Ten big food companies have teamed with computing giant IBM to develop blockchain technology that can help track and improve the US food supply chain.
Blockchain originally began as a way to legitimize cryptocurrency such as bitcoin. But in recent years it has taken on a life of its own as a shared record of data maintained by a network of computers owned and operated by many different independent businesses, rather than a trusted third party.
Now Kroger, Dole Foods, Nestle SA, Unilever, Tyson Foods and others are joining IBM in a grand experiment designed to track the movement of food products through the supply chain.
How Blockchain Works
Essentially, blockchain is simply a shared ledger for recording a history of transactions. Because many different parties are sharing the same financial ledger, it cannot be altered, reducing the risk of fraud, error, and inefficiency.
Traditional transactions are complex, with each party keeping its own set of books. It also depends on intermediaries such as credit card companies and banks to validate transactions. This antiquated, paper-laden process can result in delays and potential losses for everybody involved.
But blockchain uses a shared ledger that is tamper-evident. Once a transaction is recorded, it can’t be altered. Plus, all parties have to give consensus before a new transaction is added to the network. And paper is reduced or eliminated altogether, speeding up transaction times and improving efficiencies exponentially.
Benefits of Blockchain
It’s already paying off for some companies. Wal-Mart, which implemented blockchain trials in June, reported that the process has helped narrow down the time it took to trace food origins of mangoes from about 7 days to 2.2 seconds. That kind of timing can be critical in the handling and distribution of food products, especially if there is a product recall.
Blockchain works as a system of record that is shared among participants in a business network, such as the one being launched by IBM. That eliminates the need to reconcile disparate ledgers
Each member of the network can access the data so that confidential information is shared — but only on a need-to-know basis. Consensus is required from all network members and all validated transactions are permanently recorded. Once they are in the digital books no one, not even the system administrator, can delete or alter them.
Proponents of blockchain say it can free up capital flows, reduce transaction costs, speed up processes, and provide security and trust between businesses.