Blockchain Applications in Food Supply Chains

Blockchain Applications in Food Supply Chains: History

Please note this is an old version of this entry, which may differ significantly from the current revision.

Subjects: Operations Research & Management Science

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Blockchain has found wide acceptance not just in the DeFi and Crypto space, but also in digital supply chains, non-monetary transactions, and governance. Amongst many, the food supply chain is riddled with lots of inefficiencies and untraceable corruption. Hence, many have investigated the integration of blockchain technology into the food system.

blockchains
food systems
distributed ledger technology
food security

1. Introduction

One of the biggest sectors on the planet is the food sector, which has a complicated global supply chain with several players. The need for digitization in the food supply chain is driven by the rising demands for transparency, traceability, and food safety. Some of the issues in the food supply chain have been recognized, and blockchain technology has been suggested as a potential decentralized and transparent ledger solution.

The Food System consists of all the ‘sequential stages directly and indirectly linked to the customers’ requests’ including (but not limited to) production, transportation, inventory management, and retailing. In its linear form, the process begins with the farmer (producer) and ends with the consumer, with various other players—government, agricultural equipment retailers, logistics companies, food retailers, and inventory managers—in between. These players make decisions that affect various factors of the agricultural produce such as price, quality, shelf life, and nutritional value. Therefore, it is economically critical and socially essential to be informed, rather than ignorant, about the link between the price of an agricultural food product and its quality.

2. Blockchain Applications in Food Supply Chains

With features such as immutable provenance, blockchains enable trade parties to facilitate port checking and clearance processes faster and more efficiently. Through the use of IPFS, blockchains can be used to access storage systems to verify origin certificates and lab test certificates in a secure manner—thus promoting on-spot food safety assessments and new food labeling techniques. The most important aspect of blockchains is that their integration with existing infrastructure (IoT, QR scanner, Big Data algorithms) has been demonstrated in the literature. These capabilities render them the ability to detect and prevent fraud from happening in the food value chains.

Table 2 gives a list of blockchain applications in the food industry. Blockchains offer the ability to conduct financial and certificate audits of the food value chain. Blockchains have been studied in the issue of carbon credit tracking, hence helping businesses to track their emissions and make amends to their corporate social responsibility strategy. Blockchains are a decentralized ledger that keeps a record of all the transactions and provenances in a particular business. This helps stakeholders to avoid compliance violations and verify safety code adherence.

Table 2. Previous Blockchain Applications in Food Systems.

Food Reference	Goal	Advantage	Result
Beef [22]	Quality assurance for consumer’s choice	Informed policy making	Traceability
Halal Food [23]	Trusted information throughout the FSC	Guarantee of food safety and data protection	Reliability
Tea [24]	Steer stakeholder attitudes to adopt sustainable production	Healthy competition	Transparency
Fish [25]	Tracing Shellfish quality	Improve food safety management	Quality
Olive Oil [26]	Tracing food prices while ensuring bi-direction communication between the company and the consumer	Easy integration with existing systems and technologies	Fraud prevention
Rice [27]	Tracing source and giving credit to farmers	Greater sense of appreciation for farmers	Provenance
Agri-food [28]	Allow quality to be certified	Retailers can justify the sale of “Premium Vegetables”	Better food pricing
Dairy [29]	Create a supply chain void of data silos	Giving privacy to individual stakeholders while also ensuring disclosure of necessary data	Management
Soybean [30]	Security through transparency and brand imaging	Consumer loyalty	Trust
Sugar [31]	Increase competitiveness	SC resilience	Traceability
Eggs [32]	Ensuring food safety	Improve food safety	Fraud prevention

2.1. Evolution of Blockchain Application in Food Supply Chains

Figure 3 discusses how blockchain applications and various protocols have helped in transitioning from a mundane, paper-based, time-consuming, process-centric system to an automated, highly transparent, hassle-free people-centric system.

Figure 3. Evolution of Blockchain Technology Application in the Food Supply Chains.

Although there exists a wide variety of blockchain networks and protocols, very few have been targeted for supply chains and their business-use cases. Bitcoin and Ethereum have made many strides in blockchain technology. The earliest applications of BCT in the food sector were primarily flagged by Hyperledger fabric in 2015. Hyperledger Fabric is an open-source blockchain framework developed by the Linux Foundation. Hyperledger Fabric can be used to ensure that food businesses comply with regulations.

IOTA (2016) [33] is a distributed ledger technology (DLT) that uses a unique consensus mechanism called the Tangle. The Tangle is a directed acyclic graph (DAG) that allows for transactions to be confirmed without the need for miners or fees. This makes IOTA ideal for use in applications where high throughput and low cost are essential, such as the food supply chain. Provenance, Connecting Food, FreshFarm, InFoodChain, and Farm2Kitchen are some of the companies that use IOTA in their food supply chains. Bext350 uses a permission blockchain protocol called Stellar [34] that can aid in higher transactions per second. The Ambrosus protocol (2017) [35] works by creating a shared ledger of food provenance data using IoT sensor (hardware-in-place technique) data sharing. These data include information such as the origin of the food, the date and time of production, the location of each step in the supply chain, and the temperature and humidity conditions at each step. This information is stored on the blockchain in an immutable ledger, which means that it cannot be tampered with.

