You’ve probably heard about blockchain mostly, if not exclusively, in the context of cryptocurrency (e.g., Bitcoin). But blockchain technology also has exciting applications in industries beyond finance. In this post, I’ll talk about two areas where blockchain is just beginning to be applied — food supply chain tracking, and international aid.
A quick overview of blockchain
For the purposes of this post, all you really need to understand about blockchain is that it’s a transparent, immutable, and permanent (i.e., falsification is extremely difficult and cost-prohibitive) method of tracking and legitimizing transactions.
To get a bit more specific, blockchain is a Distributed Ledger Technology, or DLT. Let’s dig into each term in that acronym (not necessarily in order):
- A ledger is a record of a transaction. A “transaction” doesn’t have to be financial in nature — it can be anything that records a state of change. For example, your doctor might measure your blood pressure in each time you visit his or her office, and document those measurements in your medical record. Each measurement in that record is a ledger.
- The distributed nature of the DLT refers to the fact that there are multiple sources of truth. In our blood pressure example, maybe you also write down your blood pressure measurement in a notebook during each visit, creating a record that’s separate from the one kept by your doctor.
- Finally, the technology piece of the DLT is what keeps all the distributed ledgers consistent. The DLT employs a “consensus algorithm” to ensure that each time a transaction record is added, every ledger in the network determines and records the same value according to the same rules. Because the consensus algorithm is extremely computationally intensive, it’s very difficult — if not impossible — to falsify a transaction record.
If you’d like to dive deeper into the technical side of blockchain, check out this post. For now, though, we have enough background to take a look at some applications.
Blockchain for food supply chain monitoring
If you live in a developed, urban area, you probably don’t think much about how your food gets from farm and factory producers to your grocery store shelves. Unless, that is, there’s a problem — like the E. coli scare that swept the United States last fall.
The truth is, though, that food supply chains are incredibly complex even when things go well. There are issues of transparency — consumers increasingly want to know where there food has been, how it’s been processed and handled, and whether it meets certain environmental and social responsibility standards. And, of course, there are also issues of accountability and trust — how do we, as consumers, know that our food has been adequately inspected for contaminants, refrigerated in transport, etc.? When contamination scares happen, how do we reestablish trust in the systems that keep our food safe?
Blockchain technology might provide a better way of answering those questions, and of tracing our food’s journey from producer to consumer. By recording steps in the supply chain on a blockchain, we can allow consumers to look back at a secure record of a product’s production, transportation, and inspection history before making a purchase. This application of blockchain is promising enough that Walmart now requires suppliers of leafy greens, including lettuce and spinach, to participate in blockchain-based tracking; Italian brand Barilla has also partnered with IBM to track production of the basil herbs that go into its pasta sauces.
Blockchain for international aid
According to the UNHCR, the global displaced population is at an all-time high. More than 25 million people around the world have fled their home countries as refugees — and providing them with the services and support that they need is an ongoing challenge. Even where donor funds are available, transferring money and supplies to beneficiaries is tricky in countries where financial institutions are nonexistent or riddled with corruption and fraud.
Recently, the World Food Programme (WFP) teamed up with technology firm Parity to tackle some of these issues with blockchain. By using a blockchain network, the WFP has been able to directly transfer cash to people in need, without requiring a bank or other third party to transfer donations to local currency or verify the transactions. The blockchain program aided over 100,000 refugees in 2018, and saved the WFP over $40,000 in bank transfer costs. Refugees are also given permanent, digital biometrics-based identity records as part of the program, making it easier for them to apply for additional aid and other UN services.
Barriers to using blockchain for social entrepreneurship
If the programs described above are so successful, why don’t we see more applications of blockchain technology in areas like food supply and international aid?
One issue is motivation and incentives — verifying blockchain transactions is a computationally intense process. In financial systems, blockchain “miners” can be rewarded with a small financial bounty. But that incentive is hard to replicate in a government or nonprofit context.
There are also ethical issues. For example, we all have a choice as to whether we invest in Bitcoin — but is it ethical to tie a refugee’s food supply, or a small farmer’s livelihood, to participation in a blockchain network, especially if that network requires their biometrics or other personal data as part of the verification process?
Finally, there’s the question of effectiveness. Blockchain applications in these areas are certainly promising, but is integrating blockchain the most effective thing we could be doing to tackle issues like food contamination and refugee support? For some people in these fields, blockchain seems like a distraction that could take attention and resources away from other, deeper problems.
Barriers aside, decision-makers across industries are recognizing that blockchain has exciting potential in a wide variety of areas beyond finance — and I expect we’ll see more of these new and innovative applications in 2019 and beyond.