Blockchain: What does it mean and how could it impact business?
One of the most significant technology trends food companies and firms in other sectors are watching now is blockchain. Originally associated with cryptocurrencies such as bitcoin, this distributed ledger technology has many other applications and benefits that could prove invaluable to business and may have as big of an impact on them as the internet.
To start with the basics, according to IBM’s Blockchain for Dummies book, blockchain can be defined as “a shared, distributed ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible—a house, a car, cash, land—or intangible like intellectual property, such as patents, copyrights, or branding. Virtually anything of value can be tracked and traded on a blockchain network.”
Blockchain technology relies on data logs maintained on computer networks. Using blockchain technology can expedite settlement times, reduce operational costs, and increase overall efficiency, visibility, and transparency in a secure manner. Users from across the country or around the world can see information in real time.
Blockchain is built on three principal technologies. The first is establishing identity using public- and private-key cryptology. The second is a system of records providing data on a distributed network. And the last technology is a platform, or a protocol, containing information broadcast to all “blocks” across the network. Together, all three work to provide access to a blockchain or a distributed network in a secure and transparent way.
While describing blockchain gets technical, what business leaders should understand is that this technology can go beyond making information exchange faster and more secure to a vastly improved exchange of value. The World Economic Forum points out in a report that blockchain’s purpose is to allow individuals to exchange currency or other assets without a third party managing the transactions. It also could completely redefine business processes within and between companies.
Businesses in various industries are now recognizing the advantages of using blockchain in their own operations. Food companies, for example, can use blockchain to make or receive an up-to-the-moment update on a product’s status at any point in the supply chain, from its time in the field or barn, to its ride to the store on a truck, to its stay on the grocery shelf. This provides a tremendous advantage to companies and their system partners and users—whether they are growers, processors, manufacturers, shippers, marketers or retailers. Blockchain provides all parties with transparency in daily business and in times of urgency, including minimizing the effects of food-safety recalls or halting food fraud.
Major food companies such as Nestlé, Dole, Unilever, Walmart and Kroger are developing blockchain capabilities as a result. In 2017, IBM teamed up with these companies to secure digital records and improve traceability using blockchain. In particular, they see a significant opportunity to shorten the time it takes to investigate foodborne illnesses from weeks to seconds.
Walmart found, during a test pilot of the technology, that tracing a package of mangoes from the farm to the store took just two seconds with blockchain, instead of days or weeks with traditional searches. This one advantage alone would be important to public health and customer relations. One in ten people globally becomes sick each year and of those, 420,000 die due to foodborne diseases, according to a Forbes article. In the United States, 3,000 die each year for the same illnesses, as reported by the Centers for Disease Control and Prevention.
Blockchain can also help food companies automatically track other important data, including temperature, quality of goods, shipment and delivery dates, and facilities’ safety certifications, according to fortune.com.
Some companies are even using blockchain’s transparency to market to the end customer. Cargill is exploring its options in this area. Starting in November 2017, it began selling blockchain-tracked turkeys in supermarkets such as Kroger, Walmart and Albertson's in 18 states. Consumers concerned about the source of their food can go online to find out where these turkeys were raised and where to buy them.
Beyond Food to a Cornucopia of Other Sectors
Other industries also see great promise in blockchain technology. Having a secure, transparent information network appeals to firms in healthcare, banking, manufacturing, and most other entities that rely on complex supply chains. What’s stored in blockchain could be used to improve distributed cloud storage, digital identity, smart contracts, digital voting and decentralized notaries. For example, the fashion industry is beginning to see opportunities with this technology. Chinese-New York fashion label Babyghost has partnered with tech companies BitSE and VeChain to put unique digital identification on clothing, which could reduce counterfeiting, help better manage the supply chain and assets, and eventually report on customers’ experiences wearing the clothes. Protecting the designs’ intellectual property is the most immediate use for blockchain, in an industry with revenues of $600 billion a year. It could also let consumers know, with a sweep of their cell phone over a QR code on the label, who made an item, how much they were paid and where it was made, all details that could generate greater trust and brand loyalty.
It’s important to note, however, that these are potential outcomes from using blockchain and those business cases have yet to be proven in order to understand overall impacts, value proposition and legal implications. Given the relatively early stages of this technology, focusing solely, or even very heavily, on blockchain without examination of the associated risks, including, but not limited to, cost, security and the regulatory environment, can be detrimental.
In addition, a challenge for blockchain technology remains participation; all parties must adopt the technology in order for it to work. In food distribution, for example, not all companies are equal and some can exert their power more than others. Still, even as blockchain evolves, it has become big business. According to a Deloitte report, venture capitalists have invested $1 billion in more than 120 blockchain start-ups during the last three years. There are more than 800 blockchain-related companies, and the World Economic Forum expects blockchain platforms to store at least 10 percent of global GDP by 2025.
Imagination is the Limit
The internet began as a highly technical concept without bells and whistles, just as blockchain has. But with ingenuity and creativity, the internet has both embraced and transcended the practical to open up an entire new world to business and consumers. Indeed, if consumers can trace their Thanksgiving turkey to the very farmers who raised it, the full gamut of customers for all kinds of businesses may find renewed confidence, commitment and even delight in the advantages that blockchain technology offers to the companies with whom they transact.