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Blockchain altering ag commodities trading

Blockchain is still in its very earliest days, but those working in the field say the technology will be game changing, just like the internet.

When people hear the word “blockchain” they more often than not think of cryptocurrency such as bitcoin. But blockchain experts say the technology goes far beyond bitcoin and predict it will be a major force in all sectors of the economy, including agriculture.

Blockchain is a hot topic in the tech world right now. Many are saying it will do for data management what the internet has done for information and communication: Allow for the decentralization and democratization of data.

In essence, blockchain is a distributive ledger database that stores blocks of digital data with each block in the chain representing a transaction. There is no central single control or management of blockchain and the data is publicly shared and continually reconciled.

On Nov. 14, the North Carolina Biotechnology Center hosted a forum “Blockchain: The Digital Future of Ag Product Traceability” that examined how blockchain can be used to improve traceability and transparency in agriculture, improve food security, strengthen supply chains and allow for faster transfer of payments all within one virtual system.

Andy Kennedy, interim director Global Food Traceability Center Institute of Food Technologies, said a key benefit of blockchain for agriculture is better data management. The technology can help lower costs and improve transparency across all sectors of the food chain.

“It optimizes logistics. It enhances food safety with traceability and transparency. It can help improve utilization and yield with information you can trust and that growers can use,” Kennedy said at the forum.

Kennedy noted that the biggest commodity producers in the world are already getting together to use blockchain technology to lower the cost and increase the efficiency of the commodity grain market. He said commodity trading could become peer-to-peer information sharing and order fulfillment through blockchain.

“Do you really need the Merc (the Chicago Mercantile Exchange)? Do you really need people doing that trading? It could become commodity trading without commodity traders. You can trade commodities and have proof positive that you bought it, you hedged it, you transferred it and it’s gone to the warehouse, all done from your desk, and its data you can trust,” Kennedy said

For commodity trading, Kennedy said blockchain can remove the paper used in making trades and do away with the need for third party verification. Through the blockchain, all players can share information up and down the supply chain which will help farmers decide what crops need to be planted.

It will allow for the capture of data from many different sources and allow farmers, processors, retailers and regulators to share aggregate information.

Kennedy said it’s all about trust.

“The genesis of blockchain and bitcoin came out in 2008 with the collapse of the financial system. There came a need for a trusted security so that’s what spawned blockchain and bitcoin. It’s having currency without a bank, without a brokerage company, without a government. The idea of blockchain is to build trust from a computer, an algorithm, a mathematical proof. The idea is consensus, the wisdom of crowds.”

Mark Parzygnat, program director of blockchain for IBM, emphasized that blockchain goes far beyond bitcoin and cryptocurrency. “Cryptocurrency is simply an application built on blockchain,” he said.

“Blockchain is that core underlying technology that actually is fantastic for tracking data or assets. What you do with blockchain is you append only. They are cryptographically linked one block to the next so if you change anything in the midst of it, you basically break that ledger. It has to be repaired or notified as a bad actor and taken off the chain for future transactions,” he said.

“The real power of blockchain is decentralization: getting a democracy around that data that is actually being built and used and shared. Everybody has a copy of this ledger,” he said.

Each block in the chain is connected to the one before it, creating an irreversible, immutable chain. The blocks are linked together, preventing any block from being altered or a block being inserted between existing blocks.

Through blockchain, all involved can have consensus that the transactions are real, accurate and good through algorithms. Parzygnat said this all must be proven before the transactions can be appended to the ledger.

“That absolutely is the key here: Get rid of the central bottle neck. You don’t want somebody controlling everything. That’s where the power of blockchain came from and through this common understanding and consensus to agree upon all transactions that are done as things come together. That is what the power of blockchain is,” Parzygnat said.

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