Blockchain and business: Looking beyond the hype
In Australia there are 85,681 farm businesses. According to the National Farmers Federation, the complete agricultural supply chain, including the affiliated food and fibre industries, provide over 1.6 million jobs to the Australian economy. Agriculture, however, is one of the least digitised sectors in Australia.
In 2015, Australian startup AgriDigital was formed to fix the inherent problems the agriculture sector was facing, and targeted the economic supply chain with one specific piece of technology: blockchain.
AgriDigital kicked off a pilot in the Australian grains industry to prove the potential of distributed ledger technology (DLT). Using JP Morgan's Quorum protocol -- an enterprise-focused version of Ethereum -- AgriDigital partnered with CBH Group, a grain growers' cooperative that handles, markets, and processes grain from the Wheatbelt region of Western Australia to prove the technology had a place in the supply chain.
Speaking with ZDNet about the pilot, AgriDigital strategic projects and engagement manager Bridie Ohlsson explained that CBH Group was specifically interested in investigating how blockchain could form part of a digital solution, improving operations and supporting farmers and supply chains in a number of ways.
"We were looking at how we could take a batch of organic oats from on-farm, all the way through to the retail consumer and capture that data and store it using blockchain technology in a way that was immutable and completely verifiable and transparent to participants where it needed to be," she explained.
This way, once the product reached the end consumer, they could look at the digital asset and see the entire provenance, production, and processing information.
AgriDigital's founders are farmers with 80 years' experience working across the farming sector between them. The startup now feels it's well-positioned to take advantage of new technologies in agriculture.
"Agriculture supply chains are incredibly complex ... coming from a really long history in agriculture, our founders were in a position really early on to see the impact blockchain could have, particularly when we're thinking of agriculture as a supply chain or value chain rather than within unique, individual businesses," Ohlsson said.
"Agriculture is the least digitised industry -- agriculture missed out on a lot of the benefits of the internet the first time around, simply due to a lack of connectivity and we're really determined that agriculture doesn't miss out again."
For the pilot with CBH, the startup isolated two key challenges that have long-plagued the grains industry and growers globally: Matching title transfer of the grain asset to payment and supply chain provenance and traceability.
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As a commodity management platform that allows for business to be conducted via blockchain, AgriDigital created a token to represent digital title to grain.
Instead of handing around pieces of paper between participants along a supply chain, and moving it around on site between accounts, the token sits on a blockchain, meaning everyone that needs to see that information can see it and trust it.
"I think [blockchain] is a really natural fit," Ohlsson said. "You have multiple parties, each with completely differing interests, often competing, needing access to a shared set of data around a common asset that moves between all of them -- it's very well suited to distributed databases and I think the use of smart contracts to automate and drive efficiencies across supply chains is very real."
The Quorum blockchain was chosen due to its focus on privacy and scalability -- it also offers 400 transactions per second. The privacy aspect provided the foundation for the second part of the trial.
"The other side of what we were looking at was transactional security, that's actually solving for counter-party risk and the risk of not receiving payment that growers face -- and indeed any seller faces -- along the supply chain," she continued. "We were looking at how we could use smart contracts and digital assets to facilitate the delivery versus payment scenario that is not quite a reality in the supply chain."
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AgriDigital is also working with Netherlands-based financial services provider Rabobank on a project that aids with trade finance.
"We have quite a number of partners we work with to test out our smart contracts and that's really important to us because as a tech provider we want to be producing technology that can be used by a whole range of different parties," Ohlssen said.
To Ohlsson, the supply chain has a chance as the best use case for DLT.
"I don't think we can get away from seeing how natural, important, and real blockchain can be for supply chains right now -- it's just a matter of getting that commercial adoption and delivering it as a commercial product," she told ZDNet.
"That's the bridge that we like to think our solution fills ... sitting in that spot between the base-level protocol which are dealing with changing consensus algorithms to cater for scalability and dealing with privacy solutions."
According to AgriDigital, blockchain offers a redistribution of power in the agriculture supply chain, by shifting how trade finance is viewed and giving more control to the farmers.
"The accessibility to liquidity that blockchain can provide -- not just in Australia but globally -- freeing up tier two and tier threes to actually access real-time finance and have commodity and asset-backed financing where you can actually get a real view of an asset, you can create something that's digital and completely represents what's happening in the physical world," she explained.
"At the moment, all we can rely on really is what the person one transaction down a supply chain tells us about an asset -- we can't look at a bag of rice and say, 'OK rice, tell me about you' -- we have to trust whoever has put that label on is telling you the right thing ... with blockchain we can create digital rice that can talk to us and it can share its history and information and I think that is really freeing for our value chain and it will offer up a whole range of opportunities for the participants all the way down the supply chain."
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Blockchain also enables the farmers to make better and more informed decisions around where to sell their commodities.
"We really hope that's what we're delivering to farmers, the ability to make better decisions based on a valuable dataset," she added.
"We see blockchain as a big piece -- but definitely still a piece -- of creating digital and robust smart contracts -- you need to involve IoT, you need to look at having machine learning and artificial intelligence involved so you can actually understand better what's happening and drive insights from all the data that you're capturing."
To Ohlssen, the digital asset becomes somewhat of a platform on which analytics tools, marketplaces, financing platforms, and the like can be built.
"This premise of generating a digital asset just opens up the supply chain to so many new products and opportunities that we haven't had accessible before," she said.
"This isn't about carving out a bigger piece of a pie, it's about growing a pie and there's just so much potential in the area of agricultural supply chains and technology generally and I really see blockchain and what we're doing is the foundation for so much growth."
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