blockchain technology and the potential applicability

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Y. Zhang 1 , S. Lee 1 , J. L. G. van de Ligt 1 1 Veterinary Population Medicine, College of Veterinary Medicine, University of Minnesota. Blockchain Technology and the Potential Applicability in the Feed Industry 2019

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Page 1: Blockchain Technology and the Potential Applicability

Y. Zhang1, S. Lee1, J. L. G. van de Ligt1

1Veterinary Population Medicine, College of Veterinary Medicine, University of Minnesota.

Blockchain Technology and the Potential Applicability in the Feed Industry

2019

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SUMMARY

Information on the current applications of blockchain in food systems and the potential applicability, uses, and limitations of blockchain for feed ingredients common to the swine industry was gathered from a multitude of sources. The information on applications representative of supply chain logistics for imported feed ingredients was evaluated and limitations of blockchain in tracing lots of packaged ingredients vs. ingredients in bulk transportation was assessed. Overall, blockchain application is a viable technology to ensure traceability of feed ingredients. Blockchain provides key benefits including transaction security, auditability, and transparency. However, these benefits are accompanied by costs including, most importantly, the need for all-in participation and a value-driven incentive to participate that is shared across the supply chain. In addition, due to the bulk commodity nature of many feed ingredients common to the swine industry, traceability to individual manufacturer or producer through any technology becomes limited to the largest storage and/or transportation unit in the supply chain. Ingredients that move through the supply chain as discreetly packaged products, whether in kilogram packages or metric ton super sacks, have an easier entry into and more optimal traceability within blockchain technology. These concepts were modeled into a scenario for potential soybean shipments including where suppliers may verify the implementation of key preventive controls to decrease the risk of disease transmission via feed distribution.

1. INTRODUCTION TO BLOCKCHAIN

The power of utilizing blockchain technology in transactions, including uses in the food and agricultural system, is in allowing parties to trade in the absence of a mediator or trusting relationship. This is the cornerstone of all blockchain applications - secure trading of ‘things’, both physical and virtual, without middlemen and historical relationships. However, it should be recognized that blockchain applications depend absolutely on the reputability and accuracy of the data included in the blocks that are recorded in the chain. As such, it is important to understand the history and basics of how blockchain technology provides this reputability through encryption and transparency.

A. Bitcoin: The Origin of Blockchain

The blockchain technological system originated to support the creation and distribution of the first major digital currency, or cryptocurrency, Bitcoin. Satoshi Nakamoto, a pseudonym for a person whose real identity is not yet known, registered the domain

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named "bitcoin.org" in August 2008 (Böhme, Christin, Edelman, & Moore, 2015). This domain prompted the development of a peer-to-peer electronic cash system without a central bank or a single administrator. Nakamoto released the source code to the public in the bitcoin network and created the first block of the chain in 2009, named the “genesis block” (Davis, 2017).

Within blockchain, a single block is a package of data recording the most recent transaction (Figure 1). The data is encrypted using advanced mathematical algorithmic hashing techniques. The algorithms produce the exact same output, or hash, from specific inputs and associated mathematical functions. These hashes can be as large as a string containing 64 alphanumeric characters (e.g. 6bf8f0 contains 7 characters). Small changes to the inputs will result in a very different hash which guarantees the security throughout message transmission. If the output matches the target hash, then it is accepted as the solution. The process of determining the hash is known as mining. The miners, also known as the nodes, write lines of code running on high-performance computers to approach possible solutions for the target hash. When miners create a new transaction record or block and it is confirmed to be correct and accepted by the rest of the network, it is added to the public distributed data ledger of past transactions (the blockchain) and the miner is rewarded with cryptocurrency (Tasatanattakool & Techapanupreeda, 2018). According to the rules of mining and rewarding designed by Nakamoto, there is a limit of 21 million Bitcoins and, currently, there are over 17 million in circulation (Kharpal, 2018). Since each node holds an entire copy of the ledger, every time a new block is broadcast and accepted, all nodes need to refresh their copies before starting to work on or mine the next solution.

Figure 1. A block is a package of the most recent transaction information.

Mining is based upon the Proof-of-Work (PoW) consensus system, a concept brought up by Dwork and Naor (1992), and formally introduced by Jakobsson and Juels’ (1999). PoW requires each node that wishes to participate in the mining process to compete in an expensive “crypto-puzzle” (Peterson, 2017). PoW has a number of properties that allows it to act as an efficient non-interactive proof system including completeness and

Block

Current Hash Key

Previous Hash Key

Index Time Stamp

Transaction Info

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fast verification, security against malicious attacks, and efficiency and security for honest provers (Garey, Kiayias, & Panagiotakos, 2018). In general, PoW regulates the difficulty of mining and provides a consensus system that makes modifications of the blockchain extremely hard (Yang, 2018). With the PoW consensus system, an attacker would be required to modify all related blocks in order for modification of a single block to be accepted. The difficulty of modifying a block increases as time passes and the number of subsequent blocks increases.

Although the food and agricultural sector opportunities for blockchain implementation do not relate to cryptocurrency, many of the blockchain foundations established for Bitcoin and cryptocurrency are crucial to the use cases in the food and agricultural sector.

B. The Concept and Technology of Blockchain

As blockchain expanded from use in cryptocurrency transactions, it became defined as “a shared, distributed ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible or intangible” (Gupta, 2018). Anything of value can be tracked and traded on a blockchain network linking together individual blocks of transaction data. The use of blockchain is expected to reduce risk and cut costs for all participants.

The process of completing a transaction with a blockchain starts from a transaction proposal, reaching consensus validation among all nodes, packaging transaction data as a block, combining the new transaction with previous ones, and finally synchronizing the ledger copies across the network (Figure 2; Gausdal, Czachorowski, & Solesvik, 2018). In this way, each subsequent block strengthens the verification of the previous block and hence the entire blockchain (Gupta, 2018). In addition, each node (user) in the system is available for both outgoing and incoming transactions among different nodes.

Figure 2. Process of completing a transaction with blockchain.

One party

requests for transaction

Request be broadcasted to all

nodes Consensus

validation among all nodes

Combine the new transaction with

previous ones and create a block

The new block is

added permanently to the blockchain

Transaction complete

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Blockchain technology is fundamentally about a mutually shared network (Wong, 2018). It is not an independent technology, but a comprehensive technical system that integrates various practices including consensus mechanisms, encryption algorithms, smart contracts, and distributed data storage (Wu & Tran, 2018). The consensus mechanism can be realized by many kinds of programming languages, such as Proof-of-Work (PoW), Proof-of-Stake (PoS), and Delegate Proof-of-Stake (Tian, 2018). Although PoW is currently most commonly used in the blockchain, PoS is less costly in terms of computing resources and electricity and can deliver faster throughput (Gohil, 2018).

The main properties of blockchain include decentralization, immutability, consensus validation, and security credibility (Gupta, 2018; Wu & Tran, 2018; Gausdal, Czachorowski, & Solesvik, 2018; Tian, 2018). Specifically, decentralization comes from a distributed network structure which is a non-trust mechanism with no privilege for any one of the nodes. The larger the number of nodes to validate the transaction, the smaller the risk of the transaction becomes. This can lead to a completely distributed system where all nodes are interconnected (Figure 3).

Immutability means that once a transaction is confirmed and added to the chain. It becomes virtually impossible to change and, thus, also becomes resilient to tampering because a good hash eliminates the ability to back-calculate the original data (i.e. the hash changes in an unpredictable way if the input data changes even slightly; Figure 4).

Figure 4. Flow of blockchain is immutable with time stamps attached to each block.

Figure 3. Centralized, decentralized, and distributed network structures (Crowe, 2016).

