple explanation to a wildly complex question pulled from a Medium article. This example uses Bitcoin but where you see Bitcoin in the example think farm address, production practice, etc. The blockchain uses a ledger, a digital file that keeps track of all Bitcoin transactions. The ledger file is not stored in central entity servers, like a bank, or in a single data center. It is distributed across the world via a network of private computers that are both storing data and executing computations. Each of these computers represents a node of the blockchain network and has a copy of the ledger file. To send bitcoin you need to prove that you own the private key of a specific wallet as you need to use it to encrypt the transaction request message. Please note that since you broadcast the message only after it has been encrypted, you never have to reveal your private key. Each node in the blockchain is keeping a copy of the ledger. So, how does a node know what s your account balance? The blockchain system doesn t keep track of account balances at all, it only records each and every transaction that is requested. The ledger in fact does not keep track of balances, it only keeps track of every transaction that is broadcasted within the network. To know your wallet balance, you need to analyze and verify all the transactions that ever took place on the whole network connected to your wallet. All the code to perform transactions on the Bitcoin network is open source, this means that anyone with a laptop and an internet connection can operate transactions. The Bitcoin network orders transaction by putting them together into groups called blocks, each block contains a definite amount of transactions and a link to the previous block. This is what puts one block after the other in time. Blocks are therefore organized into a time-related chain, that gives the name to the whole system: blockchain. 11

12 Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate. -Marc Andreessen 12

13 Conclusions Blockchain is a nascent technology and in the infantile stages for use in food. Blockchain holds great promise to help the food industry solves some of its some most vexing challenges. It will take time for the industry to evolve to find the highest and best use of blockchain technology and then drive adoption. The ultimate takeaway is that the meat industry of the future will be tech enabled which means leaders will need new skill sets on their team, an open mindset, and growth oriented cultures in order to succeed. References

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