There are other milestones witnessed in the evolution of BCT to help smooth adoption within supply chains. The EU is a leading force in the global adoption of blockchain technology. The laws and regulations that the EU has adopted, as well as the funding that it is providing for research and development, are helping to make these technologies more widely available and to create a more favorable regulatory environment for their use.

Markets in Crypto-Assets Regulation (MiCA) is a proposed regulation that aims to regulate crypto-assets, such as Bitcoin and Ethereum. The MiCA includes provisions that promote the use of blockchain technology and smart contracts. Finally, the Blockchain Technology Regulation (BRT) is a proposed regulation that aims to create a legal framework for the use of blockchain technology in the EU. The BRT includes provisions that address a number of issues related to blockchain technology, such as data protection, liability, and consumer protection.

2.2. Blockchains and Food Security

Based on the proceedings of the World Summit on Food Security (2009) [37], Galanakis (2020) [38] defines Food security as a situation

“when all people at all times have physical, social and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life ”.

Four pillars of vital importance have emerged from this definition of food security. They are availability, accessibility, stability, and utilization. There are many issues troubling the food system. These include climate change, population growth, food fraud, and urbanization. These problems not only threaten urban food systems but also global supply chains. Blockchain technology has the ability to benefit lower-income households and, at the same time, to help farmers; to have a substantial impact on a community’s food system traceability, waste reduction, and responsible consumption; to reward stakeholders and players for their sustainable actions; and to vote for food system governance. The four main pillars of food security—availability, access, utilization, and stability—are seen by experts as essential to ensuring its sustainability [39,40,41]. Nutrition and food security are related, although malnutrition and food insecurity are not. Malnourishment may not always result from a lack of food because families may have access to nutritious diets but choose to eat poorly or because of hereditary diseases. This calls for the necessity of traceability solutions so that consumers can be made aware of the consequences of their choices. The lack of means to produce or access food in general, or nutritious food in particular, is linked to malnutrition in many regions of the world since healthier diets are more expensive than diets high in calories but low in nutrition. In such cases, blockchain-based solutions can intervene to engage in crowdfunding projects that are later sanctioned as initial coin offerings (ICOs), and the public can own a small share of such sustainability and poverty eradication projects. Furthermore, the effects and solutions offered in the food system can be studied based on the verticals of food security mentioned earlier.

Availability: Food availability refers to the tangible existence of food in a satisfactory quantity, proportionate quality, and the proper means to make it available through domestic production, food import, food aid, or a combination thereof. It is clear that food availability is a concept that concerns the supply side of the food system. Lutz et al., (2002) [42] pinpointed that food insecurity is generally brought on by a growth in population, poverty, gender inequality, education, and other important issues that negatively affect food production.

Accessibility: Unlike food availability, food accessibility refers to the demand side of the food system. It refers to the physical infrastructures that are required in order for households and individuals to consume food. This is satisfied through physical facilities such as roads, water transports, physical stores, and economical facilities, such as income and employability, ensuring that buyers have the necessary buying power to consume food at a nominal, assured, and nonfluctuating price.

Stability: Stability refers to the ability of the other three pillars to achieve their goals continuously and consistently. Stability is both a short-term and a long-term concern that is affected by internal factors, such as food price, organizational collaboration, food inspection, and population growth, and external factors, such as geo-political tensions, climate change, natural disasters, and others [51].

Utilization: Once the necessary conditions for availability and accessibility are satisfied, food security also demands that the consumers are able to consume healthy and nutritious food. Utilization refers to the manner in which consumers intake healthy nutritious food. Utilization is deeply rooted in food behavior, consumption habits, awareness of nutrients, food preparation, and hygiene conditions. Among the various goals of collaboration in the FS, perhaps the importance of food security weighs the most.

2.3. Social, Cultural, and Economic Aspects of Blockchain Adoption in Food System

The digitization of a supply chain or an organization is also accompanied by the socio-technical processes of applying innovation to a system. Introducing blockchain-based interventions for on-chain and off-chain (broader perspective of the food system) activities will result in dealing with all sorts of data for effective management, predictions, and procedures. There are still a lot of questions regarding how stakeholders will actually use blockchains in the food supply chain, despite several promises and case studies about their development. It is therefore important to understand the behavioral and institutional responses to blockchain technology from different angles. These angles include legal, geo-political, human-computer interaction, innovation management, design thinking, and policy studies.