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Consensus validation requires agreement upon transactions among all stakeholders (Figure 5). And finally, cryptography secures the records on a blockchain. The complete transfer path of the object of transactions can be fully recorded and traced, which facilitates the supervision of the transaction (Wu & Tran, 2018). Additionally, since blockchain is decentralized and distributed across peer-to-peer networks that are continually updated, it requires a huge amount of computing power to access every instance, thus reducing the risk of hacker attack (Gupta, 2018).

Blockchain normally falls into two categories: public blockchain (permissionless) and private blockchain (permissioned) (Mulligan, Scott, Warren, & Rangaswami, 2018). Wu and Tran (2017) suggested the consortium blockchain as a blended type including aspects of both public and private blockchains. Public

blockchains are permissionless and open to everyone without exception. Software can be downloaded to a private computer and the entire history of the blockchain can be viewed, money and transactions can be sent and received, information stored, and smart contracts created within the blockchain (Cachin, 2016). Private blockchains are the opposite as they give full control to their owners and the information is internally shared in the entity. Having few stakeholders enables private blockchains to enjoy a higher level of flexibility and the ability to adjust the rules to fit their needs (Heires, 2016). In practice, most enterprise blockchains are private and permissioned, thereby restricting access to trusted users (Table 1).

Table 1. Comparison of the characteristics between the permissioned (private) and the permissionless (public) blockchain.

Permissioned/Private Permissionless/Public

Faster Slower Managed by private company Public ownership

Figure 5. Consensus validation across all participants in the blockchain network (Financial

Markets Group, Federal Reserve Bank of Chicago).

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Private membership Open and transparent information

Trusted among participants Trust-free

Consortium blockchains operate under the leadership of a group of stakeholders, empowering them the option to share specific data with other stakeholders. Currently, many industry leaders and worldwide leading companies take advantage of consortium blockchains and seek organizational collaboration to support the development of blockchain platforms and tools. Applications currently being developed in the food and agriculture system appear to be more consortium-type rather than public. However, it is often difficult to discern from available information which of the applications are consortium and which are private.

C. The Development and Application of Blockchain

Blockchain technology has undergone three waves of application development.

“Blockchain 1.0” is the cryptocurrency application as represented by Bitcoin. Since the release of Bitcoin, over 4,000 other cryptocurrencies have been created (Yang, 2018). The currency application also expanded into the financial industry and financial service sectors. For example, the Spanish bank BBVA Compass carried out a pilot blockchain project in which it issued a 75 million Euro ($89.7 million) loan to a company called Indra (Kharpal, 2018); the stock exchange group Nasdaq partnered with the Swedish bank SEB to trial a free blockchain-based mutual fund trading platform (Turula, 2017); and a group of Japanese banks will adopt a blockchain ledger for a mobile payments initiative (Kobay akawa, et al., 2017). In 2017, Payments Canada, TMX Group, and the Bank of Canada in collaboration with delivery partners Accenture and R3 launched Project Jasper in order to build and test a simulated wholesale payment system using a blockchain-based settlement asset. The Jasper Phase III report (Henry, et al., 2018) announced that the distributed ledger technology allows direct cash and eliminates the need for intermediaries such as financial institutions, governments, accountants, and economic agents (Nofer, Gomber, Hinz, & Schiereck, 2017).

“Blockchain 2.0” introduced the use of smart contracts into cryptocurrency transactions and other financial fields, such as insurance and mortgage loans. The smart contract is a computer-processed trading protocol that allows the contractual clauses to be executed independently and automatically when certain conditions are met from all interested parties (Wu & Tran, 2018). Smart contract information is stored in a block with a hash that identifies it and can be triggered in a transaction by

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indicating the information on the blockchain (Gausdal, Czachorowski, & Solesvik, 2018). Smart contracts reduce the cost of management and avoid unnecessary disputes because all actions are performed accurately under the rules of the transaction (McLellan, 2018; Wu & Tran, 2018).

Figure 6. Examples of blockchain applications (Zago, 2018)

“Blockchain 3.0” extended blockchain applications to areas outside the financial

industry including, but not limited to, government, healthcare, supply chain management, consumer or industrial products, transportation and logistics, media and telecom, etc. (Figure 6; Walmart Food Safety Collaboration Center, n.d.). For example, diamond producer, De Beers, uses the technology to trace diamonds from mining to delivery to a jeweler (Kharpal, 2018); IBM and China’s Energy Blockchain Labs are building the world’s first blockchain-based “green asset management platform” to support low-carbon emission technologies (Wu & Tran, 2018); the Port of Rotterdam, Europe's largest shipping port, established a blockchain alliance in the logistics

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industry in 2016; and the port of Antwerp, Europe's second-largest port, also operates a pilot blockchain project focusing on logistics automation (WFSCC, n.d.). The industry report released by Grand View Research (2018) indicates that the blockchain market size is expected to grow to USD 7.59 billion by 2024, at a compound annual growth rate (CAGR) of 39.2%. The public blockchain network segment is anticipated to witness significant growth over the following decade. With the exponential growth of blockchain technology and the initial trials underway in the food and agricultural sector, the probability that aspects of the pork industry including feed ingredients will soon see blockchain applications.

D. Pros and Cons of Blockchain (General)

Blockchain, similar to other technologies, has many pros and cons. These advantages and disadvantages must be evaluated and addressed in each specific potential blockchain context of use.

Advantages of applying a distributed peer-to-peer network into industries include:

a) Improved transaction and operational efficiency Compared with traditional currency transaction and physical distribution systems, blockchain technology reduces the time and cost of transactions by eliminating third-party intermediaries and removing complex interactions because participants can exchange items of value directly (Gupta, 2018). Thus, transactions can be conducted at a speed more consistent with the pace of doing business. In the finance and trading sectors, transaction settlement is faster because it does not require verification by a central authority. The network is self-policed by network participants who have access to the shared ledger (Tian, 2018). Improved information intensity in the finance industry leads to the expectation of blockchain technology allowing the saving of $20 billion a year by reducing back-office costs (The Economist, 2018).

b) Enhanced security and auditability Mathematical-algorithm cryptographic mechanisms are core to the security of blockchain. Cryptography within blockchain protects transactions against tampering, fraud, and cybercrime (Tian, 2018; Arildsen, 2017). If a network is permissioned (a private blockchain), blockchain enables the creation of a members-only network with identity proof where assets are traded through secured paths. For consortium and public blockchains, a shared ledger that serves as a single source of truth improves the ability to monitor, trace, and audit transactions (Heires, 2016).

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c) Solves the trust issue Application of blockchain technology helps reduce market frictions by solving the problem of coordinating a group of members who do not necessarily trust each other (Gupta, 2018). The immutability characteristic and consensus system combine to protect the information package from being manipulated or altered by any of the stakeholders in the network.

d) Improved traceability With blockchain and digitization of production, processing, and distribution records, products can have a unique digital certification connecting information of every step from initial production (e.g. farm, birth, manufacturing) to sales, including farm-origin details, batch codes, processing data, factory backgrounds, storage temperatures, and shipping details (Tian, 2018). This brings significant development to enhancing food safety and security providing the primary incentives to implementation of blockchain technology in the food and agriculture sector.

