Blockchain Technology in Agriculture and Farming

Most people have heard of Bitcoin and blockchains. What you may not know is that the same technology used to create cryptocurrencies may change the future of agriculture and farming.

Blockchain technology has the potential to disrupt the way farmers grow and sell their products. It may even help address the need for more food for future generations.

How can a technology that was built for cryptocurrencies impact farming? To understand the answer, you need to examine how blockchain technology works and its potential uses on farms and ranches.

What Is Blockchain Technology?

Blockchain technology is the digital record-keeping technology used for the Bitcoin network. However, cryptocurrency is just one use for blockchains.

A blockchain is simply described as a digital record. The record, or ledger, is often distributed publicly through a decentralized system. This allows everyone to access the same record, reducing the risk of tampering or falsifying the data.

The blockchain is comprised of blocks that are linked in a chain. Each block is an individual record, such as a transaction. It contains all necessary data for the transaction, including date, time, value, seller, and buyer. Each block also receives a unique identifying code, preventing duplicate entries.

While blockchains are mostly used to manage transactions, they can be used to store any type of data. Farmers may use a digital ledger to store data, such as yields, soil types, rainfall, fertilizer usage, and more. It may even help track the delivery of farm-grown food from the farms to the grocery store.

Public and Private Blockchains

Blockchains are either public or private. With a public blockchain, the ledger is managed using a peer-to-peer (P2P) network. After a new transaction occurs, all connected peers verify the data and update their copies of the ledger. The data cannot be altered without consensus from the P2P network.

A private blockchain is stored and managed on a private network. Instead of requiring group consensus to alter records, only the owner and individuals with the right permissions can add or edit transactions. Farmers may use public or private blockchains, depending on how the technology is implemented. 

For example, a public ledger provides transparency for tracking transactions and improving supply chain management. A private ledger may be useful for collecting and analyzing data from smart devices, such as sensors used to monitor crops and soil. 

Uses for Blockchain Technology in Agriculture

Tracking transactions is the main use for blockchains, but this technology has much more potential. Several tech startups are already using blockchains to develop exciting new technologies for the agricultural industry. Some of the current and future uses for blockchains include:

  • Transparent Transactions
  • Supply Chain Management
  • Agriculture insurance
  • Finance management
  • Land registrations
  • Precision agriculture

Many of these applications address problems that farmers currently face. Limited access to markets, strong competition, severe weather, poor soil, and inefficient equipment make it difficult for modern farmers to continually make a profit. Here is a closer look at how blockchains may help.

Transparent Transactions

One of the main uses of blockchain technology is to provide transparency for tracking transactions. A variety of industries use blockchains to manage transactions, giving companies and customers greater transparency. In the farming industry, transparent transactions may provide:

  • More efficiency for setting prices
  • Increased traceability of food
  • Access to larger markets

Major financial institutions and retailers use distributed ledgers. Banks may use the technology to improve the speed and security of transfers while retailers use blockchains to help customers track their shipments. Transparency has far-reaching benefits, including making it easier for farmers to set prices.

Using blockchain technology increases the traceability of food. This enables consumers to track the origin of their produce and meat and may help reduce food waste by providing data on when the product was produced. 

Blockchain technology also allows small farmers to access larger markets. Small farms and growers in undeveloped countries struggle to reach consumers due to major competition from larger farms and food manufacturers. 

A blockchain startup has released a blockchain-based trading platform for agricultural products. The platform gives small farms the ability to trade and sell food around the world.

Along with opening the doors for small farms, the platform is helping farmers increase their efficiency. Farmers can easily track sales and other factors that help match output to demand, providing further reductions to food waste.

Complete transparency also allows buyers to verify the source of their food. The data obtained during the transaction may include where and when the product was harvested, along with other relevant information. 

Supply Chain Management

The agricultural supply chain is complex and includes a lot of moving parts. Blockchain technology can help track and monitor the entire supply chain, leading to the following advantages:

  • Lower food costs and increased profits
  • Access to data for improving crop selection
  • Increased food safety through better tracking

The use of blockchains may lead to lower food costs for consumers and increased profits for farmers. Farms traditionally rely on third parties to coordinate the delivery of goods to wholesalers or food distributors. An agent handles the transactions and ensures the goods are delivered, which adds to the cost of the food.

Using blockchains for procurement tracking may eliminate the need for agents and third parties. This reduces the costs of supplying food to local stores, giving farmers a larger profit margin, which may also translate to lower prices for consumers.

Tracking food provides additional advantages to consumers and farmers. Consumers may gain the ability to track the origin of the products they purchase at local grocery stores. Farmers may use the technology to monitor sales to improve crop selection for the next season.

Retailers and companies involved in the logistics of the supply chain may use the data contained in the digital ledger to improve the efficiency of their operations. With improved supply chain management, produce can reach the shelves faster.

A unique benefit of increased traceability is food safety. For example, tracking the source of an E. coli outbreak allows retailers to remove affected produce or stop shipments to protect consumers. This process is much more efficient with transparent supply chain management.

