As blockchain continues to push for mass adoption, the food and beverage industry is shaping up to be one of the most inclusive destinations for the technology: Just over the past few months, a variety of players — including juggernauts like Nestlé, Carrefour and Starbucks — have reported on their latest blockchain-powered initiatives within the field.
Indeed, in 2019, blockchain has been piercing the food industry at an accelerated pace. According to recent research, 20% of the top-10 global grocers will use blockchain by 2025. So, what makes the technology so appealing for the food industry participants, and are there any obstacles that can be a hurdle to potential adoption?
Empowering customers with more data and tracking food illness
There are at least two essential problems in the food industry that blockchain has been presumed to solve. First, the trust issue: According to a 2018 study released by the United States-based Food Marketing Institute (FMI), the public demand for transparency is growing within the market. Essentially, customers are becoming more health-conscious and want to know as much as possible about the food they get.
Specifically, the report found that as much as 75% of consumers are more likely to switch to a brand that provides more in-depth product information — beyond what’s provided on the physical label. When shoppers were asked the same question in 2016 in a similar study conducted by Label Insight, just 39% declared they would switch brands. Blockchain, being an easily accessible, immutable distributed ledger by design, seems to be the go-to solution for that case, as it can provide consumers with concrete, immutable data about their food. Matron Ven, the chief marketing officer at blockchain-powered farm-to-table food traceability solution company Te-Food, told Cointelegraph:
“Food companies implement traceability because they see that the consumers require transparency and credibility. Blockchain’s immutability helps them to prove that the information the different supply chain companies provide is uncorrupted.”
Traceability is not just the customer’s whim, however, but a crucial component for the industry at large, in which investigations into foodborne illnesses require extra swiftness to prevent human loss. Rachel Gabato, the chief operating officer at Ripe.io, a San Francisco-based blockchain startup working with the food supply chain, told Cointelegraph:
“One of the primary drivers for food providers to consider blockchain technology is the ability of the technology to collect data from various sources and create a single view of the transactionю This plays an important role in the ability to track the food product back to its origin driving more efficiency when a food safety issue arises.”
For instance, in 2017, the U.S. Food and Drug Administration (FDA) investigated a fatal Salmonella outbreak linked to papayas imported from a Mexican farm. In order to allocate the disease’s original source, the agency conducted over a hundred interviews and studied various mango samples in lab conditions. Blockchain can reduce the process of finding the responsible supplier to seconds: By using the technology, stakeholders can track the corrupt harvest of mangoes from a particular farm and then surgically remove it from the supply chain.
Indeed, as the food industry entails numerous participants — farmers, vendors, retailers, customers, etc. — within the supply chain, the process of tracking goods from farm-to-table is notably complex. Consequently, the very idea of having a blockchain encourages suppliers and retailers to get their data straight, says John G. Keog, a research associate at Henley Business School and University of Reading, who co-authored an academic article on the topic. He told Cointelegraph:
“A key benefit not discussed is the fact that data needs to be cleansed, structured and verified before it goes onto a Blockchain. This is one of the key benefits and in the use cases I have examined closely, 75% of the effort was in fixing the data.”
IBM’s blockchain solution continues to dominate the field
The most mainstream and adopted blockchain tracking solution within the field is IBM’s Food Trust, which is based on the Hyperledger Fabric blockchain protocol. With the first product trials spearheaded by Walmart in China in December 2016, Big Blue’s food-tracking ecosystem has since amassed numerous industry giants, including Carrefour, Nestle, Dole Food, Kroger and Unilever. The platform officially went live in October 2018. According to IBM, during the testing period, “millions of individual food products” were tracked by retailers and suppliers using the Food Trust blockchain.
In 2019, the tech behemoth will continue to recruit participants for its blockchain traceability program, as revealed by Nestle S.A. So far this year, Big Blue has already signed Albertsons Companies, a leading food and drug retailer in the U.S. At first, the retailer will use the Food Trust initiative to track the supply chain for romaine lettuce, but it aims to branch out into other products in the future.