Although blockchain had many advantages including operational efficiency, transactional security, trust enhancement, and improved traceability, the development of blockchain platforms and technologies is still at a very early stage. As a result, there are several drawbacks, limitations, and challenges to full implementation (Fontanazza, 2018; Wong, 2018; McKenzie, 2018; Arildsen, 2017; McLellan, 2018; Mulligan, et al., 2018), such as:

a) Expensive and energy consuming Blockchain requires large amounts of energy due to the massive amount of computing power required to solve complex problems and mathematical algorithms that are integral to maintaining the security and immutability of the ledger. The transaction records and related information require all involving participants to perform synchronous storage which requires huge-capacity storage systems (both hardware and software). For example, a single blockchain financial transaction takes thousands of times more energy than a credit card swipe. The potential energy cost per transaction is as high as 94-kilowatt hour, or enough electricity to power three households for a day (Malmo, 2017). Such limitations restrict the scalability of blockchain applications in terms of throughput, latency, and capacity when faced with mass data in a global business environment.

b) Limited efficiency Blockchain can handle a theoretical maximum of about seven transactions per second as it is presently implemented which has limited its breakthrough over the past five years. In addition, transaction time and costs have soared as the network became more congested. This actually led to the

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rejection of the technology by a number of participants. For example, Stripe, a large digital-payments firm, abandoned its blockchain experiment after three years of application, describing the technology as “slow and overhyped” (The Economist, 2018). In addition, the consensus system requires full participation from everyone within the system. As a result, the larger the network, the slower the progress of engaging 100% of stakeholders.

c) Moral hazard Blockchain is hampered by a 51 percent vulnerability which brings moral hazard. The 51 percent vulnerability exists if a single node (user) holds more than 50 percent of the blockchain's hashing power (in a PoW system) or coin ownership (in a PoS system). When this occurs, the node (user) can manipulate and modify the blockchain information in various ways. As a result, the trust issue does not vanish entirely in the blockchain system. In addition, many of the more recent blockchain applications require input of a variety of data related to a transaction. Thus, honest participation is still required. For example, in the food and agriculture sector, a grower or producer would have the ability to indicate in the blockchain transaction record that a crop was produced under specified conditions that were not met. The record would be transparent to the blockchain participants, but, in this case, the underlying trust issue is not solved without verification of the conditions entered in the record.

In all, blockchain technology developed and evolved quickly in recent years. An increasing number of technical service providers joined and platforms were built to support the burgeoning blockchain applications. The advantages of blockchain drive industries to participate in trials, while several stakeholders have taken a more cautious approach about this emerging technology while considering its drawbacks.

Part II. Major Initiatives

Among the pioneers in the third wave of blockchain development, IBM is the leading organization and has conducted several blockchain initiatives by cooperating with giants in several industries including Walmart and JD.com in the food sector.

A. IBM

IBM is one of the earliest multinational blockchain initiators in the food and agriculture sector and has been actively promoting the development of blockchain technology and

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applications. The IBM Blockchain Platform uses Hyperledger Fabric, hosted by Linux, as its foundation (IBM Blockchain, n.d.). Hyperledger Fabric is a part of the Hyperledger system, a global, open-source collaborative effort created by over 220 companies to advance cross-industry blockchain technologies (Smith & Christidis, 2016). The Hyperledger system has been using barcodes and radio ID tags to track different types of information for many years, but the missing piece was a shared forum where companies can see their partners’ transactions. This is where blockchain represents a substantial improvement for collaboration among parties by sharing information.

Figure 7. IBM has over 500 client projects in all industries (Ervin, 2018).

As a well-known technology service provider, IBM has engaged clients on the blockchain platform technology across all industries, including the world leading companies in finance, banking, supply chain, consumer goods, energy, healthcare, transportation, and so on (Figure 7). More than 500 clients leverage blockchain technologies based upon IBM’s services and host their blockchain applications on the IBM Cloud (Cuomo, 2018). IBM’s blockchain services allow supply chain customers build and test blockchains in a secure cloud computing environment. The IBM blockchain service is aimed at companies that need to track high-value items through complex supply chains (IBM Blockchain, n.d.). For example, IBM is active with blockchain solutions addressing the food supply chain, international transportation, and diamond trading.

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a) IBM Food Trust

Many major food companies around the world demonstrated interest in the idea of increasing the transparency of their supply chains with digitized automatic tracking of important information, such as temperature and quality of goods, shipment and delivery dates, and safety certifications of facilities (Hackett, 2017a). In August 2017, IBM, together with Walmart, formed a consortium to explore how blockchain technology may improve the safety and transparency of the food supply chain. The consortium was initially comprised of ten major food suppliers, including Tyson, Unilever, Driscoll’s, McCormick, Nestle, Kroger, McLANE, Dole, and Golden State Foods (Hackett, 2017a). This coalition aimed to maintain secure digital records and improve the traceability of their foodstuffs, like chicken, chocolate, and bananas. In 2018, more food companies joined the consortium: Carrefour, Topco Associates LLC, Smithfield Foods Inc., BeefChain, Dennick FruitSource, and several sub-connected suppliers and distributors (Gelski, 2018). Carrefour stated that they are using the blockchain-based network to fortify their food excellence system (Dawal, 2018). The blockchain technology highlighted the ineffectiveness of traditional inventory and supply chain. Existing blockchain test cases have shown that the use of blockchain enhances stakeholders’ ability to quickly trace and remove food from commerce when it has been identified as contaminated. This improved speed and traceability improve public health during a foodborne outbreak, reduce product waste, and increase customers’ satisfaction and trust (IBM Food Trust, n.d.).

After 18 months of testing with major food companies, the IBM Food Trust was launched commercially in October 2018 as a modular solution established to support the food industry and its supply chain. Based on the belief of building trust through transparency, it aims to provide network participants a safer, smarter, and more sustainable food ecosystem through permission-based, permanent, and shared records of food system data (IBM Food Trust, n.d.). The digitization of transactions and data has the capability to provide end-to-end visibility across the supply chain, including primary producers, processors, warehouses, manufacturers, shippers, retailers, regulators, distributors, and consumers. IBM Food Trust enables participants to enter and control access to their encrypted blockchain data. To date, the initiatives are mostly permissioned private practices. The decentralized collaborative blockchain network can help track the authenticity of products from suppliers and trace the origin of the products in less than two seconds. The solution provides authorized users with immediate access to the actionable food supply chain data, from farm to store

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and, ultimately, the consumer. The complete history and current location of any individual food item, as well as accompanying information, such as certifications, test data, temperature data, etc. are readily available in seconds once uploaded onto the blockchain and the cloud system (IBM Food Trust, n.d.).

b) TradeLens International Transportation

IBM and Maersk entered a partnership in June 2016 to improve efficiency of international transportation using new technologies based on blockchain and cloud techniques (Figure 8). The first blockchain-based cargo-tracking trial was conducted in February 2017 with a trans-Atlantic shipment taking two weeks to move from Rotterdam to the port of Newark in New Jersey passing through customs and other agencies (del Castillo, 2017). Since then, several parties have tested the platform, including DuPont, Dow Chemical, Tetra Pak, Port Houston, Rotterdam Port Community System, Dutch Customs Administration, U.S. Customs and Border Protection, etc. (MasContainer, 2018a).

Figure 8. Flow of the tracking process of the international shipment (smartereum.com).

The partnership announced the creation of the solution for global logistics using blockchain, TradeLens, in January 2018. Damco, Maersk’s supply chain solutions company, supported origin management activities during shipment while utilizing the solution. A number of trading partners, government authorities, and logistics companies have been engaged including Schneider Electric, U.S.

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Department of Homeland Security (Science and Technology Directorate), U.S. Customs and Border Protection, Port of Rotterdam, and Port of Newark (MasContainer, 2018b). Potential participants include Custom Singapore, Custom Peru, global terminal operators (e.g. APM Terminals and PSA International), Office of Inspection and Quarantine of Guangdong, etc. Application of blockchain to increase the efficiency of cross-border logistics has been one of the most successful current applications of blockchain.

