The Impact of Blockchain on Farmland
What is blockchain?
Blockchain is a shared, decentralized and distributed ledger technology in which transactions are added in a verifiable and permanent manner. It is essentially a database of records shared across identical systems in a network. Often confused with Bitcoin and other cryptocurrencies, blockchain is the underlying technology that powers them. In Bitcoin, the ledger is public and the transactions are anonymous. But for business networks, the blockchains are often private, permissioned networks where access is only granted to trusted parties in a system.
These permissioned blockchains are what have the potential to disrupt business systems from supply chains to logistics operations to contract facilitation. This isn’t just pie in the sky dream technology that basement programmers are dabbling in. Vendors like IBM and Microsoft are offering enterprise level solutions for major corporations to spin up their own blockchains. And companies like Walmart and Maersk are jumping all over it to solve problems ranging from food chain traceability to smart contracts in global shipping systems.
“Blockchain tech is designed to solve the problem of coordinating members of a group who don’t necessarily trust each other.” - Frank Yiannis, VP Global Food Safety, Walmart
How does blockchain work?
In a prototypical permissioned blockchain, each participant in a supply chain, logistics system, or series of digital transactions maintains a copy of the ledger in their own node. This model makes it impossible for anyone else to change the data, because when blocks get written to the chain, that data is immutable - it cannot be changed. However, not just anyone on the network can write data to this ledger. In order for a block to be added, every node must “agree,” providing consensus that the block is valid. In Bitcoin, these blocks are validated by miners executing Proof of Work algorithms using computing power. In business networks this validation is often executed with Smart Contracts, which are programmatic rules in the system used to validate transactions and data.
In order to visualize how this works, here is how IBM and Walmart envision tracing food through a supply chain. Each member - from farm, to packing house, transportation company, to distribution store - maintains a copy of this permissioned blockchain ledger.
When the farmer picks a batch of mangos and puts them in a box, the box can be marked with a batch number along with various information about the batch - including but not limited to: temperature when picked, pH balance of soil, produce grade, firmness, color, etc. This data can be gathered through a variety of Internet of Things (IoT) sensors automatically. Once that box is marked and identified, a block can be added to the shared ledger, verified by all the other members of the system to have accurate and validate data. When that batch of mangos arrives at the packing house, the box is scanned and another block will get added to the shared ledger indicating arrival and validation of all the information the farmer input... and so on and so forth through the food system.
Why is blockchain important?
Blockchain is a fundamental paradigm shift, the likes we’ve seen several times before. We started off with the rise of the mainframe powering backend business systems with IBM computers the size of freight cars. Then we moved onto the proliferation of personal computing bringing us companies like Apple and Microsoft building computers for individuals. Next we had the development of the internet which connected networked computers across the world ushering in the development of Netscape and AOL.
Following the proliferation of personal computers going online, we saw the rise of Web 1.0 bringing traditionally analog services online with the likes of Google and Paypal. As people got used to everything going online, Web 2.0 popped up allowing the traditional consumers of these connected technologies to start contributing their own information with Facebook, Youtube and Wikipedia. The latest paradigm shift was mobile, bringing a connection to computing and the world wide web to the pockets of billions of people.
Each step in this evolution followed the typical pattern of Moore’s Law at an arguably faster (if not exponential) rate in which the time it took to reach mass market was shortened significantly in each phase. Where personal computing took 20 years for mass adoption, mobile took 5 years.
Why is blockchain important? Because many technology futurists would argue that it is next.
Why am I reading about emerging technology on a farmland real estate blog?
Blockchain promises to improve transactional efficiencies and integrity of land registry systems where every real estate transaction is hashed and recorded into a blockchain making it publicly searchable to network participants. Not only can you instantly verify the owner of a property, you can accurately determine its history. Furthermore, contracts and transactions can be instantaneous via the use of smart contracts or proof of stake models within the distributed ledger reducing the need of bureaucratic red tape and excessive paper swapping that come with analog transactions.
"Land registry records are pretty reliable methods for maintaining land records, but they are expensive and inefficient," David Reiss, professor of law and academic program director at the Center for Urban Business Entrepreneurship
In the current system, everyone must rely on a trusted third party to verify land ownership and transactions. This often falls upon governments and banks. These bureaucracies can inevitably become inefficient and rife with fraudulent activity. The promise of a blockchain based model decentralizes that authority by distributing the ledger and automating the verification of consensus through algorithmic based smart contracts. An immutable distributed ledger means recorded property transactions can be viewed by everyone but tampered by no one. Smart contracts means instantaneous transactions and transfer of ownership. Each block that gets added to a ledger is accurately timestamped reducing the potential of fraud. Escrow and notary services can be added into the system, executed automatically, reducing friction and improving transactional efficiency.
How does blockchain affect land real estate right now?
The government of Sweden is testing a system for registering and recording land titles that utilizes blockchain in a bid to digitize real estate processes.
India's land ownership system is apparently fraught with fraud — so one state is exploring the application of blockchain technology to make it more transparent.
Ukraine will use blockchain technology to manage its registry of farmland, saying its current system is vulnerable to fraud that leads to conflicts over ownership.
It’s an industry that can be opaque and committed to self-preservation rather than consumers’ best interests. More than just enhancing or streamlining established processes, blockchain will — if supported by legislative innovation — enable new models that could make housing more affordable and accessible.
Andy Brudtkuhl works in digital, data, and analytics in the agriculture industry and sends a weekly newsletter analyzing blockchain in agriculture and food systems at https://agchain.xyz.
Topics: land investment