Revolutionizing Rice Farming in the Philippines with DeFi-Powered LandX
Decentralized finance (DeFi) has the potential to revolutionize various industries, including agriculture, and rice farming in the Philippines is no exception. By leveraging the capabilities of blockchain technology, DeFi-based solutions like LandX can help to address the challenges faced by rice farmers in the Philippines.
If you are not yet familiar with DeFi, check out my blog post explaining how decentralized finance is changing the financial landscape here.
In this article, I will break down how LandX protocol can revolutionize the rice farming industry in the Philippines. We will specifically focus on rice farming as rice will be the introductory commodity that the protocol supports in the country. In the future, LandX will include other local crops, so stay tuned for more developments on that front. It is worth noting here that when I say farmers, they are the landowners. There will be some iterations in the protocol to cater a wide range of situations as it matures, but, in the meantime, LandX requires landowners to be the ones engaging the protocol.
Obstacles in Philippine Farming
Rice farming is a critical industry in the Philippines, providing sustenance for the country’s population and supporting millions of families. However, rice farmers are facing a plethora of obstacles that hinder their ability to meet the demands of the country’s growing population. The cumulative effect of these challenges results in lower crop yields and income for farmers and makes it difficult for them to support themselves and their families, and for the country to meet its own food needs. These challenges include:
1. Low Productivity — Many farmers in the Philippines still use outdated farming methods and do not have access to modern technology and equipment. This hinders their ability to improve crop yields and the quality of their produce.
2. High cost of production — Seeds, fertilizers, and other inputs can be expensive, and farmers often have to borrow money at high-interest rates to finance their operations.
3. Pest and disease infestations — Pests and diseases can significantly reduce crop yields, leading to significant financial losses for farmers.
4. Climate change — Extreme weather events and changes in rainfall patterns can damage crops and reduce yields.
5. Lack of government support — Rice farmers often do not receive adequate support from the government in areas such as access to credit, market, and extension services.
What is LandX Protocol?
LandX, a decentralized finance (DeFi) protocol built on the Ethereum blockchain, is looking to revolutionize the way rice farming is done in the Philippines. The LandX protocol enables an agreement between borrowers (farmers) and investors through the use of blockchain-based perpetual commodity vaults, which can act as a token that trades for a market-determined principal price. The holder of the staked token receives a daily yield of the underlying commodity in perpetuity.
One of the key problems LandX aims to solve is the difficulty farmers often face in accessing capital. This can be due to various factors such as administrative difficulties in obtaining financing for agricultural purposes, location-dependent access to capital, and unfavorable loan terms. By allowing farmers to tokenize a portion of their future crops, LandX provides them with upfront capital in exchange for a percentage of their land’s future harvest. This can help farmers to purchase additional farmland, and new equipment, and make facility updates, which contribute to local food security in a direct way.
LandX advocacy lies in providing solutions to the growing food security concerns against an increasing population and a reducing supply of arable farmlands. Their part of the solution is to create that bridge that capital will use to flow into the farmlands and allow farmers to be sustainably financed for longer periods of time thus generating boosted productivity. LandX is designed as a global offering to farmers to tap into this financing stream that will come from DeFi into the real world.
Fair Capitalization
The first step to accessing LandX protocol is the land assets are checked by experts: agrarians, financiers, and lawyers to determine the fair parameters of the land and the legal purity of ownership. Based on the LandX algorithm, a rating is assigned to the land plot for use in the asset pool on the LandX platform. This ensures the proper assessment of the real value of the land thereby providing fair capitalization for the farmers.
Fixed Payment
This will be a bit technical, but I will try to explain this as simply as possible.
The prices of crops during harvest can vary depending on various market conditions, and if the prices are low, farmers are at a loss. Traditional loans with high-interest rates can put farmers at a financial disadvantage. In a crop share agreement with LandX, farmers commit to providing a fixed payment measured in kilograms per year, to the protocol, regardless of changes in market prices. This ensures farmers’ payment remains the same even when prices are low.
It’s important to note, though, that there can be some downsides too. The farmer will lose some control over their harvest as they have to share a portion of it with LandX. Additionally, if the farmer’s crop is not successful due to weather conditions or other factors, they will still be responsible for providing the fixed payment to the protocol. However, eliminating the risk of price fluctuation will allow farmers to focus on one thing, productivity.
Bigger strategic options
With fair upfront capitalization, farmers can implement a variety of strategies to increase productivity.
1. Use modern technology, such as tractors, threshers, and other farming equipment.
2. Modernized production facilities to increase yield by building irrigation systems, storage facilities, or other improvements.
3. Repayment of bank debt, reducing leverage and stress on the farmers
4. Purchase of additional land, livestock, processing facilities, or other types of equipment that can change the productive capacity of the land.
Side note for Investors
LandX is not only beneficial for farmers, but also for investors looking for sustainable investment opportunities in the agriculture industry. The platform provides a new way to gain access to real-world farmland assets, which are often difficult for individual investors to invest in directly due to legal and bureaucratic restrictions. Through tokenization of the economic value of the land, it allows investors to gain exposure to real-world farmland assets and a daily yield paid out in units of the underlying commodity.
This creates new investment opportunities in the agriculture industry, particularly for investors seeking to diversify their portfolio. The investments in farmland through LandX can be uncorrelated to traditional markets, such as stocks and bonds, providing a hedge against market volatility. Additionally, the yield paid out in units of a commodity can offer a sustainable and stable return, claimable in USDC, which can be a valuable addition to any investment portfolio. With LandX, investors can not only gain access to a new asset class but also contribute to local food security by providing capital to farmers to improve their operations.
In the future, I will try to create articles about the intricacies of LandX in a more technical way.
LandX Advocacy
LandX has strong advocacy for regenerative farming, which is a holistic and sustainable approach to farming that aims to improve the overall health and productivity of the land, while also reducing the negative impacts of traditional farming methods on the environment.
The platform is built on the idea of supporting farmers in undervalued regions, not only by providing access to capital but also by supporting sustainable practices that will improve the health of the land and the communities that depend on it. LandX has a goal of allocating a portion of its revenue towards LandX Choice initiatives, these initiatives aim to fund transition to environmentally friendly farming practices around the world.
Regenerative farming emphasizes the use of natural processes and techniques such as crop rotation, cover cropping, and reduced tillage, which can help to improve soil health, increase water retention, and reduce the need for synthetic fertilizers and pesticides. It also promotes the integration of livestock and wildlife, which can help to increase biodiversity and improve the overall health of the ecosystem.
By advocating for regenerative farming practices, LandX is not only providing financial support to farmers, but also promoting a sustainable and responsible approach to farming that can help to improve the health of the land and the communities that depend on it.
Summary
LandX is a decentralized protocol that utilizes blockchain technology to revolutionize the way farmers access capital and investors gain access to real-world assets in the agriculture industry. The platform allows farmers to tokenize a portion of their future crops and receive upfront capital to improve their operations and contribute to local food security. It also opens up new investment opportunities for investors seeking sustainable yield and portfolio diversification through exposure to real-world farmland assets. Additionally, LandX aims to allocate a portion of its revenue towards funding the transition to environmentally friendly farming practices around the world. Overall, LandX platform offers a transparent, trustable, and sustainable way for the investment and trade of agricultural assets, and it aims to support farmers in undervalued regions.