Additionally, it has been reported that the U.S. seafood trade association National Fisheries Institute (NFI) is now working with IBM’s Food Trust to trace seafood. Purportedly, this is the first effort to track multiple seafood species, an initiative jointly pursued by multiple companies. Just a couple of months prior to that, North America’s largest branded shelf-stable seafood firm, Bumble Bee Foods, launched a blockchain platform for seafood traceability in collaboration with German tech company SAP. Based on the SAP Cloud Platform Blockchain service, the new platform can purportedly monitor the supply chain of yellowfin tuna from Indonesia to end customers.
Meanwhile, earlier Food Trust members have been expanding the scale of IBM blockchain’s application this year. For instance, in April, Nestlé and French retail giant Carrefour reportedly started using the technology to track the supply chain of Mousline, a well-known brand of instant mashed potatoes. As per the initiative, customers are able to scan a QR-code with their smartphones to know exactly where the potatoes in a specific packet came from, as well as their journey to the exact Carrefour store.
New blockchain-based food traceability tools continue to emerge
Additionally, in March, Carrefour introduced its own blockchain-powered solution for tracking milk, called Carrefour Quality Line (CQL). CQL is reported to guarantee consumers complete product traceability across the entire supply chain — from farmers’ fields to the store shelves. As per the press release, consumers will get access to meticulous information, including GPS coordinates of the farmers producing the milk, details on when it was collected and packaged, as well as the list of stakeholders involved in the product line. Other notable blockchain initiatives happening within the food industry this year include the U.S. National Pork Board partnering with Ripe.io to test out a blockchain platform for pork supply chains. The company’s representative told Cointelegraph of the initiative:
“The ripe.io platform will enable the NPB ecosystem of pork producers to monitor, evaluate and continuously improve their sustainability practices based on six defined ethical principles guiding the U.S. pork industry. These principles provide industry standards in food safety and public health, animal well-being, protecting the environment, and improving the quality of life for the industry’s people and communities.”
Further, in the beginning of 2019, World Wildlife Fund-Australia (WWF-Australia) and global corporate venture BCG Digital Ventures (BCGDV) jointly launched a blockchain-powered supply chain tool dubbed OpenSC. The system reportedly allows both businesses to track products they produce, as well as consumers to view the origins of said products via a “unique blockchain code at the product’s point of origin.”
In July, Nestlé joined OpenSC for an initial pilot program that will trace milk from farms and producers in New Zealand to the firm’s factories and warehouses in the Middle East. The aim of the pilot project is to find out whether the system is scalable. Furthermore, the company is considering tracking palm oil sourced in the American Continent.
Alcohol and coffee: Blockchain is being applied to more niches
Blockchain has been picking up pace within the alcohol and beverage industry as well. In March, news surfaced that premium scotch whisky brand Ailsa Bay is going to release what it believes to be the world’s first scotch whisky tracked with a blockchain-based system, while later in May, the Big Four audit firm E&Y announced its proprietary blockchain solution for a major new platform that helps consumers across Asia determine the quality, provenance and authenticity of imported European wines.
Finally, Starbucks has unveiled more details regarding its “bean to cup” initiative. In May, it was reported that the coffeehouse chain will implement tech giant Microsoft’s Azure Blockchain Service to track the production of it’s coffee and allegedly provide coffee farmers from Rwanda, Colombia and Costa Rica with more financial independence.
China’s food industry has now co-signed the technology
Interestingly, China’s food and beverage industry — which posted a record high of 4.27 trillionyuan (a whopping $620 billion) in revenue in 2018, and in so becoming the largest in the world — is also increasingly interested in blockchain. In January, the official newspaper of the Chinese Communist Party reported that the Food and Drug Administration of the Chinese Chongqing Yuzhong District is going to apply blockchain to strengthen the supervision of food and drug quality assurance with better traceability of the product life-cycle and anti-counterfeiting measures.
