Role of Blockchain to prevent Information Asymmetry in Food value chains

In today’s time data has become the most important commodity transacted every minute of the day between trusting or untrusting parties be it for commercial or personal reasons. With the advancement of technology, access to any kind of data is just a click away but, who can guarantee the fairness of such easily available data?

While no one can deny the fact that data when analysed and used responsibly holds tremendous potential yet many factors decide whether, and to what extent, that gets actually fulfilled. Our ability to address the complex problems using data solely depends on how our respective ecosystems are designed and interact with one another.

Problems such as information asymmetry occurs when all parties involved in a transaction are not equally informed. Information asymmetries affects all industries with every minor or major stakeholder getting affected in one way or the other. This data mismatch occurs due to a variety of reasons, some of which are:

· information often remains stove-piped and siloed like when data is not shared by harvesters regarding farm equipment during leasing of used tractors etc

· data of poor quality (or even “fake”); and/or is not validated and not trusted like rampant doctored or photoshopped news floating in social media

· easily accessible data are shared and integrated while important data remain carefully hidden for e.g. consumers and regulators having no access to provenance information about products being sold like when buying Darjeeling tea, one is really not sure whether its source is a real Darjeeling tea garden or not

Serving a plethora of functions, food supply chains are awe-inspiring in terms of complexity. And due to the increasing distances, the food is traveling these days, from producer to consumer, keeping the food safe for longer hauls and at good quality is a big challenge. Information asymmetry here can create a series of problems, even market failure, with consumers risking the danger of selecting low quality, or even unsafe food caused by the absence of reliable information relating to food quality.

At present, majority of business in agri-food chain are centralised and involves a third party. Generally, this centralised trading system has plenty of drawbacks like lack of trust caused by information asymmetry and allowing information to be tampered easily. Also, in this highly interrelated, interconnected world, existing systems are limited when it comes to understanding and handling huge volumes of data.

And this is exactly where Blockchain comes in. By leveraging a shared and verified database of ledgers stored in a distributed manner, Blockchain seeks to redesign information ecosystems in a more transparent, immutable, and trusted manner. In simpler words, blockchain technology can reduce asymmetric access to information as all the participants in such an ecosystem basically have access to the same information and any tamper is practically impossible.

Reducing Information Asymmetry in Agri-chain

1. Track and Trace to reduce information asymmetries in the supply and value chain: Agri-food companies are highly vulnerable to trace the origin of a problem/fault. Blockchain can be used to ensure the origin and authenticity of a product or a problem.

2. Asymmetries related to the management of identity: The lack of verifiable identities has emerged as one of the major problems of the information age, enabling everything from identity theft to privacy violations, new and existing forms of surveillance, and other forms of fraud. Digital identity and private records can be stored and confirmed with blockchains through securely encoded legal documents.

3. Addressing transactional inefficiencies through smart contracting: Smart contracting has the potential to reduce fraud and transaction costs for businesses, governments and citizens. It can control digital assets and formulate the participant’s rights and obligations. Payments also can be initiated in a transparent and efficient manner. In this way, it reduces ‘third party costs’, simplifies the supply chain process, and also reduces risks.

In order to see the fruits of real change in the food value chain stakeholders need to have patience, long term commitment with a single-minded focus to bring in value. The above outlined mechanisms then will not only remove risks associated with imperfect information but also pave the way for a sustainable economy in the longer run.