Help or hype: Should food manufacturers invest in Blockchain?
The hype about Blockchain is real, according to Petter Olsen, a scientist at Norwegian research institute Nofima.
“There is a big problem that Blockchain is being oversold at the moment; that the technology providers are pretending that you will automatically have authentic products if you use it. That is completely wrong, and I am negative about these over-exaggerated claims.
But that doesn’t mean it can’t also be helpful for the food industry.
"Blockchain has very important attributes that can fix two fundamental problems in the food industry," he said.
What is Blockchain?
Vice president of food at certification agency Bureau Veritas Vincent Bourdil gives this definition: “Blockchain is a short name for a distributed chain of blocks that traces transactions and assets. It is information which is encrypted, time-stamped and not removable which is openly shared on a ledger by many thousands of computers at the same time.”
There’s no need for technophobes to go running. There are simpler ways to think about it, according to Olsen.
“Every time someone says Blockchain, you should mentally substitute it for the word database," he said. "A Blockchain is a database that is always online, has many identical copies, is synchronised every 10 minutes and encrypted – meaning it is incorruptible.”
“Don’t overcomplicate it. It’s simply a database with these extra properties.”
The first scenario where Blockchain can play a role is in disincentivising fraud thanks to the incorruptibility of the information it stores. Once information is saved on the Blockchain, a continual peer-to-peer verification system means it cannot be changed.
For instance: a consumer picks up a fish pie in a supermarket that contains cod. It’s not possible for him or her to tell, but the pie actually contains haddock, a cheaper fish. This fraud is possible because somewhere along the supply chain, between the fisherman, wholesaler, manufacturer, distributor and retailer, one player sold the haddock as more expensive cod.
“If that information about the haddock suddenly becoming cod was delivered on Blockchain, the lie would be visible. That false statement cannot be over-written. This is one fairly important problem we currently have that Blockchain solves,” Olsen told FoodNavigator at the FoodIntegrity conference held in Nantes this week.
(However, Olsen noted there is no guarantee the information stored on the Blockchain is true in the first place. If falsified information is added onto the Blockchain, it will remain falsified.)
The other benefit relates to better story-telling.
“In the current system, there is no way for you – as a supermarket buyer or consumer – to see the whole chain before. All you see are the final statements about the product that appear on the label. So it might say ‘Atlantic salmon, origin Scotland’ but you don’t know where these statements come from. Blockchain allows you to visualise these statements with detailed information coming from each recording that was made onto the Blockchain.”
Counting the costs
The environmental impact of Blockchain, however, is a growing concern. According to a 2014 study, the Bitcoin network used roughly the same amount of electricity as Ireland. Recent estimations suggest more than Switzerland.
Fiona Delaney is a software developer and CEO and founder of Origin Chain, an Irish company that provides producers and manufacturers a Blockchain-based service for supply chain traceability and proof-of-origin.
“I work with organic producers who are really concerned about sustainability, and public Blockchain uses a phenomenal amount of electricity. Yes, it solves problems but the proof of work is an absolute shocking waste of electricity, resources and processing power. So if we are trying to make a better world for our children, we need to take that on board.”
Bitcoin, Ethereum and public Blockchain uses an energy-intensive 'proof-of-work' method to validate the transactions as opposed to the more energy-efficient proof-of-stake method that is also available.
But any Blockchain used to store data is going to be more expensive than, say, an Excel spreadsheet.
“Like your emails, Blockchain keeps growing and you have to pay to store it," said Delaney. "But if you have built your Blockchain system and the trust element is at the heart of it, you can’t just turn it off - you would be breaking contracts. So you need to be really careful about how much data you’re putting in there because it is really expensive.”
Recouping the investment
A big question for manufacturers considering investing in Blockchain, therefore is the return on investment.
Companies that switched from manual ledgers to electronic databases 15 years ago saw a return on investment after 18 months maximum, according to Nofima data. Blockchain, however, is an emerging technology and the data is not yet there.
However, Delaney said there are plenty of ways in which a company can selectively use Blockchain to store certain pieces of sensitive data.
“I don’t put all the data on the Blockchain, I use it to store some sensitive data. In three years, we won’t be talking only about Blockchain, it will be just one way of many to store data.”
So is it worth it?
A company trying to weigh up the pros and cons will have to consider the ways Blockchain can protect and enhance its existing business model, avoid risks and recalls.
“All companies make business decisions about risk,” said Olsen. “Very few are in this for idealistic reasons. They don’t want to be in a situation like Tesco was during the horsemeat scandal. It was on the front page of all the newspapers whereas Marks & Spencer’s could say ‘We guarantee there is no horse meat in our products.’
“We are also talking about potential added-value benefits, such as story-telling. So depending on the company’s profile, they will assess the risks and benefits, and decide how ambitious they want to be, how much they want to invest.”
One well-known food industry user of Blockchain in US retailer Walmart, which has introduced mandatory Blockchain for its suppliers of leafy greens to combat listeria.
If other supermarkets go in the same direction as Walmart, this could act as a strong incentive to manufacturers that want to be considered as a potential supplier to the supermarket in question.
Just because it works for some companies, doesn't mean it works for all.
”Blockchain is a solution,” Olsen added. “As a food company, you need to ask yourself: What problem do I have that it can solve?”