Blockchain And Fair Trade

As I always try to emphasize, blockchain is what we call a foundational technology – meaning that it is not an end in itself, but simply a platform upon which applications are built. Because of that, the things blockchain can be used for tend to be more interesting than merely discussing what the heck distributed ledgers are. I’ve previously written about how it can be used in the music industry and for humanitarian purposes, and now I’ll try to answer the question a friend of mine asked me a few days ago: can blockchain do anything to help rose growers in poor regions in Ecuador?

Being the blockchain enthusiast that I am, my answer will be the same as it always is: it probably can. It won’t necessarily be an easy solution that can be implemented right away, but the potential for changes in the long term is there. So here’s how blockchain could be an interesting tool for those growers, and for the proponents of an overall fairer trade system:

It can make murky supply chains more transparent

Supply chains are so long and complex nowadays that it is almost impossible for ordinary consumers to be certain of where the goods they are buying come from, or under which conditions they were produced. Even if you consider yourself an ethical, responsible consumer, the only guarantee you can have that the coffee you are drinking is organic or that the chocolate you bought is not made using child labor is a stamp from some organization that says so – which sometimes might not be reassuring enough.

Because blockchains are essentially a way to organize large amounts of data in a linear and unchangeable manner, it is now possible to imagine a supply chain in which can visualize the whole trajectory of a given product, thus making sure of its origin and standards. Fairfood’s partnership with Provenance, for example, piloted a project aimed at making sure that the participating coconut farmers in Indonesia received a fair price for their goods. Wallmart and IBM, in their turn, are developing solutions to track food production in China. Although their main goal is related to food safety, and not ensuring fair trade practices, the underlying mechanism functions in the same way and, if this initiative works, we can soon start to see some applications on a larger scale.

Reducing the need for middlemen and ensuring an easier payment system to producers

The reduction in the number of intermediaries is a much-cited advantage of blockchain technology that is also present in its fair trade potential initiatives. The reasoning in those cases would be that the automation of processes would lead to fewer agents capturing value in the supply chain, in such a manner that more of it would be left for the actual producers.

Bext360, for example, has worked out an idea to make the coffee industry – a U$ 100 billion global market that directly involves more than 25 million people, the majority from developing countries – more sustainable. They have designed a machine combining smart image recognition technology that can evaluate the beans brought by the farmers, determine their price and automatically pay the seller via mobile app – thus eliminating many of the intermediaries that could reduce the price paid to the farmers.    

So, what happens now?

The use of blockchain could then, ideally, both increase consumer awareness and strengthen the position of smaller producers, giving them more control over the goods they produce and improving the quality of life in developing nations. The initiatives involving convergence with IoT, in that sense, are particularly promising. These are all, of course, fantastic ideas, and it is always great to see people getting together to create solutions that could benefit the underdog. Let’s not forget, however, that blockchain technology is still at a very early stage, and it is still hard to develop and to use. People need to be educated and be convinced to adapt their behavior – think, for example, on how to best convince a functionally illiterate farmer who doesn’t have access to anything more sophisticated than a “dumb” phone, that he should trust some weird machine to take care of his product and pay him via mobile.

We don’t have the answers for problems related to scalability and adoption yet, but they are questions that definitely will have to be addressed. We will also need to think about how to make sure that the data recorded on the blockchain is accurate. While the data in the chain cannot be altered, nothing can really guarantee that what is put in there is true. If a company is using child labor, for example, it is safe to assume that they will not willingly declare that they are doing so, but instead simply lie and insert false information in the blockchain.

We still have many challenges to solve and blockchain is definitely not there yet, but I’m confident that we will keep on innovating and improving until we are. Anyone else up for blockchain-ging the world?

This website uses cookies.

This website uses cookies.

Exit mobile version