Additionally, Walmart China also has revealed big plans for blockchain. In June, the company announced it was going to track food through its supply chain using VeChain’s Thor blockchain. According to the press release, the Walmart China Blockchain Traceability Platform (WCBTP) will be a joint venture by Walmart China, VeChain, PwC, cattle company Inner Mongolia Kerchin and the China Chain-Store & Franchise Association.
So far, Walmart China has revealed 23 product lines that the system will track and plans to release another 100 products for further inclusion, covering more than 10 product categories. Notably, the company expects that tracked sales will be significant in volume. The official statement reads:
“It is expected that the Walmart China’s traceability system will see traceable fresh meat account for 50% of the total sales of packaged fresh meat, traceable vegetables will account for 40% of the total sales of packaged vegetables, traceable seafood will account for 12.5% of the total sales of seafood by the end of 2020.”
In the neighbouring Vietnam, Te-Food has recently implemented blockchain-based traceability at Vinamilk, one of the largest dairy companies in Southeast Asia, with $2.2 billion in yearly revenue. Together, they will track a new infant formula product called Vinamilk Organic Gold.
Other solutions focus on food safety
Some tech companies have been applying blockchain particularly in the context of food safety instead forgoing large retailer sin setting up supply chain management. Thus, in April, Swiss food technology giant Bühler introduced two “blockchain-ready” products: Laatu, a tool aiming to reduce microbial contamination in dry goods, and Tubex Pro, a scale system that self-optimizes and produces a constant flow of production data. Both solutions are connected to the Bühler Insights Internet of Things (IoT) service, hosted on the Microsoft Azure cloud platform.
According to Bühler, their Laatu product is able to destroy over 99.999%of salmonella while maintaining the quality nutritional value of food by exposing dry foods to low-energy electrons. As the press release states, “With a potential link to blockchain, it [Laatu] is capable of providing an accurate and secure audit trail for food producers and all players in the supply-chain.” Further, in June, a nonprofit blockchain organization Iota Foundation teamed up with digital food safety management firm Primority to track food allergens with blockchain.
As Iota has specified in the announcement, the collaboration aims to reduce risks associated with potentially fatal food allergens, targeting 220 million people worldwide. Specifically, it includes the development of an application that would enable consumers to check a vast variety of foods for allergens, considering that “small traces of an allergen can then appear in the food which was supposed to be allergens free,” as the nonprofit puts it.
The application will reportedly allow consumers to access a number of details about food products by scanning a barcode on the app. The shared information would include tracking of raw materials used and their suppliers, as well as a review of food production processes. As Iota stressed in the announcement, consumers will be able to access the data “without sharing any personal, sensitive information, and without owning any cryptocurrency.”
Potential hurdles on the way: data-related issues and interoperability problems
However, blockchain adoption within the food industry has its own limitations — at least for now. First, there is no guarantee that the data that suppliers initially enter into blockchain is reliable in the first place — although the technology allows for the prevention of tampering and falsification at later stages in the supply chain. Thus, if a supplier has a reliable in-house system ensuring that its food is attributed correctly when released to vendors, a blockchain can ensure that this data remains immutable.
However, there is a catch, as Keog pointed out, “Things go wrong in food chains and the need to correct a record is a reality hence we need more research and discussion on the value and need for ‘mutable’ Blockchains.” Further, in most cases, data is difficult to obtain and digitize due to abundance of various setups used by suppliers, says Gabor of Ripe.io. She told Cointelegraph:
“As we have engaged with farmers in the food areas of dairy, meat, produce, citrus, commodities, a primary challenge is the access and availability of data. Farmers capture data in many different forms and the ability to digitize this data for capture and sharing has been our primary challenge.”
