By Jeremy Muhlfelder

Blockchain, the distributed, immutable, public ledger technology that underlies popular cryptocurrencies like Bitcoin, has the potential to impact all realms of commerce by removing inefficient third-party intermediaries from industry systems and processes. The food industry, particularly livestock and agricultural production, is fraught with administrative headaches and a lack of transparency. These problems make the food industry ripe for disruption, and implementing blockchain technology in the food supply chain, as promoted by companies like IBM, is an important step for the industry to enter the age of exponential technology. Matthew Wilson, Retailers and Producers Turn to IBM Blockchain to Improve Safety, available at https://www.ibm.com/blogs/cloud-computing/2017/08/blockchain-food-safety/ (Aug. 24, 2017).

Given how central food is to our daily lives, both economically and culturally, it’s not surprising that there is increasing awareness among consumers about food safety and transparency. This concern counters the past century of consolidation within the agricultural and food sectors. Although this period of consolidation led to some economies of scale –Americans now spend a smaller percentage of their annual income on food than citizens of any other nation on Earth – it also resulted in monopolies that impair small farmers’ ability to compete. Consumer Expenditures—2016, Bureau of Labor Statistics, available at https://www.bls.gov/news.release/cesan.nr0.htm (Aug. 29, 2017); see also Ingredients: The Local Food Movement Takes Root (2009).

The subsequent lack of competition has left our system opaque, leading to major food safety concerns. Conglomerate food producers aren’t always forthcoming with their cultivation and manufacturing methods, and without legitimate competition, there isn’t an economic incentive for them to be more transparent. One major reason for this lack of transparency is that there are so many players and steps in getting food to a consumer’s plate that it is difficult to determine who should be responsible for this transparency. Consumers want that to change, and believe that this burden is on the food companies. See Charlie Arnot, Transparency Is No Longer Optional: How Food Companies Can Restore Trust, available at https://www.forbes.com/sites/gmoanswers/2015/11/30/transparency-no-longer-optional/#418614ac69d4 (Nov. 30, 2015) (explaining that when asking consumers who they hold most responsible for demonstrating food production transparency, “[f]ar and away, consumers hold food companies most responsible”).

Blockchain technology aims to address this type of problem: removing the concentrated power of incumbent third-parties and instead relying on a crowdsourced effort to maintain a trustworthy record of information. Imagine a public, tamper-proof ledger of the supply chain, where each party must input its respective information as it completes its step in the process. As a food product moves from a seed in the ground to a consumer’s purchase in the store, each step is reliably tracked, verified, and aggregated via a blockchain protocol. No third-party would either have control over the information or the ability to retroactively change the historical record, and anyone could go to a designated website or application and see exactly where their food came from. Jeff John Roberts, Big Pharma Turns to Blockchain to Track Meds, available at http://fortune.com/2017/09/21/pharma-blockchain/ (Sept. 21, 2017). This would both help satisfy the desire of consumers to know the origin of their food and help provide this information to the proper regulatory bodies tasked with ensuring our food safety. See Portlandia: Farm (Season 1, Episode 1), available at https://www.youtube.com/watch?v=WAlWrT5P2VI (showing a far extreme, where a couple goes to the farm that grew the chicken they were to be served. While this is one far extreme, and while we don’t necessarily expect every food consumer to be able to interact with the person who grew their food, we do want a system that provides some basic information on where the food comes from.) This also has the potential to aid smaller farmers by allowing them to crowdfund resources, automate much of their record keeping, and simplify regulatory compliance.