Since blockchain technology is aimed at smart contract-based automation, it is possible that those who are not digitally literate may develop an aversion towards its adoption. Some argue that this will cause losses of jobs and differences of interests. Others argue that digital technologies may merge with existing practices and create a combination of ‘digital’ and ‘analog’ skills. With regard to the ownership and legality of blockchains, numerous questions arise and are currently under investigation. These include, understanding and including temporal aspects into smart contracts, designing human–machine readable smart contracts that are both legally and digitally viable, privacy and data ownership, and ethics.

2.4. Legal and Regulatory Compliance

As mentioned by Wang et al. (2019) [132], blockchain security risks include transaction-ordering dependence (TOD), where the miner-dependent execution order creates vulnerabilities; timestamp dependence, allowing attackers to manipulate contract-triggering timestamps; and mishandled exceptions, where unchecked returns from contract calls pose threats. Re-entrancy vulnerability permits attackers to exploit contract re-entry, leading to loops such as the DAO attack. Moreover, Ethereum’s limited callstack depth of 1024 frames can be overflowed by adversaries to disrupt victim functions if not properly handled.

As mentioned by [133], a smart contract does not create obligations in the legal sense. The author highlights that according to the classical definition of the term ’obligation’, it is hard to argue that blockchains provide the key elements of an obligation, namely the future orientation of the contract and the ability to ’will’ between the service provider and the service receiver.

Food Safety Regulations: The food industry is heavily regulated to ensure consumer safety. Implementing blockchain should align with existing regulations such as the Food Safety Modernization Act (FSMA) in the United States or the General Food Law in the European Union. Blockchain can aid in meeting compliance by providing an immutable record of food provenance and quality.
Data Privacy and Protection: Blockchain records are immutable, but they can still contain personal or sensitive data. Compliance with data protection regulations such as the General Data Protection Regulation (GDPR) requires careful handling of personal information stored on the blockchain. Ensuring that only necessary and compliant data are stored is crucial.
Product Labeling and Claims: Blockchain can help verify product claims such as organic, non-GMO, or fair trade. However, misrepresentation can still occur, and blockchain implementation should not violate labeling regulations or mislead consumers.
Customs and Trade Regulations: For international food supply chains, blockchain can streamline customs and trade processes. However, adherence to import/export regulations and tariffs remains essential.

As the potential for enforcement and liabilities remains, concerns surrounding contract establishment are similar in both conventional and smart contract realms. The key distinction lies in the accuracy attainable when specifying and incorporating terms. Any uncertainties must be addressed by a functional program, leaving no space for ignorance or disregard.

2.5. Data Ownership and Security Concerns

Data ownership and security concerns in relation to blockchain revolve around the challenges of identifying rightful data owners, maintaining control over shared data, and ensuring protection against unauthorized access. While blockchain’s distributed nature offers enhanced data integrity, its public and immutable nature can lead to privacy issues. Balancing transparency with confidentiality and addressing potential vulnerabilities in smart contracts and access controls are essential for addressing these concerns.

Ownership of Data: Blockchain’s decentralized nature raises questions about who owns the data stored on the chain. Participants might share ownership, but determining access rights and responsibilities should be defined through smart contracts and legal agreements.
Liability for Data Accuracy: Blockchain’s immutability can be a double-edged sword. While it prevents tampering, erroneous data entry can become a permanent record. Establishing protocols for data verification and correction mechanisms is crucial to preventing legal disputes.
Smart Contract Ambiguity: Smart contracts on the blockchain automatically execute actions when predefined conditions are met. Ambiguities or unforeseen situations could lead to contract disputes. Legal experts should review and ensure smart contract language is precise and comprehensive.
Cross-Jurisdictional Legal Challenges: The food supply chain often crosses international borders, introducing diverse legal frameworks. Blockchain implementation should consider how it complies with varying laws related to contracts, data protection, and more.
Product Recalls and Liability: Blockchain’s traceability capabilities can expedite recalls, but they also raise questions about shared liability in case of a recall. Clear agreements regarding responsibility and processes are crucial to managing such scenarios.
Smart Contract Failures: If a smart contract malfunctions, resulting in financial loss or other damages, liability becomes a concern. The legal status of smart contracts and their enforceability vary by jurisdiction and should be addressed in contracts.

One of the key challenges and risks in blockchain security pertains to the absence of established standards and regulations. In a study by Juels et al. [134], the notion of criminal smart contracts (CSCs) was introduced, highlighting several typical instances of CSCs, such as the exposure of confidential data, theft of cryptographic keys, and engagement in real-world criminal activities such as murder, arson, and terrorism. The lack of effective regulatory mechanisms makes it challenging to monitor and address these malicious activities within smart contracts. Given the significant security vulnerabilities associated with blockchain and smart contracts, regulatory bodies such as the U.S. Securities and Exchange Commission have started acknowledging the regulatory and operational hurdles that stem from these emerging technologies [135].

This entry is adapted from the peer-reviewed paper 10.3390/blockchains1010004

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