Agriculture Insurance

Farmers typically obtain insurance to protect against losses due to unexpectedly small yields or unpredictable weather. Filing a claim is a complicated, time-consuming process. Blockchain technology can streamline the claim process, offering several benefits:

  • Automated claims process
  • Faster payouts for claims
  • Access to affordable insurance

Several major insurers already use distributed ledgers to manage insurance claims. They use blockchains to create smart contracts that are automatically triggered when specific situations occur, such as crop damage due to a tornado. 

The blockchain can store information needed to verify the claim. Automatically updating the ledger with crop data, weather information, and other statistics eliminates the risk of false claims, which benefits the insurer. Farmers can enjoy the peace of mind that comes with a straightforward claims process.

In rural areas, small farm holders are less likely to obtain insurance due to the complex validation process. With a more efficient insurance system, smaller farms may be willing to purchase insurance products to mitigate their losses.

Many of the insurance options available are index-based. With index-based insurance, payouts are completed based on a measurable index, such as weather conditions. For example, an exceptionally large amount of rainfall may trigger a payout.

Blockchains facilitate this process by automating the collection of data and triggering the payout, which reduces risk. Farmers can also receive more timely payouts, without waiting for an insurance agent to inspect damages. 

Finance Management

Farmers may also use blockchain technology to manage their finances. A large farm often has multiple income streams and dozens of expenses. Distributed ledgers provide an efficient platform for managing finances and tracking expenses.

Another unique feature of blockchain technology is the ability to handle transactions without the need for a central authority. Farmers could sell directly to suppliers or distributors without involving banks. Payments would be handled through software that updates the digital ledger, with farmers and buyers maintaining updated records of all transactions.

Along with eliminating the need for banks or agents to facilitate sales, blockchain technology may create new financing opportunities. Farmers could seek investors and microfinancing. Investors would manage their investments directly through a digital ledger instead of involving third parties.

Land Registrations

By creating a secure digital ledger, blockchain technology may assist with land registrations. In underdeveloped countries, rural farmers sometimes struggle to keep their properties, especially when the region is affected by war or natural disasters.

Blockchains can create incorruptible records for land registrations, helping farmers permanently record their ownership of an area of land. Several countries have started using blockchain technology for this purpose. 

For example, the Swedish government has started tracking land registries and property transactions using blockchain technology. The Republic of Georgia and India are also experimenting with the digital ledgers for land registrations.

Precision Agriculture

Precision agriculture is a growing industry that may revolutionize farming. It relies on advanced technologies to monitor crops and cattle, improving farm management processes. 

Some of the uses of precision agriculture include:

  • Improving yields through advanced crop monitoring
  • Reducing waste on farms and ranches using big data
  • Tracking and monitoring livestock for better health

Blockchain technology aids these processes by providing a more efficient platform for compiling information. Digital ledgers are easily updated and can hold vast volumes of data, assisting with monitoring applications.

Risks of Implementing Blockchain in Agriculture

Blockchain technology offers many potential advantages to farmers around the world. However, the technology currently has a few limitations and introduces several concerns:

  • Availability of case studies for blockchains
  • The complexity of implementing the technology
  • Potential security risks of using blockchains

One concern is the reliability of the data. For blockchains to provide solutions for transparent transactions or analyzing farm data, they need to obtain accurate data from sensors and equipment. However, as with most new technologies, the biggest obstacle is widespread adoption. 

Until more farmers start using this technology, there is not a lot of real-world examples to showcase the benefits of blockchain. Farmers may hesitate to implement technology without carefully analyzing the impact on their current processes.

Blockchain is also relatively new in the agriculture industry. Farmers have a limited selection of tools and software for introducing blockchains, increasing the difficulty of implementing the technology.

Updating a large blockchain with streams of data from sensors and monitors also requires a wireless network. Many rural farmers rely on DSL and older cellular networks, which may not provide the bandwidth needed for blockchains. Until rural regions receive reliable 4G networks or the latest 5G networks, blockchain technology may not be an option for all farmers.

Along with the challenges of using blockchain technology, farmers are concerned about the security risks. While blockchains are considered more secure compared to central databases, they still have security issues, such as:

  • Lack of full-scale testing
  • Potential endpoint vulnerabilities
  • Lack of standards or regulations

As a relatively new technology, blockchains have not been fully tested in a large-scale setting. While the technology is used to manage cryptocurrencies, the blockchains used for digital currencies have not reached their peak sizes. Digital ledgers may eventually become too large for some software to process.

With a lack of full-scale testing, developers also have very limited experience addressing issues with the code. A simple glitch could make the entire blockchain unusable. A large blockchain with many users may also increase the risk of malicious attacks. The best practices for responding to these issues have not yet been developed.

The main security threats come from the endpoints where humans interact with the blockchain. Users may provide false information when completing a transaction. After the transaction is completed, altering the record is almost impossible. 

There is also a lack of standards and regulations for blockchain technology. It is uncharted territory and farmers are traditionally skeptical about adopting unproven technologies. 

Conclusion – Is Blockchain the Future of Farming?

Blockchain technology is set to change the way many industries operate. In the agriculture industry, blockchains may simplify many existing farming processes.

From transparent transactions and increased traceability, blockchains bring many advantages. However, the complexity of implementing the technology remains a major challenge. 

Farmers that are willing to try innovative new technologies may find themselves at the forefront of an efficient new approach to farming.