In the simplest terms, blockchain is “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything.” What is Blockchain Technology? A Step-by-Step Guide For Beginners, available at https://blockgeeks.com/guides/what-is-blockchain-technology/ (citing Don & Alex Tapscott, Blockchain Revolution (2016) (internal citations omitted)). This technology can be used to build an immutable, public, historical record of information that is maintained without being controlled by a powerful third-party intermediary. See Beginner’s Guide to Blockchain Technology, available at http://blockstrap.com/en/a-complete-beginners-guide-to-blockchain-technology/. While Bitcoin, the initial implementation of a blockchain,  and other cryptocurrencies have generally driven much of the conversation and hype around this technology, these are only examples of use cases that take advantage of this record-keeping mechanism. See https://bitcoin.org/en/; see also Philipp Kristian, ICO Hype, Bitcoin Gold Rush, Bullish Markets: Should We Trust The Brave New World of Finance, Forbes, available at https://www.forbes.com/sites/outofasia/2017/11/28/ico-hype-bitcoin-gold-rush-bullish-markets-should-we-trust-the-brave-new-world-of-finance/#d0b283a70084 (Nov. 28, 2017); see Cryptocurrency Market Capitalizations, available at https://coinmarketcap.com/ (providing the market caps of the 100 most valuable cryptocurrencies). While cryptocurrencies are influential in their own right, the importance of blockchain technology is far more expansive, comparable to the creation of the double-entry accounting method or as some consider it, the second iteration of the internet, as individuals and enterprises can rely on this new protocol to provide more transparent and efficient records of transactions. See Don & Alex Tapscott, Blockchain Revolution pg. 7 (2016); How Blockchains Could Change the World, McKinsey & Co., available at https://www.mckinsey.com/industries/high-tech/our-insights/how-blockchains-could-change-the-world (May 2016) (positing “[w]hat if there were a second generation of the Internet that enabled the true, peer-to-peer exchange of value?”).

In a traditional transaction, one party aims to send something of value to another party, with a third-party intermediary, such as a bank, clearing-house, or other service provider facilitating that transaction. These third parties provide trust between two parties that may not know each other, validating and making reliable an otherwise unfamiliar transaction. For blockchain-based systems, rather than relying on such an intermediary to provide trust to a transaction, a blockchain derives this trust from a network of participants and the underlying protocol.  These networks are “distributed” in that many network participants hold a copy of this record to ensure its integrity, while other participants called “miners” independently validate the transaction through cryptography. This system allows users to conduct transactions peer-to-peer, creates a decentralized, secure, permanent ledger of all transactions that have occurred in the ecosystem, and eliminates many administrative costs imposed by these third-party intermediaries. See Ever Wonder How Bitcoin (and other cryptocurrencies) Actually Work?, available at https://www.youtube.com/watch?v=bBC-nXj3Ng4 (providing a 26 minute, comprehensive yet understandable explanation of how blockchain technology works); see also How Bitcoin Works Under the Hood, available at https://www.youtube.com/watch?v=Lx9zgZCMqXE&feature=youtu.be (providing a deeper technical analysis of how building a blockchain works); How Does Blockchain Technology Work, Coindesk, available at http://www.coindesk.com/information/how-does-blockchain-technology-work/ (providing clarifying illustrations and a useful explanation of a blockchain network).

Importantly, there are obstacles to overcome such as verifying real-world events that are reported on the blockchain, as well as addressing the large amounts of energy consumed during the validation process. CoinTelegraph, Blockchain Oracles, Explained (Oct. 18, 2017); see also Nathaniel Popper, There is Nothing Virtual About Bitcoin’s Energy Appetite, New York Times (Jan. 21, 2018), available at https://www.nytimes.com/2018/01/21/technology/bitcoin-mining-energy-consumption.html?mtrref=undefined. Regardless, blockchain will significantly aid in improving food safety while providing much-needed transparency to the current black box that is the food production supply chain.

Jeremy Muhlfelder is a third year law student at Duke University Law School, pursuing a JD/LLM in Law and Entrepreneurship while focusing on emerging technologies. Mr. Muhlfelder is certified to practice under North Carolina’s 3rd Year Practice Rule. This article is a shorter version of a research paper he submitted in his Food, Agriculture and Environment seminar.