Currently, TradeLens has signed 94 organizations for program-border supply chain to manage and captured more than 154 million events shipping on the platform worldwide, including shipment data (i.e. arrival times of ships and the shipment container) and documents such as press office, commercial invoices, and bills of lading. Traditionally, a simple intercontinental shipment of refrigerated goods can go through nearly 30 people and organizations including more than 200 different interactions and communications (IBM, 2017a). Digitization of global trade is expected to benefit the industry through the management of transactions among the network of shippers, freight forwarders, ocean carriers, ports, and customs authorities. Use of blockchain and digitization of records associated with the trade documentation and administration are estimated to reduce the actual transportation costs by 80 percent.

c) Other Initiatives

IBM is also working with the startup solution provider, Everledger, to monitor the movement of diamonds. By creating an unalterable permanent record, blockchain allows tracking diamonds and other goods where buyers demand to know the origins of the products and the previous owners. Everledger targets industries where transparency, trust, and provenance matters. For diamonds, Everledger helps companies track the provenance of diamonds allowing buyers to identify for stones mined in regions where forced labor is common or where violence is involved in the proceeds (Nash, 2016a). This allows the industry as a whole to identify illegal goods and decrease fraud worldwide. For each diamond, Everledger measures 40 attributes: cut and clarity, the number of degrees in pavilion angles, the mined location, etc. The participating companies generate a serial number for each diamond (a block), inscribed microscopically, and added to Everledger’s blockchain (Nash, 2016b).

Although blockchain was originally developed for use with virtual assets, the IBM affiliated examples are currently some of the largest scale blockchain applications applied to physical goods. The learnings and interaction among the IBM Food Trust

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and TradeLens provide highly relevant examples and tested technology for potential implementation of blockchain in the animal feed space.

B. Walmart

Walmart has one of the most complex global supply chains in the world with over 11,735 units sold under 55 banners in 27 countries and e-commerce websites in 10 countries (Walmart, n.d.). A single shared ledger where all parties provide consensus to new transactions can improve the track and trace capabilities for consumers and stakeholders, reduce paper processes, and speed up transaction times.

Walmart expects use of blockchain technology to: increase trust by end consumers through transparency; improve shelf-life management and decrease waste of expired products; minimize fraudulent products; build a more sustainable food system; create a global view of the provenance across Walmart’s supply chain; meet requirements of demanding governments (Galvin, 2017). Walmart blockchain tests started in 2016 and accelerated over the past two years (Figure 9). Walmart completed two blockchain pilots: pork in China and mangoes from Mexico (IBM, 2017a; Kamath, 2018). Walmart conducted the mango pilot for a month with 16 mango farms in Mexico, two packaging houses, two import warehouses, and one processing facility (Churchill, 2018). Recently, Walmart announced it will require its direct suppliers of leafy greens to join their blockchain by January 2019 (Nash, 2018).

Figure 9. Timeline of Walmart’s blockchain initiatives

C. JD.com

Chinese e-commerce company, JD.com, in cooperation with shipping company, Maersk, started a pilot project to track the frozen beef from Inner Mongolia to

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supermarkets in China’s megacities including Beijing, Shanghai, and Guangzhou. JD.com started tracking beef products in May 2017 (Wong, n.d.).

When customers order a beef product from JD.com, the product arrives the next day with an attached QR code. Scanning the code using the JD.com app will provide the cow’s serial number and a 64-digit alphanumeric code for the transaction (Huang, 2017). Customers have access to information about the cow including age, weight, slaughtered date, breed, farm identifier, feed, and the name of the veterinarian who attended the cow prior to slaughter.

Following implementation in China, JD.com expanded the business to imported cattle. In March 2018, JD.com partnered with an Australian beef producer, InterAgri, to track the supply chain information of Angus beef imports.

In addition to the beef supply chain work, in December 2017, JD.com joined Walmart, IBM, and Tsinghua University National Engineering Laboratory for E-Commerce Technologies to launch the Blockchain Food Safety Alliance which aims to achieve greater transparency across the food supply chain in China (Aitken, 2017; IBM, 2017b). The Alliance aims to provide real-time traceability of food origin, safety, and authenticity through blockchain technology. A key aspect of the Alliance is creating standards-based methods to collect the information about the food that JD and Walmart commercialize.

Part III. Specific Food Product Initiatives

As blockchain technology matured, the food and agricultural supply chain began experimenting with and developing blockchain applications. The applications range from small, niche producers of specialty products to large, multinational players with commodity products and affiliated industries and products. However, each and every application is guided by a driving incentive. Incentives include consumer transparency, food safety, food fraud reduction, sustainability, premium claims, and many others. Blockchain technology facilitates traceability and verification of the incentive drivers across the food system from primary production to the consumer. Although no current blockchain applications exist in the animal feed industry, the experience and technology being developed, used, and tested in the broader food and agricultural supply chain will inform and, ultimately, determine the potential to deploy blockchain as a supply chain traceability tool in the animal feed industry.

A. Protein Products

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a) Poultry

1. Carrefour (France)

Carrefour, a major leading food retailer and distributor, announced the launch of blockchain technology for eight of Carrefour Quality Line products. The technology is implemented for free-range Carrefour Quality Line Auvergne chickens. Since March 2018, customers were able to have the information on feed, farmers, treatments, quality labels and slaughtering process of free-range Carrefour Quality Line Auvergne chickens via QR codes on the product label (Carrefour, 2018). All participants in Auvergne chicken supply chain are required to keep records of every step of the production process in a digital database that consumers can access by scanning the QR code. The detailed information recording process is explained Figure 10.

Figure 10. Flow of tracking Carrefour Quality Line Auvergne chicken (Carrefour)

Carrefour plans to expand blockchain application to animal and vegetable products including Cauralina cored tomatoes, Loué farmhouse eggs, PDO Rocamadour cheese, Gillot milk, Norwegian salmon and Noël fattened chicken (Carrefour, 2018). As a part of the Carrefour 2022 transformation plan, they plan to apply blockchain technology to all Quality Line food products by 2022.

2. ZhongAn Technology (China) – Go Go Chicken project

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ZhongAn Online P&C Insurance Co. Ltd. is China’s first complete online insurance company established in 2013 with the joint work of three Chinese companies Ping An, Tencent, and Alibaba. ZhongAn Technology is a subsidiary the insurance company focusing on research and development of the latest technology (Palamara, 2018). One of their projects is the ‘Go Go Chicken’ project that tracks organic chickens from the farm to customers using blockchain technology and an IoT (Internet of Things) device.

ZhongAn Technology set specific food security standards to ensure the quality of the product through tracking chickens from birth through the use of an electronic pedometer anklet. All production procedures, as well as real-time information about the chickens, at Go Go Chicken farms are recorded in a blockchain ledger. Once customers purchase the chicken and scan the QR code on the product, they can have the information on the birth and slaughter dates, daily step counts, and feed (Lim, 2018). The company also provides a real-time farm monitoring system which was originally designed for farmers to monitor their poultry and is now also available to the public. For the farmers, the system alarms them when air, water, or soil quality changes to the unexpected levels. For the customers of Go Go Chicken, this real-time monitoring system provides credibility for their products.

Currently, ‘Go Go Chicken’ project is cooperating with 200 farmers in Anhui, Henan, Guizhou, Shaanxi, Gansu, Hainan and other provinces. ZhongAn Technology aims to expand their project to 2,500 farms across the whole country by 2020 (ZhongAn Technology, 2017).

b) Pork

1. Walmart (China)

In 2016, Walmart established the Walmart Food Safety Collaboration Center in Beijing to confront food safety issues. Food safety is one of the most important quality-of-life indicators. Between 2001 and 2013, 49,500 food safety incidents in food production and circulation sections were detected in China with 68% caused by illegal activities (Galvin, 2017).

Teaming up with IBM and Tsinghua University, the Center studies foodborne contaminants and develops risk assessment models to digitally track the movement of pork in China with blockchain. The system

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was intended to connect and verify pork suppliers, shippers, buyers, and others involved around China (Nash, 2016c). Walmart planned to invest 25 million dollars over five years to research global food safety (Kaye, 2016; Kamath, 2018). Using blockchain ledgers to record transactions and distribution was anticipated to protect against tampering with products as they traveled through complex supply chains to Walmart units in China (Nash, 2016c).

