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Potential of Blockchain in Agriculture  


By Niti Rawat

Blockchain technology is a moot point for the financial sector as of now, but it holds untapped potential for agriculture. Digital technologies which include artificial intelligence (AI), machine learning (ML), remote sensing, IoT, and blockchain hold the inherent capacity to discard redundancy and streamline operations.

Blockchain Technology, defined as a digital ledger of the transactions with the feature of duplication and distribution throughout the network of systems on the blockchain is also referred to as Digital Ledger Technology (DLT). The system of recording is distinctive with characteristics of decentralisation, transparency, ability to be managed by multiple participants in the process. The use of blockchain in agriculture can meet the ailing production in terms of quantity as well as quality, and efficiency; generating a fair income for the farmers along with the environmental advantage. The world population is expected to reach 9.8 billion in 2050 (UN). As the population increases, there will be greater food requirements. The Sustainable Development Goal (SDG) 2 aims at zero hunger. The Food and Agriculture Organisation (FAO, 2021) aligns the goal to the dimensions such as efficiency, inclusiveness, resilience, and sustainable agri-food systems. The perspective of  ‘Nutrition’ as envisioned by FAO is based on the merits of inclusiveness, resilience, efficiency, and sustainable agri-food systems. The current global crisis has increased the costs and paucity of food, fuel and fertilisers. The current food predicament is concomitant with the climate change problems. There is a burgeoning need for sustainable food systems that can accommodate future generations.

The agriculture sector in India contributed 18.8 percent to the Gross Value Added (Economic Survey, 2021-22). Digital technology with its potential to revolutionise agriculture has been acknowledged and used already by the countries like US, Australia and the Netherlands. India is progressively moving in the same direction with its initiatives such as Digital Agriculture. These initiatives utilise AI, remote sensing and GIS technology besides blockchain technology. Modernised operations, traceability and better pricing options are a few of the many strong points extended by Blockchain Technology. The inclusion of the technology in agriculture can be benevolent in a plethora of ways: First, blockchain can be utilised to monitor the crop and soil by the collection of soil data such as temperature, pH, pesticides, and other crucial weather details, warehousing and the retail and marketing stages. The details on the quality of soil, etc., can facilitate the direct buyers in making conscious decisions. Second, quality control is ensured by the technology in warehousing, distribution and transportation details at this stage. The food safety data ascertained can help determine the safety of food for consumption. Third, the bill details, taxes and other compliance can be met by the innovation, too. Blockchain technology is useful at ferreting out the facts that can be generous to yield fair prices for crops using accounting information. The precautionary measures can be taken quickly for the crops by quick access to information. Fourth, the current drags in food supply chains make it inefficient and inflexible. The current food systems are locking horns with the grey market, dilution, concealment and counterfeiting of food. The use of technology will be conducive to preventing these fraudulent practices. Further, it can help develop trust through transparency. Consumers will be able to retrace the origin, transport, factory, expiration, and other key details. Ethical consumerism can be insured by the transparency of the technology. The environmental sustainability initiatives taken by the producers can also help consumers make sustainable consumption choices. Fifth, agriculture is referred to as “a gamble of monsoons” for a reason, a minute variation in weather conditions can escalate the prices. The transparency offered by blockchain helps to deliver the price variations. Besides, it will help farmers seek their insurance claims. Fifth, the frailties such as credit histories, lack of transparency, institutional credit, etc., impede producers from generating surplus yields. The technology once inculcated can relieve the smallholders; they will be able to get rid of the liquidity constraints. The farmers will be able to directly reach out to the retailers, the intermediaries will be removed which can reduce the costs.

The application of blockchain technology comes with a set of confrontations as well. The blockchain technology that relies heavily upon the data requires a lot of resources such as access to electricity supply, computer upgrades and 3G coverage. The technology demands responsibility that can be garnered only through trusted actors, irrespective of the third-party intermediation (World Bank) that is scarcely available. The interoperability is also a challenge as there are differences in technical interfaces and algorithms among platforms. The smallholders without the devices like smartphones will have to rely upon third parties to deliver and secure the necessary details. The financial institutions may doubt the credibility of such data obtained from third parties. Moreover, the regulations (legal and regulatory frameworks) are prerequisites too. There is a need for structures that recognise the use of digital ID to match the know-your-customer requirements, asset ownership recognition, and enforcement mechanisms for the DLT-based contractual agreements. (World Bank, 2018). With relevant modifications, blockchain technology will go a long way in generating gains and vanquish the multiple rigidities that impede agriculture.