5 Ways Blockchain Technology Will Improve The Specialty Coffee Trade

As I sit down to write this article from my apartment on Penang Island Malaysia, I am sipping on a freshly brewed cup of washed-processed Catimor Arabica coffee from my friend Mr. Nui’s farm in Thepsadet Village, Chiang Mai Province, Thailand.

I visited his village earlier this year while this coffee was being harvested to see how he and his farmers took care to select only the ripest beans and then carefully process and dry them.

Later, when his coffee was ready for export, I purchased and had a small lot of the green beans sent to me. I roast them myself as needed — just enough to last me a week at a time. It is smooth, clean and delicious. It is beyond anything you’ll ever find at a chain coffee shop — anywhere. This is as near perfect and direct-source a cup of coffee as any human can drink. It may be hard to believe, but I am not alone in my passion for incredible coffee.

This type of high-grade single origin coffee is Specialty Coffee — and demand for high-scoring super quality coffee like this has grown to nearly 10% of the global coffee market. And as demand for specialty coffee has increased, so has the awareness of many of the inefficiencies in the global coffee trade.

Having spent much of my time over the past five years at source on coffee farms throughout Indonesia, Thailand and Costa Rica and meeting with farmers, coffee traders, roasters and retailers in at least ten different countries, I’ve gained an up-close understanding of the specialty coffee supply chain and many of its current issues.

Over this same period of time, I have also followed along and gotten involved as blockchain technology has developed by leaps and bounds. From the first time I read about Bitcoin in 2012 and learned how its immutable, decentralized ledger technology would change the world — I’ve worked towards introducing this technology to the coffee industry.

In 2013, I was the first person to sell source-roasted Bali Arabica coffee for Bitcoin to customers around the world with my Roast Station Project. Since then, I have worked towards realizing my hopes for this technology being applied to the coffee industry at fintech hackathons in Singapore, startup contests in Taiwan, and bitcoin and blockchain meetups in the USA, Thailand and Indonesia.

Now, just a few years later, this technology has reached the point where it can benefit the specialty coffee supply chain in much more substantial ways. Having a foot in both worlds, I can clearly see where and how blockchain technology can now be used to improve the lives of people involved in the specialty coffee supply chain.

Here are five ways this can be done…

1. Payments

Right now, the specialty coffee supply chain suffers from the interference of too many middlemen and centralized choke points. Nowhere is this more obvious than in the slow and ancient centralized bank system of international payments. By the time payments have been sent and received via the SWIFT system through multiple central banks in different countries — producers have already lost a large portion of their earnings from exchange rate commissions and transfer fees.

With blockchain technology though, tokens can be issued as vouchers that work as a decentralized digital currency. A currency that can be sent and received anywhere in the world in moments — with tiny transaction fees. These tokens can then be exchanged quickly and locally into the national fiat at market rates via crypto exchanges. There are many of these exchanges already up and running in coffee producing countries around the world.

No longer does the payment for green coffee have to go through the slow, inefficient and profit-destroying central bank system. A coffee roaster in the USA for instance can instantly send payment via a blockchain token to a coffee producer in Indonesia. It arrives within minutes. The Indonesian producer can then exchange the tokens for fiat on a local exchange and have cash in hand the same day.

2. Contracts

Believe it or not, the international coffee trade still relies on telex, fax machines and email attachments to send, receive and update coffee contracts around the world. This creates a slow and error-prone paper trail that can require weeks between the time a deal is made to purchase coffee until the coffee is on its way to the buyer.

Tokens issued on a blockchain can carry indestructible, verifiable data though. This means they can be used to instantly transmit, verify and secure coffee contracts for buyers and sellers. This can reduce or even eliminate the need for the multiple communications via telex, fax and email that are standard in the industry now. It can reduce the contract process from weeks to days.

3. Logistics

Specialty coffee still needs to travel from producing countries to consumer countries. This is mainly done via container ship — and to a lesser extent airfreight. (Mainly for smaller, high-value specialty coffee lots.) This requires logistics providers.

Currently importers, exporters and shipping companies suffer from the same inefficiencies in payments and paperwork as the producers and roasters do. Blockchain tokens used a both payment vouchers and data transmitters will massively reduce inefficiencies at this stage of the supply chain as well.

Payments will be cheaper and faster to make, paperwork will be processed and verified sooner — meaning specialty beans will get from origin to buyer much quicker, improving quality while decreasing costs.

4. Coffee Crowdfunding

Blockchain technology also offers producers the opportunity to crowdfund the production of higher quality beans.

Currently, producers must take out loans or rely on the promise of higher prices at the end of season from buyers before they can take on the extra expense and effort of producing specialty grade coffee. This is a massive risk that often does not work to the farmers’ advantage.

Using the crowdfunding opportunity available with blockchain tokens though producers can raise funds before the season begins directly from buyers around the world who are interested in receiving specialty coffee at the end of the season. This has the potential to help small-scale coffee producers break free of the loan-debt cycle many are currently trapped in.

5. Marketing

Using blockchain technology to create a more direct-source supply chain also creates a higher perceived value for the end consumer — the coffee drinker. For coffee roasters and retailers, being able to show how they are using a technology that improves the amount of money farmers receive for their beans and improves the lives of those living at source is a benefit that coffee drinkers will respond to positively.

Where We Go From Here

Right now, there is a lot of interest in new blockchain tech companies being launched and crowd-funded by Initial Coin Offerings — ICO’s. Millions of dollars are often raised in mere minutes as participants join these launches, hoping that the founders’ promises will result in new types of software and services that will add value and change the world for the better.

With our CoffeeCoin project though — we are doing something different. We are using blockchain technology to solve current, existing issues with a real-world supply chain. The specialty coffee supply chain already exists, it has problems that need solving, and as described above — blockchain tech can go a long ways towards solving those issues right now.

Using the Wavesplatform blockchain, we are currently developing a specialty coffee token and trading platform that takes advantage of this technology to solve these and other issues in the specialty coffee supply chain.

I look forward to launching one the first solutions to bring blockchain technology to a real-world supply chain, adding value and improving lives around the world. If you are interested in following along as we develop our project, please visit http://coffeecoin.io .