The trial of tracking Chinese pork lasted four months. At the farm, every pig was smart-tagged with a barcode which followed the product all the way to packaged pork. Using radio frequency identification and cameras, participants recorded the pig’s movement. After slaughter, identification details about each party handling the pig and subsequent pork products and interactions among participants were recorded and shared on the blockchain system. Videos and images of the pigs were permanently attached to the identifying data (Kamath, 2018). In pork production, cameras installed in slaughterhouses captured the entire production process. Shipping trucks deployed temperature and humidity sensors, along with global positioning and geographic information systems (GIS) ensured the conditions of the meat when arriving at retailers. Walmart traced the movement of trucks and monitored conditions in each refrigerated container. If conditions exceeded the established thresholds, an alert prompted corrective action. With the blockchain technology, procurement managers could remotely trace all information, from farm origination, batch numbers, processing data, fertilizers, storage temperatures, to shipping details (Kaye, 2016). Consumers could also access the information via a quick response (QR) code which linked to the e-certificate of the product.

This pilot expanded to Walmart’s collaboration with JD.com described previously.

2. TE-Food (Vietnam)

Since 2016, TE-FOOD launched in Vietnam tracking 1,200 pigs and started to expand their coverage to Germany, Gibraltar, Hungary, and South Africa. They provide a farm-to-table traceability solution for livestock and fresh foods using blockchain technology allowing food tracking information flow to consumers, supply chain companies, and other supply chain participants from farms and slaughterhouses to wholesalers and retailers (Figure 11; TE-FOOD, 2017).

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Figure 11. Flow of TE_FOOD traceability across the supply chain (TE-FOOD, 2017)

TE-FOOD’s traceability tools include applications for pork, poultry, and egg identification. Identification for cattle is under development. TE-FOOD also hosts retail/consumer tools and farm management tools. Their traceability solutions track 12,000 pigs, 200,000 chickens, and 2.5 million eggs per day and are used by 3,100 farms, 3,400 livestock agents, 70 slaughterhouses, 35 food producers, 25 veterinary companies, 30 wholesale markets, 190 wholesale distributors and 2,600 retailers and markets. The data reaches more than 6,000 business customers, tracks 400,000 transactions per day, and has reached 34 million consumers (TE-FOOD, 2017).

The pork traceability solution began in the Ho Chi Minh City region on December 12, 2016. TE-FOOD expanded their traceability service to poultry and egg in 22 Vietnamese regions in 2017 and plan to provide cattle, fish, fruits and vegetable tracking service by the end of 2018 (TE-FOOD, 2017). TE-FOOD invested in R&D projects aiming to develop animal face recognition technology to improve their identification tool beginning in 2018. TE-FOOD uses blockchain to provide a transparent trust-based solution and tokenize all financial transactions using smart contracts. They sell TFD tokens, which can be used to pay for transactions on their blockchain ledger, to raise funds to finance the expansion of TE-FOOD International in target countries (Dking, 2018).

In 2018, TE-FOOD accelerated developing active partnerships across the food and agricultural sectors to become more firmly embedded as a viable service provider for blockchain solutions across the sector. Current partnerships include Deloitte, GS1, FAO, United Nations Sustainable

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Food Programme, TERRA, Auchan, Nongshim Data Systems among others (TE-FOOD, 2019).

c) Beef

1. Wyoming Certified Beef, LLC (Wyoming, US)

Wyoming beef producers provide premium beef products and the majority of operations are traditional family-owned ranches. Wyoming Certified Beef, LLC launched BeefChain to provide solutions for Wyoming beef producers. BeefChain uses blockchain ledger from TE-FOOD International and provides traceability to Wyoming beef products using radio frequency ID (RFID) tags. On May 15, 2018, 323 calves in Campstool Ranch were tagged with RFID tags and they were the first set of blockchain calves in the US (del Castillo, 2018).

BeefChain also aims to provide ‘Rancher to Retail’ end-to-end supply chain solution to beef producers in Wyoming. Wyoming Certified Beef, LLC partnered with six multi-generational ranches and plans to have more than 500,000 lbs of BeefChain calves ready for the customers by 2019 fall (BeefChain, n.d.). Moreover, Wyoming Certified Beef, LLC plans to start exporting the traceable premium Wyoming beef to Asian countries in early 2019 (TE-FOOD, 2018).

2. Kelly Products (Georgia, US)

Kelly Products is a Georgia, US-based agribusiness enterprise and they incorporated blockchain technology in their Kelly Registration System software for tracking inventory and administrative management solutions (Kelly Products, 2018). They began tracking animal information in 2018 and plan to expand to other participants in the meat processing supply chain in Georgia and the Southeast (Kelly Products, n.d.). Kelly products collects data including “animals’ breed, sire, sex, vaccinations, weights, average daily gains, antibiotic or growth hormone use, feed and forages, farm location, changes in ownership, date slaughtered, date processed, carcass grading (Kelly Products, n.d.)” They expect to strengthen their beef brand by providing transparency to consumers on beef production processes.

d) Fish

1. Provenance – Tuna

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London-based Provenance conducted a 6-month pilot program in Indonesia to apply blockchain technology to provide a digital passport to fish. They label tuna with radio-frequency identification (RFID) tags to prove its authenticity and the origin of the product (Volpicelli, 2018). RFID tags provide real-time tracking information that each step of the supply chain is automatically updated to the blockchain. The consumer at the end of the supply chain can verify the origin of tuna using a mobile app. The goal of this pilot was to provide robust proof of quality from the origin that prevents the sale of fake products and prevents the “double-spending” of certificates (Provenance, 2016).

Indonesia is the largest tuna-producing country where more than 60 million people live in the coastal area and tuna fisheries are a major source of income. However, many are not fairly compensated for their labor. Most of these fishermen practice pole and line and handline fishing which is labor intensive and makes it challenging to compete with larger vessels (Provenance, 2016). Provenance wanted to provide complete traceability and transparency along the supply chain of tuna that allows these fishermen to reduce the cost from the double-spending of certifications and guarantees the traceability of the product to consumers.

Over the six months, Provenance interviewed eight local companies and found a company using digital accounting for the fish product called “ThisFish Tally-O system” by Ecotrust Canada. Provenance integrated their system into the Ethereum blockchain.

Data collection started with the registration of fisherman by local NGOs (Figure 12). These fishermen sent SMS messages to register each tuna they caught with each message becoming a new asset on the blockchain. When the assets were transferred from fishermen to supplier, a unique ID of fish and digital register was transferred along with physical transactions and the identity of the fishermen as saved on the blockchain. All transaction information of the tunas were on the blockchain explorer so that all participants could verify the information. When tunas were processed and delivered, the original information as well as new status information in each step was updated. The customers at the end of the supply chain were able to see the final product’s (e.g. tuna can) end-to-end journey (Provenance, 2016).

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Figure 12. Flow of Provenance tuna traceability across the supply chain (provenance, n.d.)

2. World Wildlife Fund (Fiji)

The World Wildlife Fund (WWF) in Australia, Fiji, and New Zealand launched a pilot project in Fiji to track the journey of tuna from “bait to plate” (Visser & Hanich, 2018). In partnership with ConsenSys, a US-based global blockchain venture, TraSeable, technology implementer, and Sea Quest Fiji Ltd., a tuna fishing and processing company, WWF aims to stop illegal, unreported, and unregulated (IUU) fishing and human rights abuses due to the use of slave labor in the tuna industry (World Wildlife Fund, n.d.).

Using blockchain technology with a combination of RFID and QR codes, WWF allowed customers to trace the whole supply chain with a simple scan of tuna products using a smartphone app (World Wildlife Fund, n.d.). Blockchain records showed where and when the fish was caught, by which vessel and by whom, and most importantly, the fishing method (World Wildlife Fund, n.d.). When customers buy WWF certified tuna, they have certainty that they are purchasing sustainable tuna which has been caught with no human rights violations.

