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Cryptocurrency and blockchain for farmers

Igor Kutyaev/Getty Images Creative concept of blockchain technology with handshake and finger clicks on a digital tablet on background. digital money transfers and decentralization concept
CONNECTIONS: Farmers have long relied on a handshake to make deals. Today, that is taking on a more virtual look as companies turn to blockchain to track movement of agricultural products. The possibility of even more advancements around cryptocurrency could be on the horizon.
Sorghum Focus: The future of farming will include digital traceability, currency and payments.

From the dawn of time, humans have exercised an innate ability to improve the world around them through the application of expanded knowledge and new discoveries.

From fire to the printing press, and from the automobile to the internet, technologies resulting from knowledge and discovery have changed our daily lives in stunning ways. Nowhere is this truer than in agriculture, where innovations like the mechanical reaper and precision farming radically changed family farmers’ fortunes — often in the span of just a single generation. But what about some of today’s still unfolding technological revolutions? How will those impact agriculture? Will they? I believe the answer is yes.

Understand digital dealings

The terms “Bitcoin,” “cryptocurrency” and “blockchain” are back in vogue. With the dramatic increase in the price of Bitcoin from its March 2020 low of $4,970 to its February 2021 all-time high of $57,464, there is again much talk about the esoteric digital currency and the possibility that it could transform our daily lives as much or more than any other technology in history.

While I won’t prognosticate on whether such a revolution will take place or what the price of Bitcoin will be in the future, I do think keeping an eye on the technology is worth farmers’ time, so I want to overview it here. (Full disclosure: I’m long on Bitcoin, Ethereum and Tezos. Nothing I say here should be construed as financial advice of any kind.)

First, it’s important to understand the difference between a blockchain, which is a type of database known as a distributed ledger, and Bitcoin, which is a type of token or cryptocurrency. Think about the blockchain network like a giant spreadsheet that anyone across the globe can access and use in real time. The beauty of blockchain technology is that a change to the ledger can only happen if the other users agree to confirm that the change is warranted. This immutability means blockchain technology can theoretically bring transparency and traceability to food supply chains. More on that later.

Bitcoin, on the other hand, is fuel that drives a blockchain network. Things get really complicated here, so just remember that the rewards for confirming changes to the ledger come partly in the form of tokens. Bitcoin is type of token or cryptocurrency. As I write this, upward of 4,000 distinct cryptocurrencies are in use.

So how exactly can farmers benefit from this technology? The answer is limited only by your imagination, but most of the potential use cases are still just that — theoretical processes and technologies that exist primarily in the imaginations of extremely forward-thinking individuals. Still, the possibilities are intriguing.

Make sense of blockchain

The most common use case currently being discussed in agriculture looks something like this: A farmer is cutting a field of sorghum. Each time he or she unloads, information on the location in which the grain was grown is uploaded to the blockchain network through precision agriculture equipment. This process is repeated each time the grain changes hands, and the end result is that the consumer has a complete and trustworthy ledger tracking his or her product from the field to the plate.

There are several problems with this case. Grain is commingled, many farmers are uncomfortable with the privacy implications, and this is likely an unnecessarily complicated method of tracking movement of a product through the supply chain. But it should help shed some light on blockchain mechanics and give farmers a working knowledge for when the day comes that every precision agriculture conversation includes a discussion about blockchain technology in the context of traceability. It’s coming soon, if it’s not already here.

Beyond the traceability case, there are a number of other concepts being piloted. There are ways to use the blockchain network to distribute production risk — think crowdsourced crop insurance underwriting. Cryptocurrencies can be used to simplify international trade transactions, and, the distributed ledger concept can be used to track land titles. It will be interesting to watch the opportunities that arise with this technology over the coming years.

Duff is executive vice president for National Sorghum Producers. He can be reached by email at john@sorghumgrowers.com  or on Twitter @sorghumduff.

The opinions expressed by Duff are not necessarily those of Farm Progress.

 

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