Blockchain Bonus | The Food Supply Chain
by Dr. Nir Kshetri
January 31, 2020
Dr. Nir Kshetri is a Professor at University of North Carolina-Greensboro. He holds a PhD from the University of Rhode Island. He has authored nine books, and about 140 articles. Dr. Kshetri has provided consulting services to Asian Development Bank and various UN agencies. In January 2019, his paper " Blockchain-Enabled E-voting " was awarded by the 2019 Blockchain Connect Conference as the top eight winners of the Most Influential Blockchain Research Papers.
This interview was conducted and condensed by frank news.
frank | What is your professional and academic background?
Dr. Kshetri | I'm a professor at the University of North Carolina at Greensboro, in the Bryan School of Business and Economics. My research focuses on the newest information technology trends for initiatives within food distribution. In the space, there are two primary things that are important to focus on. The first is the quality and safety of the food and beverages people consume. The second is fairness, in the sense that this technology is enabling the farmers who grow the food to get a higher share of the profits that the companies make off their food.
The food distribution processes affected by blockchain spans from farming to purchasing power. How does blockchain work directly with farming technologies?
Let’s take China as an example, where food safety has been a huge concern. In 2008, 300,000 people in China became sick because after they consumed contaminated infant formula. Another example: if you buy Australian beef in China, there is actually only 50% probability that the packet you are buying is Australian beef. In many cases it may be things like rat meat, camel, or frog's meat. They sell a lot of these things. So the question is how to make sure the meat you're buying is not contaminated. Answering that question has become a priority in China.
Companies like Walmart and Alibaba currently use blockchain to track the product all the way from the food manufacturer to consumer. In the case of Walmart, in June of 2019, they started implementing the blockchain project in tracking seafood, meat, vegetables, all these things in China.
This change goes all the way back to the farmer's side. The farmers can scan all the things, the meat or details of the pigs that they are growing. If they have organic certification, they upload organic certification on the blockchain system. The transport companies put all the data on the blockchain, how the food is being transported. The consumer can scan in the packet that they are buying in the Walmart store. And they can know where exactly food originated from. However, most of the farmers in China are poor with no internet connectivity and cannot do all these things. So doesn't really go to the smallest farmer, but it goes to more organized farms right now, the big farms.
Focusing on the consumer side of that process, does having all this information on the blockchain present a solution to messy FDA rules and guidelines for what can be labeled organic? If we start looking at that information directly and don't go through a vague regulatory process, is that better? Can you trust the information more or is it equally confusing?
That is a very important point.
Blockchain definitely poses the ability to help with the process, as the certification would be identified on the blockchain. At the end of the day, the issue lies in the trust of the food manufacturer and the third party certification organizations.
The idea is that different parties can post the information, and the information is accessible to everyone else in the system. Normally we would see these third parties, such as organic certification companies, food manufacturers, food retailers, posting certification. But, specifically in China, there were a lot of reports published a few years back in the news that the labels on the organic food were not accurate or that you could bribe these people a few dollars, and you can get organic certification. The point is the organic certification companies aren’t reliable. And that is one of the fears in the blockchain system.
What about order of operations? How do you see this being implemented?
Right. So first of all the idea isn’t for this system to be on a public blockchain like bitcoin, they are private individual blockchain with one manager. Using Walmart again as an example, they would be that manager. They then go on to decide the peers, the nodes in the system, who will get access to the system.
The transportation company that moves the produce, the farming company fom where the produce came from, potentially border enforcement, potentially the health department, and the warehouse, are peers in the supply chain.
Then the mango farmer can enter all the details in the blockchain. Then the transportation company brings the transportation from Mexico to the US. During the transportation, the information again goes to all the parties including the farmer. Now it gets to US Customs. And US Customs conduct an inspection, they give certification, and they upload the certification.
And if Walmart, for example, wants to make sure that the meat products are transported under whatever system pressure, humidity, all the conditions, and it is possible to measure, they can monitor the information all the time, and it will be available to all parties.
All the information that every entity is entering on the blockchain is available. It cannot be deleted. It cannot be modified. And blockchain makes that. That is inimitable. Walmart gets its say in which entities have access to the system.
How does blockchain address environmental concerns and the impact of farming on the environment?
If we talk about the environment, in coffee, for example, there are all types of certifications. Coffee companies claim to be bird-friendly coffee, environmental-friendly coffee, or companies that do not consume a lot of water, but really, there is no way to verify that. No way to verify for us as consumers.
As far as I know, at this point, the blockchain performance has not reached the stage to measure all the environmental concerns you have. Rght now, we have to start with the farm and the products, to make sure what manufacturers claim, are literally that type of product. In the future, it might be possible to continuously measure the water consumed by coffee or things like that. It may be possible to measure with sensors which are becoming cheaper and cheaper. If all those things can be measured and can be entered into blockchain and all of that have access to that, that concern might be addressed.
If you look at China and Africa, food products are grown by small farmers, and they are not at the point to implement blockchain. If you link that blockchain system with the farm, and if there is any type of problem with the system, they cannot fix the system. So we cannot really use that system currently in small farms and to address all the environment. So again, right now, only more organized, big farms that are currently using the system because of lot of cost, lack of connectivity in the poor farmers' farms, and all those problems there are right now.
What advancements in this space are we seeing already right now?
Technology right now is using the private blockchain. The public blockchain like Bitcoin is very insignificant, and it is not possible to process a lot of information. It is very small. It is very costly. It is possible to use that system at a lower cost and fast also.
What issues do you foresee in the adoption of this technology?
One thing is that these are private blockchains, and there will be a few. I can give you an example of a Chinese company, JD.com, which is the second biggest retailer in China, they have a system developed with the Inner Mongolia in China, the food company they call Kerchin, K-E-R-C-H-I-N, a big farming company with $300 million dollar annual revenue. They track food. Only two parties are in that transaction, JD and Kerchin. Consumers buy food with more confidence.
If these two companies decide to collude and sell consumers low quality food, consumers have no way to know that. This is the disadvantage with the private blockchain that if there is enough benefit, these parties collude and write false information, and provide tracking QR, and consumers track, but there might be false information.
So if there are few parties, that means the risk of collusion. Except for the collusion problem, blockchain is probably more secure than any other system. I'm not worried too much about the cyber security part. It is more secure definitely than anything else. The only thing I would worry about is this potential collusion – because there are such a few number of players in this private blockchain system, which are not public like Bitcoin. That is the only concern that I would have.