B. Commodity Products

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Due to the nature of commodity products (e.g. flowable product, bulk shipments, etc.), constructing a traceable end-to-end supply chain system is difficult. As a result, the applications of blockchain technology in the commodity products are mainly focusing on the support of the production side. Producers of commodity products (e.g. soybean, sugar, grains) are vulnerable to commodity price fluctuations since they are usually a price taker in the market who do not have control over the price. Most blockchain application cases focus on either assisting producers in making direct sales or enhancing the production efficiency.

a) Smartcane (Australia) – Smartcane Best Management Practice (BMP)

Smartcane BMP is a practice system to support sustainable sugar producers in Australia to maintain its competitiveness in the global market. In July 2018, Australia's federal government announced investment of $1.6 million in a blockchain initiative called the Sustainable Sugar Project which was developed by the Queensland Cane Growers Organization in collaboration with Smartcane BMP (Marinov, 2018). In Smartcane BMP, industry researchers and sugarcane farmers collaborated to create sugarcane growing standards based on productivity, profitability, and sustainability (Wan, 2018).

The Sustainable Sugar Project aims to develop a transparent supply chain of Australian sugar and provide the end-consumers confidence in what they are purchasing. Sugarcane growers participate in data collection by answering the self-assessment questions developed by industry experts which enables them to update their crop conditions and production situations. Data will be owned by the sugarcane industry and will be collated to improve production.

b) Grainchain

Grainchain aims to utilize the blockchain technology to support farmers to directly sell their products to buyers within their platform. Farmers will benefit by the guaranteed ‘instant payment’ upon delivery and quality verification, elevators will be able to reduce the cost by tracking the real-time inventory across multiple locations, and buyers could purchase the quality products directly from farmers using smart contracts (GrainChain, n.d.; Caspi, 2018).

C. Other Food Products

a) Walmart (Mexico) – Mango

Starting in May 2017, Walmart conducted a pilot with IBM’s Hyperledger-based blockchain to trace sliced mangoes from South and Central America to North

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America (Kamath, 2018). The trial involved 16 farms, two packing houses, three brokers, two import warehouses, and one processing facility. Over a 30-day period, the pilot captured 23 different lot codes and tens of thousands of sliced mangoes (McKenzie, 2018).

By using the blockchain system, Walmart tracked mangoes’ information at all stages from production to consumption. Since it was international trade, Walmart worked with shipping and logistics providers to capture bills of lading and to propel invoice consents, dispute resolution, and cargo provenance. The distributed ledger technology helped record updates to legal agreements and platforms to ensure both legal and security integrity (Kamath, 2018). IBM contributed to the blockchain solutions for cross-border supply chains in collaboration with Maersk (IBM, 2017a). Mango importer facilities and retail distribution centers then recorded shipments, documented proper certificates, ascertained cargo and temperature excursions, and evaluated external and internal quality via a shared ledger. In distribution, blockchain-connected devices and smart sensors will eventually deliver the information to the other nodes. The nodes could enrich the data as well; for example, customers’ feedback regarding quality could be linked to growers and sources (Kamath, 2018).

With a farm-to-table approach, Walmart’s blockchain solution reduced the time for tracking mango origins. The trace would typically take six days and 18 hours using traditional traceability methods. After using the blockchain system, the same exercise took 2.2 seconds, promoting greater efficiency across Walmart’s food supply chain (McKenzie, 2018). However, to maintain the whole-chain traceability, this kind of initiative depends heavily on leadership to coordinate stakeholders and promote awareness and incentive of collaboration. Another challenge lies in the tracing capability with respect to the mango production process. As an expectation, blockchain will provide transparency; however, it is still too hard to track producers that may be using contaminated fertilizers, hiring children, or paying poverty wages. Although blockchain provides transparency, it relies on 100% honest participation of each party. This aspect is essential to building trust with consumers and stakeholders and is not guaranteed by the system Walmart explored. There are a couple of other industry initiative examples that are approaching this issue through alignment reputable NGOs that will certify producers and production processes in remote regions.

b) Walmart – Leafy greens

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On September 2018, Walmart announced a new blockchain-enabled Food Traceability Initiative to have their leafy greens on an end-to-end traceable blockchain. Direct suppliers will be required to adopt one-step back traceability on the blockchain network by Jan 31, 2019 and they are expected to set end-to-end traceable system tracking requirements back to the farm by September 30, 2019 (Walmart Inc, 2018). Leafy greens suppliers are required to use the IBM Food Trust to create blocks (IBM, n.d.).

This initiative started following a multistate outbreak of E.coli which contaminated romaine lettuce in 2018. By June 2018, 210 people from 36 states were infected with E. coli from romaine lettuce produced in the Yuma, Arizona region (CDC, 2018; Smith, n.d.). It was difficult to determine the source location of the outbreak since none of the bags of salad were labeled with ‘Yuma, Arizona’. It was also difficult for supply chain participants to determine where this lettuce was grown and, as a result, the Centers for Disease Control (CDC) advised customers and grocers to destroy romaine lettuce and produced bags of salad (CDC, 2018; Smith, n.d.).

Frank Yiannas, former Vice President of Food Safety at Walmart, mentioned that it may take 7 days for Walmart to track down the place of origin of romaine lettuce with paper-based ledgers, but he said they could shorten the time to 2.2 seconds with blockchain technology and hyperledger (Smith, n.d.). Since the food system is large and complicated for any single entity to track all the supply chain processes, Walmart is working with IBM to digitize all information to accelerate identifying, researching, and reacting process for food safety situations like E.coli outbreak.

c) Ripe.io (US) – Tomato

Ripe.io collected data on tomatoes produced at a particular farm and created a s “data fabric” using which the restaurant purchasers can identify the qualities of the tomatoes (Hammerich, 2018). The farmers can monitor various aspects of the production process from sunlight, temperature, humidity, pH levels to color and provide that information on the individual tomato to their customers (Hammerich, 2018; Splitter, 2018). Ripe.io argues that the tracking of this information could help producers to understand customers’ preferences well that they can find strategies to optimize farming conditions.

Even a relatively simple food, the tomato, creates a bundle of food-related data which can be shared with all the supply chain participants using blockchain technology. Unlike the financial sector, the food industry does not have a center

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of transactions so Ripe.io anticipates blockchain to cover dispersed participants throughout the food system (Splitter, 2018).

d) Olivacoin (Spain) – Olive Oil

Spain is the world's largest olive oil producer producing over 1 million tons of olive oil annually from 1994 to 2013 (Worldatlas, n.d.). A Spanish company, Olivacoin, has been developed by the Seville University to bring transparency to the olive oil market. Mislabeling is a huge issue in the olive oil market where approximately 80 percent of the Italian olive oil sold in the US market is counterfeit (Rodriguez, 2016). Olivacoin aims to provide transparency to the olive oil market by offering financial security for producers, protection against price fluctuation for distributors and retailers, and quality assurance for consumers (Olivacoin, n.d.; Moreno, 2018). The Olivacoin analytical traceability system will allow verifying the quality of the final olive oil product and response to the supply of it at the destination (Mercacei, 2018). Users will be connected to the Olivacoin blockchain once they purchase the olive oil product in the system so that they can verify whether the system certifies the quality and characteristics of the product they purchased. The system will enable a mass balance aspect to assure dilution does not occur. Once the product is verified, the actual transaction automatically occurs through the Olivacoin smart contracts (Mercacei, 2018). According to the company roadmap, their goal is to officially release the platform by March 2019.

e) Bext360 (Colorado, US) – Coffee

Denver-based agtech startup, Bext360, created a blockchain program to trace the coffee supply chain combining the blockchain software provided by Stellar, a financial tech venture and information about the coffee from a device called ‘bextmachine’ which can grade harvested coffee beans, upload collected information, and pay farmers right away (Hackett, 2017b; Knapp, 2017). The bextmachine, a Coinstar-like device using artificial intelligence and the internet of things (IoT), can analyze 30 kilograms of coffee cherries by three-dimensional scanning of the outer fruit and grade their quality. Farmers will be paid right away depending on the grade of their coffee cherries (Knapp, 2017).