“The main challenges of implementations are not blockchain related,” confirms Marton Ven from Te-Food. “It’s a common misbelief, that farm-to-table traceability in centralized format is already an existing method, and we just need to replace it with blockchain based solutions. The reality is that traceability throughout food supply chains is non-existent yet, except for a few examples.” He then elaborated:
“The hardest obstacle comes from collecting data from a large number of different companies. In the recent decades, supply chains have become global, sometimes incorporating hundreds of companies from different countries, with different technological maturity, using different identification methodologies. Keeping the data integrity — which is the backbone of traceability — requires all of them to actively cooperate on what data to collect, how to capture the data, and how to compile the information into meaningful product data, which the consumers can read.”
Interoperability is another hurdle that is important to deal with, according to Keog. However, if blockchain solutions become compliant with the existing GS1 standards — which the food industry have been largely relying upon to format data for shared communications across supply chains before the technology’s arrival — it might be much easier to overcome the obstacles. He added:
“In this context, a Blockchain should be viewed as an outcome of a configuration of multiple technologies, tools and methods and hence interoperability is a critical component. The Blockchain solutions using the GS1 standards for product identification, company identification, location identification and the joint GS1/ISO interoperability standards called Electronic Product Code Information System (EPICS) will excel in this space.”
In the academic’s view, blockchain is not a traceability solution, but a record-keeper that can be used by a traceability platform as a trusted data source. Consequently, the state of supply chains within food industry will largely depend on how these blockchain solutions are applied:
“Wal-Mart’s strategy with a single platform from IBM Food Trust is an example of both progress and a hurdle at the same time. […] I would have preferred to see Wal-Mart providing a Blockchain enabled, standards-based platform and then their hundreds of suppliers who will use dozens of Blockchain solutions being able to connect and share standards-based data (GS1) seamlessly. Having a vendor lock-in is counterintuitive in the evolving Blockchain world.”
“As traceability throughout food supply chains barely exists worldwide, blockchain has a good chance to become the de facto standard technology for it,” agreed Ven. “But to provide global solution, other standards have to be applied as well, like GS1 standards for identification and event structure.”
Thus, as more retailers and suppliers are joining forces with blockchain companies, the idea of adopting the technology is perceived as more tenable within the food industry. As the experts have stressed, blockchain adoption within the field is not so much about figuring out the technology as the lack of proper data analysis in the first place. Ven told Cointelegraph:
“We haven’t ever met any food company which refused to use blockchain. Although solution providers have to put in a lot of education effort, food companies are open to the idea of using blockchain. Certainly the media hype around blockchain helps this effort, but 90% of the implementation challenges are not blockchain related ones.”
Regulatory Overview of Crypto Mining in Different Countries
A move by the Iranian government to cut off the power supply to local Bitcoin (BTC) minersgrabbed headlines in June amid a soaring price gain by the preeminent cryptocurrency. As Bitcoin surged to prices not seen since 2017, a rising hash rate mirrored renewed interest in the cryptocurrency. By July 1, the Bitcoin mining hash rate surpassed 69 quintillion hashes per second.
Nevertheless, the action by Iranian officials is a stark reminder that regulatory moves can still hold sway over the use of cryptocurrencies around the world. The Bitcoin mining space has marched on over the last two years through the depths of a humbling and harsh environment for the entire cryptocurrency space.
According to data from Blockchain.com, the Bitcoin mining hash rate has been on a steady increase over the last six months:
These are encouraging signs for the mining ecosystem despite pressures on a number of fronts. Price volatility and regulatory efforts have been notable obstacles. With this latest instance of regulatory pressure on cryptocurrency mining in Iran, Cointelegraph takes a deeper look at the major countries that have extensive cryptocurrency mining activity and the stances they have taken over the past few years toward the emerging industry.
China has had an intriguing relationship with cryptocurrencies over recent years. Its government has taken a hard line toward cryptocurrency trading, with financial institutions by banning Bitcoin trading, initial coin offerings (ICOs) and crypto exchanges.
