By Peter Vincent, Chief Technology Officer, Grain Discovery
Special to The Digest
There has been a lot of buzz recently around blockchain, with most of the talk centering around Bitcoin and on cloak and dagger stories about collapsing cryptocurrency exchanges. But lost in this high-drama debate is the fact that blockchain’s most interesting use-case is much more down-to-earth: tracing agricultural products, including biofuels, back to their origin.
Traceability in the supply chain
A blockchain is really just a simple tool which “chains” together “blocks” of data in a way that can’t be changed. Everybody has a copy of the same chain and agrees about its content, and you can prove mathematically that it hasn’t been tampered with, so it’s a chain you can trust.
It’s no coincidence that one of the best uses of blockchain technology is another type of chain: the agricultural supply chain. The crop’s journey from seed to feedstock to fuel is the “chain”, and each stop along the way is a “block”.
Using this technique you get a map of the product’s journey: a “digital passport” that is stamped (by adding blocks) by all the participants it passes through. This stamp cannot be forged and it’s always in the correct sequence. The participants can “stamp” it with anything from receipt date and shipping time, to more detailed data like sugar content, seed varietal, fertilizer application, and mycotoxin levels.
Traceability through a chain of custody is not a new concept in the agricultural industry. For instance, the familiar concept of Identity Preservation, whereby the identity (origin, unique characteristics, traits, genetics) and journey (handling, shipping, storage) of the agricultural product are recorded in a paper trail at every step in the supply chain, is in many ways the precursor to a modern blockchain. Blockchain takes this solid foundation and makes it electronic, adds tamper-proof security, distributes a copy to everyone, and gives everyone control over their own data, and the result is huge gains in efficiency and more reliable traceability.
However, blockchain doesn’t solve every problem. Though data already on the blockchain cannot be changed, the data originator can still write false data to the blockchain as easily as they can write false data on paper. The difference is, with blockchain, each participant uses a digital signature unique to them, which means everyone can tell who wrote the false data to the blockchain. Reputations can only be destroyed once, so the stakes are higher on a blockchain where there is no plausible deniability. Further, with the rapid shift to automation underway in the agricultural industry, much of the writing to blockchains will be done by tamper-proof sensors and this will also raise the overall level of security and trust in the system. And in stark contrast with paper systems and standard databases, data can never be erased, modified, overwritten, or deleted. It’s there, permanently. There is no liquid paper for blockchain, and when you sign something, there can be no doubt that the signature happened at this point in time, and by this authorized person.
How might this impact the Biofuels industry? Let’s look at two specific examples: biofuels by-products such as DDGS, and carbon-intensity (CI) tracking.
DDGS and other by-products
Last season, farmers across Canada and the US experienced abnormally wet conditions and this led to a serious outbreak of DON, or vomitoxin contamination, in the corn harvest. While vomitoxin does not make it into the ethanol itself, and so the primary product is unaffected, it survives the production process, and is concentrated into the feed by-products. DDGS contaminated by DON become unmarketable, and a significant revenue stream for the ethanol plant is lost.
How could blockchain help in this instance?
Canadian blockchain start-up Grain Discovery may have a solution. They use blockchain as part of an online marketplace that allows farmers and buyers to market their grain in real time and complete their trades through blockchain, resulting in secure and instant payment with built-in traceability.
This April, Grain Discovery, in partnership with the Canadian Seed Growers’ Association (CSGA) successfully completed a first-of-its-kind pilot using blockchain to follow Certified soybean seed through production and processing, ending with fresh-packed tofu on store shelves. This was achieved by recording every step the soybean took in real-time onto a blockchain, from seed to shelf, creating a digital food passport that could be accessed by scanning a QR code on the final packaged product.
In the same manner, the Grain Discovery platform could be used to tackle the DON problem in the ethanol supply chain. The corn seller could attach test data to the crop’s “digital passport”, which could include DON levels from labs, DIY test kits, or from an elevator where their load was rejected. Rather than discovering the high-DON corn during sampling at the weighbridge, the ethanol plant could plan “contaminated by-product” operations in advance and target high-DON corn at a significant discount while the plant is discarding DDGS.
Conversely, during normal operations, the plant would target uncontaminated corn and reduce the number of loads rejected at the weighbridge. Meanwhile, the DDGS buyer can be given access the blockchain to get an instant and accurate picture of the quality of the feed they are buying, including the vomitoxin levels of the feedstock and any other data that the ethanol plant chooses to add to the “digital passport”.
This is especially handy when exporting. When export markets are closed off by fear of contamination, blockchain is the simplest, safest and more secure way to verify claims.
Blockchain traceability also has another interesting use-case in biofuels: achieving a lower carbon intensity. The ability of blockchain to trace specific characteristics and traits along supply chain means the ethanol buyer would be able to pursue low-carbon corn grown with reduced nitrogen fertilizer usage and pay a premium to attract sellers that would ordinarily not be compensated for this practice. Farmers would be incentivized by this premium to adopt precision ag strategies to prevent over-fertilization, and to use targeted lower nitrogen technologies such as slow-release nitrogen nanotechnology, and seeds inoculated with engineered nitrogen-producing microbes. These nutrient budgeting practices could help to reduce the estimated ¾ of nitrogen fertilizer that is wasted and lost to the environment and could have a major impact on reducing the carbon intensity of ethanol.
Traceability of sustainable practices is increasingly becoming a requirement for governments around the world, and the ability to accurately calculate, trace and verify the carbon intensity of biofuels and their feedstocks is especially important for exports to Europe.
The bottom line is that the biofuels industry is only getting more complicated: margins are getting thinner, feedstock production is increasingly unpredictable, and regulation is increasing. Additionally, governments, export markets, and consumers are demanding more transparency in the biofuel and by-product supply chain. The adoption of blockchain will be increasingly necessary to address market volatility and meet the needs of the market in the most efficient and transparent way.