Bitcoin for farmers – Part III
In the previous two instalments of this series of posts, we looked at the basic principles of blockchain technology, why the large scale adoption and application of it has not realised thus far, and how Hedera Hashgraph can overcome these barriers. The application of Hedera, especially in agriculture, is discussed in more detail.
Hedera is third-generation blockchain technology. The network uses only a fraction of the electricity of the previous generation of blockchains. More important is that it can process more than 10 000 transactions per second, reach transaction finality in 3 to 5 seconds, and costs are limited to $0,0001 per transaction. This is a game changer relative to first-generation blockchain technology – on which bitcoin was built – which is expensive and extremely slow (also read “Bitcoin for Farmers – Part I”).
With companies like Google, IBM, Boeing and South Africa’s own Standard Bank at the helm through the Hedera Governing Council, the company is focused offering cost effective enterprise ready solutions. Hedera is focused on two main products, the first is the Hedera Consensus Service which enables users to place transactions in irrefutable chronological.
Consensus service traceability: Wool
A good example of its application is enabling the traceability of wool. A identity number can be added to wool bales. When the bale is full, the farmer can simply use an app to capture both the bale identifier and information regarding the bale such farm name, class, shearing team name and classer.
The producer’s location can also be captured because the phone has GPS. Subsequently the application will register the bale identifier on the Hedera Consensus Service, which creates a record of the bale which cannot be altered.
When the bale is loaded, the truck driver can also confirm the identity of the bale with an application and it can now be confirmed on the Hedera Consensus Service that the bale is now loaded.
The process will be similar when the bale is delivered to the woolshed, auctioned and when it is shipped to the processor. Consequently, the processor will have access to the exact record of the origin of each of the bales and how each one found its way to the factory. Eventually, even the consumer could have access to information about the origin and processing of his or her jersey.
This principle can be applied to most agricultural value chains. The temperature of export fruit can, for example, be documented at every step so that the eventual buyer or retailer can be certain that the cold chain was not broken at any time. The process is already used successfully by the British medical service to confirm the integrity of the cold chain of its Covid-19 vaccines.
In principle the process is relatively simple, but it has not been possible to implement it at scale due to the limitations of first and second-generation blockchains. With the low cost of Hedera to create or retrieve a records on its network, it is now within reach.
Consensus service traceability: Credit applications
Another agricultural application of the Hedera Consensus Service was developed by the Brazilian company Agryo. Agryo wants to ensure that small and medium-sized producers have the same access to credit as their larger counterparts.
It created a creditworthiness prediction model that integrates producers’ financial and management data with satellite, climate and agronomic data to supply producers with a cost-effective way to get a credit score.
This score is then recorded on the Hedera Consensus Service so that its authenticity and creation date can be confirmed when used by the producer to obtain credit.
Token service: Digitising physical assets
The second application of Hedera is its Token Service which is similar to exchange coins or coupons. A token is transferrable, digital proof of ownership backed by the blockchain or in the case of Hedera, distributed ledger. A company or individual can use this service to create digital exchange coins that represent an asset or a fraction of an asset, which can be traded in turn.
An example of a possible application of this in agriculture is with exceptional breeding stock. The buyers who paid R1,7 million for the Boran bull Tarzan last year would, for example, have been able to issue 100 ‘Tarzan tokens’ and sell them at R17 000 each. This would have given each buyer the right to 1% of the bull’s seed or the proceeds from it.
Because these digital exchange coins are tradeable, their value would vary according to supply and demand. One can expect the value to decrease as the bull ages until they are eventually equal to the slaughter value.
These are only a few examples of the use of third-generation blockchain technology made possible through Hedera. It will, however, still take a while before existing businesses integrate this technology into their systems, or before new businesses arise, but the future is exciting.