Bitcoin points the way to major changes for food and energy industries
While the bitcoin market relies on blockchain to transmit and store the value of each token, the transparent tracking technology might have even greater potential in tracking food and energy transactions.
Blockchain is upending the world’s financial markets with the rise of bitcoin, and now the digital-ledger system is poised to do the same next year for raw materials like food and energy.
Companies including BP, ABN Amro Group and Mercuria Energy Group said last month they will adapt blockchain to streamline physical energy transactions. In October, four banks joined a venture started by UBS Group and International Business Machines to use the technology in a platform for the global goods trade. Natixis and Trafigura Group announced in March they will employ the system to finance buying and selling oil.
“We’re talking about this massive change in the way that business is being done,” said Eric Ervin, the chief executive officer of Reality Shares, a San Diego fund manager that created an index to track returns of companies adopting the technology. “Everything happens automatically, without a bunch of paperwork, processing and transferring.”
Blockchain is an online ledger that records transactions using encryption to ensure security while allowing a network of users to verify them. The most prominent use was in bitcoin, which became a global sensation in 2017. Over the past year, as investors became more comfortable with how bitcoins and ledger systems work, the price of the cryptocurrency has surged more than 2,000 percent and touched a record this month of $17,578.45.
While the bitcoin market relies on blockchain to transmit and store the value of each token, the transparent tracking technology has “much greater potential” across businesses that increasingly need to store and exchange massive amounts of data, Bloomberg New Energy Finance said in a Sept. 12 report.
Farmers already see the possibilities. The government of Ukraine said in October it will use blockchain technology to manage its registry of crop land because the current system is vulnerable to fraud that leads to ownership disputes. In sub-Saharan Africa, a fertilizer company and an exchange owner are using the technology to develop an agricultural commodity platform.
The technology is a big selling point for the global food industry to identify counterfeit ingredients and to trace the source of contamination during product recalls. Michigan State University estimated fraud costs the global food industry as much as $40 billion a year. In August, IBM said it’s working with a group of companies including Walmart, Nestlé, Tyson Foods, Unilever and McCormick & Co. to identify ways they can incorporate blockchain.
In most food-supply chains, “it might take weeks to figure out where it went from source to destination,” and in some cases, the source may not be known, Arvind Krishna, IBM director of research, said at a Dec. 5 technology conference in Park City, Utah. “On a blockchain, it takes just seconds.”
More are joining in. JD.com, China’s second-largest e-commerce platform, Walmart, IBM and Tsinghua University said Thursday they’ll work together to create a blockchain-based system for collecting data about the origin, safety and authenticity of food.
The growing use of blockchain means “the opportunity to transform what is fundamentally the underlying infrastructure to every transaction that happens with consumers and business-to-business,” said Brigid McDermott, IBM vice president of blockchain.
De Beers is investing in a blockchain platform that traces the origin of diamonds in a bid to boost confidence in an industry that has been marred by the sale of gems from war zones.