Marjan Schnetz wrote a paper about the use of Blockchain applications within the Logistics Agri-chain. She is studying Horticulture and Agribusiness, part-time, at the InHolland Hogeschool. Marjan works for the Ockham Group, in the Netherlands, as an IT advisor.
"We also see it as our duty to bring hyped-up IT claims back into proportion. Blockchain is the biggest hype of the last 25 years. This is according to my colleagues and me," says Marjan. "We have been doing research, publishing, and presenting for three years now. After all this time, we have not found a single case supporting blockchain. We now suspect that there is not a single commercially responsible application of blockchain. Also not agri-chains.'
With her permission, Marjan's entire paper follows.
Four central arguments about blockchain in agri-chains
In the following, we discuss why the agri-sector would do well to stay away from anything vaguely resembling a blockchain. The discussion is in a Q&A format.
1. “Blockchain is the technology behind Bitcoin. Everyone is working with it. Chain logistics, in particular, is the starting point for groundbreaking blockchain applications.”
It is true that without the blockchain, there would be no Bitcoin. However, what is also true is that blockchains only works on a small scale. For example, the Bitcoin blockchain can handle a maximum of seven transactions per second. Everything happening around Bitcoin is also aimed at bypassing blockchains.
A lot of effort has indeed been put into blockchain applications. This has been the case since Bitcoin's emergence in 2008. But, at closer inspection, this effort is still more about research and pilot projects. Or there are unsubstantiated claims. It is exactly the lack of successful applications that should make sensible business people stop and think.
2. “Information stored on a blockchain cannot be changed. It must, therefore, be correct.”
This is the central claim of blockchain applications. It is clearly false. A transaction made in a blockchain could just as easily be untrue or fraudulent, as when done in a non-blockchain environment. Say a fictitious Brazilian orange farmer records information on the Albert Heijn blockchain. He states he has shipped 1,000 kg of ripe, properly cultivated oranges to the Netherlands. None of that need be true.
Such an incorrect or even fraudulent claim can not be changed afterwards. This feature is a disadvantage, rather than an advantage. The logistics partners' blockchain nodes cannot validate the truth of a statement. How can this be possible? A prankster can claim to have painted the Mona Lisa on a blockchain.
We see this confusion or deception again and again in so-called scientific blockchain publications, such as this. Decide for yourself:
3. “Ok, but is it true that data on a blockchain cannot be changed afterward?”
Unfortunately, this is also incorrect. With pure blockchain, like that supporting Bitcoin, data can be manipulated. That is if the participants have more than 50% of the computing power. With Bitcoin, that is, although not impossible, very difficult to do. This is because so much computing power is used worldwide.
With smaller cryptocurrencies, the bar is lower. Successful hacks have taken place. With blockchain applications within logistics chains, the computing power threshold is mostly even lower. In theory, the risks are much higher. In theory; because such applications are always run in secret. The term used for this is 'private blockchain'. People in the IT sector call it security by obscurity.
Of course, this is precisely what happens in traditional logistics systems. Here, an insider, for example, an unethical player in a logistics chain, can easily provide fraudulent information. Participants in a closed logistics chain can jointly pull the wool over everyone's eyes. Nothing is controllable.
We must conclude that both real, public, and private blockchains offer no guarantee for unscrupulous manipulation. In a public blockchain, this can be done by outsiders. And a private blockchain does not provide any guarantee of truth to outsiders.
4. “Blockchains promote cooperation between chain partners that do not trust each other."
When it comes to public relations and marketing, this is undoubtedly true. In other situations, it is not. Just as with any other application, a blockchain application has to be designed. The partners must, therefore, come to bottom-up agreements. Or a third party with a workable application must have brought it. Here, top-down agreements must be implemented. These agreements must meet the chain partners' wishes.
Both practices have been standard for many years. The first is called custom software. We know the second as package software. It is prudent to place the operation of this application with a trusted third party, in one place. This is if there are good agreements, or even when there is a functioning application. There are limited risks of abuse of a joint application, especially in chain logistics.
The Brazilian orange supplier and Albert Heijn will, after all, continue to maintain their own, local administration. This administration is in addition to that of the chain's blockchain application. As soon as there is one dodgy change, the chain parties administration will no longer match that of the joint administration. Alarm bells will begin sounding everywhere, hopefully automatically.
There is a stronger argument against the use of blockchains in chains. Distrustful chain participants with conflicting interest can already see everything that is happening in the entire chain. This, without extra complicated, expensive measures. A good example in this context is The Greenery. This company is able to meet market demand precisely. They do this by handling their supply cleverly. Sometimes all their oranges will come from Brazil. But, in most cases, it will be a mix of products from different growers.
Homogenizing agri-flows is one of The Greenery's core activities. The other is using its own market knowledge and information to direct product streams. It is no surprise that The Greenery is not keen to take part in a blockchain application. (It is, therefore, also logical the AH and Carrefour's blockchain applications use one supplier.)
It is difficult to think of a single case where complete transparency is acceptable to all the chain partners. So, it is easy to understand why we see separate blockchain applications for different parties. These are parties such as Albert Heijn, Carrefour, and Walmart. Chains in the blockchain world are not network structures. They are tree structures.
Conclusions
The claimed usefulness of blockchain in logistics chains is questionable, to say the least. The good news is that even non-IT experts can see through the most impressive claims. There is a frequently heard argument that with so much publicity, there must be some use for blockchain. However, as more time passes with no workable solutions, this argument becomes less and less credible.
Agri-companies that are considering switching to blockchain chains are advised to be careful not to be used as marketing puppets by large retailers. Anyone participating in a private blockchain-based chain solution would be wise to demand the computing power be evenly distributed among the partners. They should also insist that all software and blockchain data be made available for inspection by all participants.
A company that fails to do this is a possible threat to all non-insider stakeholders. These are usually the end-users. But, they could also be smaller, weaker chain partners.
For more information:
Marjan Schnetz
Ockham Groep
39 Leidse Rijn
3454 PZ De Meern, NL
Tel: +31 (0) 881 182 400
marjan.schnetz@ockham.nl
www.ockham.nl