Despite the status quo, China’s Bitcoin mining scene is a major player in the global hash rate, with China-based mining pools reportedly mining potentially 70% of all the coins created yearly. Furthermore, the global Bitcoin mining pools are dominated by Chinese ones. The reason for this dominance is largely due to the massive surplus of electricity in the country. This is most evident in the Sichuan province, which is considered to be the Bitcoin mining capital of China. It has been reported that this surplus of electricity has led to various power producers encouraging companies to set up mining operations in order to exploit untapped energy.
The dominance of China’s Bitcoin mining contingent could be disrupted if the regulations that were suggested back in April of 2019 come to fruition, with a government agency lobbying to ban crypto mining outright in the country.
It is a potentially damning blow for a country that is home to the likes of Bitmain, the producer of the world’s most popular ASIC miners. The company also has its own mining operations setup in the country.
Various reports in 2018 also suggested that many mining operators were looking for greener pastures overseas amid growing pressure from the Chinese government. It is understood that environmental concerns and a lack of tax revenue are driving factors of the apathy toward crypto mining in China.
Russia has a more lax approach to Bitcoin and cryptocurrencies in comparison with China — in that it still does not have a definitive regulatory stance on the space. Bitcoin is not regulated, but its use as a payment option for goods and services is illegal. This is set to change in the summer of 2019, as the Digital Financial Assets bill is expected to come into effect.
Up until this point, cryptocurrency mining has continued in the country, with the cold climate and cheap electricity as contributing factors. However, a report in June suggests that cryptocurrency mining operators could face fines in the future.
Anatoly Aksakov, the chairman of the State Duma Committee on Financial Markets, told local media outlet TASS that the cryptocurrencies created on open blockchains were considered illegitimate. At the same time, Aksakov stressed that it is not illegal to hold Bitcoin in Russia if the cryptocurrency has been bought or acquired outside of the country.
As Cointelegraph reported earlier this week, Iran’s government has taken a stern stance toward the crypto mining industry in the country due to a massive increase in electricity usage over the past month. The Iranian energy ministry believes that mining operations are to blame for an irregular 7% spike in electricity consumption amid fears of its grid is taking undue strain and intends to cut power to crypto mining operators until it has approved new energy tariffs.
Iranians currently benefit from government subsidies, which reportedly bridge the gap of how consumers are billed and what their actual electricity costs are. It is a situation that has provided a favorable environment for crypto miners. The mining ecosystem received a regulatory stamp of approval in September 2018 after a number of Iranian government departments officially accepted crypto mining as a legitimate industry in the country. This is expected to be ironed out by formal regulatory and legal frameworks.
Given the increase in mining activity and the profitability in Iran, the country’s deputy energy minister, Homayoun Haeri, suggested that the billing of mining operations should be the same as charges for power exports in June 2019. Despite the positive sentiment that was portrayed at the tail end of 2018, the crypto mining scene in Iran will have to endure a few months of uncertainty until the new electricity tariffs are approved by the Iranian government. It is a blow for a country that is looking to cryptocurrencies as a possible means to bypass harsh economic sanctions that have hampered its ability to trade with the global community.
Canada has positioned itself as a crypto-friendly country that is openly providing opportunities for cryptocurrency mining operations to set up shop. The country has classified Bitcoin as a commodity, which makes users liable to pay tax, depending on how they acquire and use the cryptocurrency. If a Canadian receives Bitcoin as income, it is taxed as such, and if they hold it as an investment asset, they are liable to pay capital gains taxes.
As Cointelegraph contributor Selva Ozelli noted in an expert take last year, cryptocurrency mining is also taxed, depending on whether the operation is run as a business or a personal hobby. The latter is considered a nontaxable event. While the trade and use of cryptocurrencies are welcome but controlled in the country, the mining scene has been nurtured to a far greater extent.
A major catalyst for this has been the work of electricity provider Hydro-Québec and the Canadian government’s energy regulator, Régie de l’énergie. In May 2018, Quebec’s provincial government lifted a moratorium on the sale of power to cryptocurrency mining operators. At the time, over 100 potential mining operations had applied to purchase power from Hydro-Québec with reported energy consumption in excess of 10 terawatts per hour. Hydro-Québec runs 60 hydroelectric power stations, which, at that time, produced a surplus of around 13 TWh.
