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Blockchain for AgriFood Online Course Module 5 5.2 Blockchain Use in the AgriFood Sector

DECENTRALIZATION

  • Definition: Trust in blockchain in the agrifood sector involves confidence in the decentralized nature of the technology. Participants trust that there is no central authority controlling the entire network, reducing the risk of manipulation or single points of failure.
  • Role in Trust: Decentralized blockchain networks enhance transparency. All participants have equal access to the distributed ledger, fostering trust in the accuracy and authenticity of information. Decentralization also promotes accountability, as no single party has unchecked control over the entire system.

Trust also relies on transparency.

TRANSPARENCY

  • Definition: Trust is facilitated by the use of smart contracts, self-executing code that automates and enforces predefined rules in agreements, reducing the need for intermediaries.
  • Role in Trust: Participants trust that these contracts will execute as programmed, reducing the need for intermediaries and streamlining processes. Trust is built through the execution of predefined rules, ensuring that contractual conditions are met without the possibility of manipulation.

Blockchains enable good digital risk management.

DIGITAL SECURITY

  • A rigid tamper-proof chain : Both the content of the blocks within the blockchain and their order are tamper-proof. This relies on the decentralised architecture and the consensus principle. On top of this, there can be a mechanism incentivising positive behaviour, disincentivising negative behaviour, and a cryptographic system supporting strong technical guarantees.
  • The PoW relies on consensus and a cryptographic proof that is costly in terms of computing power, while the PoS relies on consensus and an incentive structure and has not yet proven it could be trusted at a large scale.

RISK MANAGEMENT

  • Definition:  Trust in the context of risk management involves the confidence that the technology is designed to identify, assess, mitigate, and respond to potential risks effectively.
  • Role in Trust: Effective risk management strategies, including the identification and mitigation of potential risks associated with blockchain implementation, contribute to the overall trustworthiness of the technology. It is integral to building and maintaining trust in blockchain technology within the agrifood sector.

SECURITY MEASURES

  • Definition: Trust in blockchain includes confidence in the security measures implemented, such as cryptographic techniques, encryption, and access controls.
  • Role in Trust: Participants trust that the technology is designed to protect against unauthorized access, tampering, and data breaches.

Trust in the blockchain can never be complete. Several elements have questioned this trust.

DIGITAL SECURITY

  • A rigid tamper-proof chain : Both the content of the blocks within the blockchain and their order are tamper-proof. This relies on the decentralised architecture and the consensus principle. On top of this, there can be a mechanism incentivising positive behaviour, disincentivising negative behaviour, and a cryptographic system supporting strong technical guarantees.
  • The PoW relies on consensus and a cryptographic proof that is costly in terms of computing power, while the PoS relies on consensus and an incentive structure and has not yet proven it could be trusted at a large scale.

FURTHER ELEMENTS CHALLENGING THE COMPLETE TRUST

  • While blockchain technology holds great promise for enhancing trust in the agrifood sector, there are certain elements and challenges that have questioned or may question the complete trust in its implementation.
  • Some of these elements include:
    • Technology complexity,
    • Integration challenges,
    • Scalability concerns,
    • Data Privacy Concerns.

HOW CAN BLOCKCHAIN IMPROVE TRUST IN THE AGRIFOOD SECTOR

  • In the agrifood sector, blockchain technology can improve trust among supply chain actors and between producers and consumers through the following specific mechanisms:
    • Traceability: By allowing the creation of a transparent ledger that traces the journey of agricultural products from the farm to the table. This visibility enhances trust by providing consumers and supply chain participants with accurate and real-time information about the origin and handling of food products.
    • Immutable Records: The immutability of blockchain records ensures that information about the origin and characteristics of food products cannot be altered. This reduces the risk of food fraud and counterfeiting, contributing to increased trust among consumers and supply chain participants.
    • Real-Time Updates: Utilizing IoT devices and sensors connected to the blockchain allows for real-time monitoring of the supply chain. This transparency enables stakeholders to track the status and location of products at every stage, ensuring authenticity and reducing the risk of counterfeiting.

TYPES OF BLOCKCHAINS – PUBLIC VS. PRIVATE

  • The choice of blockchain type can impact the transparency and, consequently, trust in the agrifood sector.
  • Public blockchain: highly transparent; all transactions visible to anyone on the network
    • Enhance trust between businesses and consumers by providing a transparent and tamper-proof record of transactions; consumers can independently verify the authenticity and origin of products.
  • Private blockchain: restricted access to a set of participants, reduced transparency in comparison to public blockchains; participants can see transactions, but the broader public doesn’t have access
    • While a private blockchain may increase trust within a company or the participants of the agrifood sector, it may not enhance trust between businesses and consumers because the level of transparency is limited.

TYPES OF BLOCKCHAINS – PERMISSIONED VS. PERMISSIONLESS

  • Permissioned blockchain: control who can participate in the network and validate transactions; participants have visibility; external entities may not have the same level of transparency
    • Permissioned blockchains can improve trust within a closed ecosystem of businesses as participants are known and accountable. However, transparency might be limited when interacting with external stakeholders.
  • Permissionless blockchain: allow anyone to participate; often associated with public blockchains; high level of transparency
    • Permissionless blockchains can be effective in building trust, especially in scenarios where inclusivity and openness are essential. Consumers may trust a system more when they know it is not controlled by a single entity.

PROS VS. CONS

Transparency:

  • Blockchain enhances transparency by providing a tamper-proof and publicly accessible ledger, allowing consumers and stakeholders to track the entire supply chain, from farm to table.

Traceability:

  • Blockchain's immutability ensures accurate traceability, making it highly effective in quickly identifying the origin and journey of products, instilling confidence in the supply chain.

Smart Contracts:

  • Implementing smart contracts automates and enforces agreements, streamlining processes, reducing the risk of disputes, and enhancing trust by ensuring that predefined conditions are met.

Reduced Fraud:

  • The decentralized and secure nature of blockchain reduces the risk of fraud and counterfeiting, creating a more trustworthy environment for both consumers and supply chain actors.

Scalability Challenges:

  • Blockchain networks may face scalability issues, which, if not addressed, could impact the speed and efficiency of transactions within the supply chain in the agrifood sector.

Data Privacy Concerns:

  • Despite security features, concerns about data privacy on a decentralized ledger may arise, necessitating careful consideration of data protection regulations

Regulatory Uncertainty:

  • The evolving regulatory landscape for blockchain in the agrifood sector may lead to uncertainty and potential compliance issues as regulations are developed and implemented.

Integration with Existing Systems:

  •  Integrating blockchain with existing agrifood systems and technologies may pose challenges, requiring careful planning and potential modifications to current processes.
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