Partnered with companies like Coda Coffee (a Denver-based coffee roaster) and Great Lakes Coffee (a Uganda-based coffee exporter), Bext360 conducted the first pilot program of tracing coffee from Uganda to Denver, Colorado. With the success of the first pilot, Bext360 conducted the second pilot with Moyee Coffee tracing coffee from Ethiopia to Amsterdam (Allison, 2017). Bext360

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charges coffee producers and roasters for the use of the machine and the blockchain program. Price will be between 1% and 2% of the wholesale price of the beans (Phillips, 2018). The company is expecting to reduce the cost in the supply chain by eliminating paperwork and intermediate processes.

To date, most of the blockchain initiatives in the food and agriculture supply chain focus on food, while no blockchain applications are being evaluated in the animal feed. The model of tracking pork, chicken, tuna, or mango slices is theoretically applicable to packaged animal feed and, similar to bulk food commodities, there may be difficulties in terms of the application to bulk animal feeds and ingredients.

Part IV. Blockchain Application in Animal Feed

Blockchain technology has developed quickly and is being applied to many food and agricultural sectors as explained in this report. However, there are no current blockchain examples in animal feed. In addition, most of the blockchain projects in the food industry have concentrated on products that are comparatively easier to trace and track. There has been no successful case for bulk commodities yet, which is the common form of ingredients in animal feed. Based on the advantages and disadvantages of blockchain technology discussed previously, we would like to probe the pros and cons of applying blockchain technology into the feed supply chain by using soybean and soybean meal as the example. The reason for selecting soybean meal is that it is a widely traded animal feed ingredient. In addition, recent reports suggest that viruses survive in soybean meal longer than other feed ingredients (Dee et al., 2018)

A. The Mock Model

A model using soybean and soybean meal production and distribution shows how the physical product and exemplary blockchain records (virtual) may flow through production, import-export, and transportation and distribution phases. The exemplary model shown provides an insight as to how records important to quality, feed safety, regulatory compliance, certifications, etc. may be captured and aligned with the physical product.

Although a bulk commodity product was used for modeling, similar principles would apply to discreetly packaged products with the benefit that product in packages (or individual contained units) are inherently easier to trace with blockchain applications as illustrated by the exemplary applications discussed.

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a) Production Phase

Production begins at the farm and extends several steps into the supply chain (Figure 13). For this model, it is assumed that soybeans are distributed either raw as a bulk ingredient or transported to a manufacturing facility for further processing into soybean oil and meal. For simplicity, this is considered a direct transaction with only soybean meal as the product.

As the soybeans are grown, records that can be stored as blocks on a blockchain include, but are not limited to, criteria such as GMO status, agronomic conditions used, specialized growing conditions (e.g. organic), location, climate, and environmental conditions on the farm, water and soil quality, fertilization programs, seed certification, integrated pest management plans, endemic animal disease status of the region or country and proximity to livestock farms. In addition, any third-party certifications, good agricultural practices (GAP) compliance data, yield, quality, moisture, and others may also be recorded.

Figure 13. Flow of soybeans during the production process (see Appendix A for symbol explanations)

When soybeans are used for processing into soybean meal with the intent of the soybean meal to enter the animal feed supply in the US, several regulations apply to their production. In addition, producers use a variety of processing conditions to meet typical quality standards for soybean meal. For example,

Plants harvest storage

farmer

procurement

factory

drying flaking DT

Soybean mealstorage

Physical

digital

extracting

Land Transportation and Process

Harvesting

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information related to the final product quality characteristics may be recorded and shared via blockchain technology including moisture, protein content, residual solvent, particle size, and others.

The implementation of the Food Safety Modernization Act (FSMA) and the potential for viral transmission through feed will require implementing preventive controls (e.g. process, sanitation, and sanitary transportation preventive controls; See SHIC Sponsored report - Risk-based preventive control plan for foreign animal viruses carried by feed: Pilot case for porcine epidemic diarrhea virus (PEDV)) focused on virus prevention and inactivation. Records related to the implementation of these preventive controls can also be shared with blockchain technology.

In the production of soybean meal, processing conditions used for ingredient manufacturing may be suitable for virus inactivation and serve as process preventive controls. When appropriate preventive controls are identified for viruses, the extent in which each lot of soybean meal production meets these preventive controls may be captured in blockchain applications. Information like processing time and temperature in a heat treatment, chemical treatment conditions, moisture level, pest management, and others could be digitized, stored, and made available to soybean meal buyers. In addition, the implementation of food safety management systems such as Hazard Analysis and Critical Control Points (HACCP) and Good Manufacturing Practices (GMP) plans and private certifications such as GFSI, ISO, and SQF can be also be included. Digitization and sharing of these key preventive controls increases trust and transparency between suppliers and customers.

In addition, the conditions required to meet and support sanitation and sanitary transportation preventive controls could also be recorded. Within facility sanitation and sanitary transportation are critical steps to prevent recontamination of ingredients that have already undergone a process for virus inactivation as they travel through the production process.

However, blockchain will not contribute to the effectiveness of preventive controls and sanitary transportation. In addition, only those conditions related to the preventive controls that the participating parties deem relevant, and agree to record, will be captured.

b) Transportation and Distribution Phases

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Transportation of soybeans and soybean meal occurs throughout the supply chain from production through distribution to feed manufacturers. Blockchain facilitates traceability during this phase, but it also has the capability to track other records as well (Figure 15).

Figure 15. Flow of soybeans during the transportation and distribution process (see Appendix A for symbol explanations)

Using blockchain, cleaning and sanitation procedures of any packaging, storage facility and warehouse, as well as, transport vehicles including frequency and sanitizing agent, routes traveled, and loads carried have the potential to become available to customers and users of the soybean products. These will be important attributes to prevent recontamination of soybean meal following the production phase. In addition, these types of attributes will be required to be recorded as part of the sanitary transport regulation so digitization and sharing via blockchain would be an incremental process for suppliers to provide customers.

Similar to the production and processing phase, blockchain will not enhance the effectiveness of sanitation and sanitary transport procedures during transportation and distribution. Consensus about conditions and criteria to be recorded must be achieved with trust in the system that the conditions are

Packaged Soybean meals

Bulk Commodities (soybean)

Land Transportation and Process Shipment OverseasLand Transportation and

Process Distribution

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recorded accurately and honestly. For example, if contamination following production is of concern, then conditions and criteria related to preventing this contamination would need to be determined among the participating parties and then accurately and honestly recorded at each step of the subsequent processing, transportation, and distribution phases for the product.

In addition, when considering the application of blockchain for feed ingredients, an important concept becomes obvious - the difference in tracing discreetly packaged product versus bulk and mixed commodities. Many of the current blockchain applications track single units or units that are not commingled during harvest, transport, manufacturing, and shipping. Several types of feed ingredients follow this method of distribution with discreet packaging into a variety of smaller containers and packages (e.g. 50 lb bag of a vitamin). However, with many feed ingredients, mixing and commingling is the norm, and blockchain traceability to criteria like location of production will be limited to the largest size storage or transportation facility where commingling occurs.

For example, in Figure 15, the lot of three bulk sacks may be traced to three trucks each with soybeans from three farms for a total of nine different farm locations represented in the three bulk sacks. The oceangoing bulk shipment of soybeans would contain and commingle a much greater number of production locations, potentially losing the ability to trace the shipment or referring to many origins.

c) Import-Export Phase

During import and export portions of the supply chain (Figure 16), understanding conditions of warehousing, storage, and transportation are still important considerations that can be captured via blockchain. In addition, blockchain application can speed this process by carrying all the information needed for customs clearance in the quick response (QR) code accompanying the shipment. As discussed in the logistics applications, international ports are quickly adopting blockchain technology to improve efficiency.