In June 2018, Hydro-Québec then introduced rules that required prospective cryptocurrency mining companies to bid for electricity. Their request would need to be substantiated by business cases, which specified jobs and investments that would be generated by their specific operations. Part of these rules would allow Hydro-Québec to enforce load-shedding on mining operations during periods of increased power demand from the province.
Within a couple of months, the energy supplier had to halt the processing of requests from miners due to the massive demand from the industry, which exceeded the provision of electricity at the time. Almost a year later, in April 2019, the Régie de l’énergie released new rules for the sector that have essentially ironed out the process for cryptocurrency miners to gain access to electricity.
Hydro-Québec was ordered to allocate 300 megawatts to the blockchain industry over and above the 158 MW that it had already been providing to its existing customers, along with 210 MW supplied by municipal distributors. In order to gain access to this allocated power, mining companies have to pass a selection process. The main criteria include jobs created, payroll of these jobs, the value of investments as well as heat recovery.
The Czech Republic and Iceland
The Czech Republic is worth noting, as it is home to Slushpool, one of the biggest mining pools in the world. The pool accounts for 7.5% of the total hash rate distribution. The European country is fairly relaxed in terms of its regulatory stance toward Bitcoin and cryptocurrencies as a whole. The Czech government does not consider Bitcoin as legal tender and classifies the cryptocurrency as an intangible asset.
Likewise, Iceland became a hub for cryptocurrency mining, given its cold climate and abundance of renewable energy sources. In February 2018, it was speculated that the electricity usage of the industry would surpass the total amount of energy used by households in the country. At that time, Genesis Mining was reported being the biggest energy consumer in Iceland.
The United States
America also has a strong mining culture that has been enabled by a fairly pragmatic regulatory approach in the country. The U.S. Commodity Futures Trading Commission (CFTC) classified Bitcoin as a commodity in September 2015, and it is still treated as such. There are no specific restrictions on mining activity, while several states have taken different lines of approach to cryptocurrencies in general.
The city of Plattsburgh in New York could well be the only place in America that has formally banned cryptocurrency mining back in March 2018. This occurred after local residents began to complain of rising electricity bills as a result of cryptocurrency mining in the area. The city is located near a hydroelectric dam that provides cheap electricity. In March last year, the biggest mining operator in Plattsburgh reportedly used 10% of the city’s 104 MWh power supply. As a result, the Plattsburgh city council enforced an 18-month cryptocurrency mining ban.
A report from Crescent Electric Supply Company last year identified the cost to mine one Bitcoin in relation to the cost of electricity in each U.S. state. Louisiana was identified as the cheapest location to mine the first cryptocurrency. It was followed by Idaho, Washington, Tennessee and Arkansas. GigaWatt, the largest mining farm in the U.S., is situated in Washington.
A global phenomenon
The countries mentioned above have significant mining activities, but the truth is that cryptocurrency mining has become a global phenomenon. The major factor in the location of large mining farms is the availability of affordable electricity. Following that, the climate also plays a role. European countries and places like Canada have the added benefit of being in cold environments, which makes the cooling of equipment a straightforward endeavor.
The nature of Bitcoin mining, in particular, demands an increasing amount of power as the mining pool grows. The difficulty is constantly adjusted every 2016 blocks to ensure that one block is mined around every 10 minutes. This means that mining could potentially use more energy over time, as more miners vie to verify transactions and receive the BTC reward after mining a block.
Late in 2018, a study suggested that the total electricity usage of global cryptocurrency mining had surpassed that of mineral mining. This is a fact that has led to heavy criticism over the past two years. Some of these concerns have been abated by another report in June 2019 that suggests that as much as 74% of Bitcoin mining is powered by renewable energy sources. This will continue to be a hotly debated topic and will no doubt continue to be a consideration for mining operators around the world.