Bitcoin is more than a currency.
Bitcoin is more than a currency and has important implications for food producers.
This from Kevin Cooney, ASB's head of rural corporate, as quoted from the NZ Herald, 20 July 2017.
Behind bitcoin and most of the other crypto currencies out there is some very useful software called blockchain and it is the blockchain technology that can revolutionise the way farmers do business around the world.
Let's consider how blockchain works before we hear from Kevin Cooney on how he believes blockchain can be the future of farming.
- To start our blockchain example, someone decides to undertake a transaction of some kind. The transaction can involve payment using bitcoin or any other currency, but it might also include a contract, records or other information that needs to be stored as part of the transaction.
- The requested transaction is sent to a network of private computers called nodes. Here the information is shared with millions of private computers, not copied or locked for editing by any one operator. There is only ever one version of the transaction which helps ensure its integrity.
- The network of private computers all share in validating the transaction using a known set of rules.
- Once the transaction is verified, the data is added as a block to the chain of all the previous transactions - hence the name blockchain.
Where do the banks come in all of this? Surely bitcoin and all the other cryptocurrencies have the potential to disrupt normal banking as we know it.
Rather than bitcoin as an alternative currency, the banks are interested in the development of the blockchain technology and how it might revolutionise the way they conduct their business, no matter what type of currency people are using. This is where Kevin Cooney from ASB is coming from. When he looks at blockchain technology he sees:
- Blockchain being ideally suited to food transactions as it connects buyers and sellers directly. In its simplest form it would form a trusted network for buying and selling food.
- Buyers will be able to see where their food has come from because the relationship with the food producer will be direct. This is called the provenance of food and it is already an important part of food retailing. I, for one, want to know where my food and wine has come from and who produced it.
- The blockchain transaction will be fast, secure and transparent.
- Records of the transaction are available to everyone and are reliable.
- Blockchain technology will be able to handle the volume of information that comes with each food transaction. If you want, you will be able to see the animal providing the meat you intend to purchase in the field from the start of its life to the end of its life. You will be able to track the meat as it leaves the meat works and as it enters the store. Sensors record the time, date and images as it happens. All that data and imagery would be available to the end customer as part of the transaction. This provides a lot of confidence to the retailer and the consumer that the product is special and valuable. It all becomes part of the claim that this food is top of the range, best quality and safe to eat. A rare thing worth striving for.
- Kevin believes that blockchain technology has the potential to reduce inefficiency in the food supply chain and manage food waste better. It will also impact strategic thinking and positioning for food producers. A great way to get closer to the consumer!
Kevin tells a story of how an Australian bank recently trialled using blockchain technology to purchase wheat from an American grower. "Instead of waiting for the usual manual letter of credit arrangement, the cotton shipment was paid automatically with the necessary verification triggered automatically through sensor-based physical tracking of the wheat shipment in real time. Blockchain provided greater certainty, reduced errors and did in minutes what usually took days." (NZ Herald).
Kevin also tells how Australia is funding research into the use of blockchain technology to advance their ability to trade globally, and this was back in their 2016 budget.
Potentially, blockchain will become a component of the drive here in New Zealand, a nation totally reliant on it global trading status, to capture more margin from the sale of the food we produce and truly get closer to the end customer.
Keep asking great questions ...