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Figure 16. Flow of soybeans during the import export process (see Appendix A for symbol explanations)

B. Pros and Cons

As with all new technology applications, implementing them in the feed supply chain has both pros and cons. Some will be similar to the overall technology application, but others will preferentially affect the feed industry.

Benefits of blockchain technology in the feed supply chain include improved time efficiency and improved feed safety through enhanced transparency. Like other applications, transaction time for interactions in the feed supply chain will be reduced because the information intensity is enhanced within the network. There is always a desire in the industry to work more efficiently by utilizing modern information technology. Feed safety requirements are similar to food safety, thus many of the improvements to and pilots of blockchain in the food industry will be applicable. Feed security and safety is expected to be enhanced with improved access to records including final product quality characteristics, implementation of preventive controls, results from third-party audits, and traceability. In addition, the enhanced transparency will improve supplier’s and customer’s sense of responsibility and the regulation in each phase of harvesting, producing, shipping, and distributing. When the information

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of every single transaction is shared among stakeholders, people will be more likely to obey rules and requirements in feed production and transportation. These potential benefits may be realized for both discreetly packaged and bulk commodity feed and feed ingredients.

Although many benefits are possible, implementation of blockchain in the feed supply chain will face significant hurdles to implementation, especially when considering bulk commodities. Tracking and traceability are limited for the trade of commodities such as soybeans. Bulk commodities, as the common form of ingredients in animal feed, are more difficult to track than discreet or packaged products in existing blockchain projects. When raw commodities from many farms are mixed into the bulk, it is impossible to accurately track the products continuously in the subsequent transportation and distribution phases although emerging research is beginning to offer modeling approaches to address this hurdle (Comba et al., 2018). In addition, honest and 100% participation is required for end-to-end transparency for both bulk and discreetly packaged products. Methods and standards will need to be developed to ensure honest participation. Standards may include aspects such as third-party verification and data sharing protocols. This may be even be more complicated in the feed industry where companies may have simultaneous supplier, customer, and competitor relationships with each other. And finally, and perhaps the most significant hurdle, is the lack of incentive to attract participants. The feed industry functions on thin profit margins and investment in a new technology needs to have very clear economic incentives. As a result, incentive or lack thereof will preferentially increase the difficulty of implementation for those feed ingredients, like commodities, where margins are weak. In the food industry, major companies can request/require their suppliers to join in the network (e.g. Walmart and leafy green producers) and establish processes for sharing data and addressing liability in the event of a foodborne illness outbreak. However, given the complexity of relationships in the feed industry, this may not be possible. It is also possible to build reputation and social responsibility incentives with the use of blockchain. However, the rewards would be longer term and perhaps out of reach for the feed supply chain (except in the case of specialty feeds such as pet food).

Blockchain applications offer the feed supply chain incredible benefits and efficiencies in the goal to improve feed safety and animal health. However, implementation of the technology will experience hurdles and will require consensus among the industry for standards and methods of data collection and sharing. In addition, the cost of entry to access the data and who will pay for it will be a driving factor in the success of blockchain technology adoption.

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Fontanazza, M. (2018, June 26). Is the food industry ready for blockchain?. Retrieved from https://foodsafetytech.com/news_article/is-the-food-industry-ready-for-blockchain/ Galvin, D. (2017). IBM and Walmart: Blockchain for Food Safety [Presentation PowerPoint]. IBM Corporation. Garay, J. A., Kiayias, A., & Panagiotakos, G. (2018). Blockchain and Consensus from Proofs of Work without Random Oracles. Gausdal, A. H., Czachorowski, K. V., & Solesvik, M. Z. (2018). Applying Blockchain Technology: Evidence from Norwegian Companies. Sustainability, 10(6), 1-16.

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Gelski, J. (2018, October 8). Access to IBM blockchain-based food system expands globally. Retrieved from https://www.foodbusinessnews.net/articles/12642-access-to-ibm-blockchain-based-food-system-expands-globally Gohil, H. (2018, May 16). Blockchain: getting beyond the hype. Retrieved from https://www.softwebsolutions.com/resources/blockchain-hype-vs-reality.html GrainChain. (n.d.). Retrieved from https://www.grainchain.io/ Grand View Research. (2018, May). Blockchain Technology Market Size, Share & Trends Analysis Report by Type (Public, Private, Hybrid), By Application (Financial Services, Consumer Products, Technology, Telecom), and Segment Forecasts, 2018 – 2024. Retrieved from https://www.grandviewresearch.com/press-release/global-blockchain-technology-market Gupta, M. (2018). Blockchain for Dummies (2nd ed.). John Wiley & Sons, Inc. Hackett, R. (2016, October 19). Walmart and IBM Are Partnering to Put Chinese Pork on a Blockchain. Retrieved from http://fortune.com/2016/10/19/walmart-ibm-blockchain-china-pork/ Hackett, R. (2017a, August 22). Walmart and 9 Food Giants Team Up on IBM Blockchain Plans. Retrieved from http://fortune.com/2017/08/22/walmart-blockchain-ibm-food-nestle-unilever-tyson-dole/ Hackett, R. (2017b, September 29). This Blockchain Startup Ties Coffee to Crypto. Retrieved from http://fortune.com/2017/09/29/national-coffee-day-starbucks-blockchain/ Hammerich, T. (2018, February 7). Blockchain and IoT (Internet of Tomatoes). Retrieved from https://futureofag.com/blockchain-and-iot-internet-of-tomatoes-240db6c5e54f Heires, K. (2016). The risks and rewards of blockchain technology. Risk Management,1. Henry, S., et al. (2018). Jasper phase III: securities settlement using distributed ledger technology. Ottawa, Canada: Bank of Canada. Huang, E. (2017, August 10). Blockchain could fix a key problem in China’s food industry: the fear of food made in China. Retrieved from https://qz.com/1031861/blockchain-could-fix-a-key-problem-in-chinas-food-industry-the-fear-of-food-made-in-china/ IBM Blockchain. (n.d.). IBM Blockchain: Now delivering value around the world. Retrieved from https://www.ibm.com/blockchain

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IBM Food Trust. (n.d.). IBM Food Trust Solution Brief 2.0. Retrieved from https://www-01.ibm.com/common/ssi/cgi-bin/ssialias?htmlfid=89017389USEN IBM. (2017a, March 5). Maersk and IBM Unveil First Industry-Wide Cross-Border Supply Chain Solution on Blockchain [Web log post]. Retrieved from https://www-03.ibm.com/press/us/en/pressrelease/51712.wss IBM. (2017b, December 14). Walmart, JD.com, IBM and Tsinghua University Launch a Blockchain Food Safety Alliance in China. Retrieved from https://www-03.ibm.com/press/us/en/pressrelease/53487.wss IBM. (n.d.). Retrieved from https://www.ibm.com/us-en/marketplace/food-trust/purchase#product-header-top Jakobsson, M., & Juels, A. (1999). Proofs of work and bread pudding protocols. In Secure Information Networks (pp. 258-272). Springer, Boston, MA. Kamath, R. (2018). Food Traceability on Blockchain: Walmart’s Pork and Mango Pilots with IBM. The JBBA, 1(1), 3712. Kaye, L. (2016, October 25). Responding to food safety concerns, Walmart invests $25 million in China. Retrieved from www.triplepundit.com/2016/10/responding-food-safety-concerns-walmart-invests-25-million-china. Kelly Products. (2018, July 24). Kelly Products to Launch Beef Blockchain to Provide Complete Conception-to-Market Transparency for Georgia Beef. Retrieved from https://www.prnewswire.com/news-releases/kelly-products-to-launch-beef-blockchain-to-provide-complete-conception-to-market-transparency-for-georgia-beef-300685008.html Kelly Products. (n.d.). Kelly Products to Launch Beef Block Chain to Provide Complete Transparency from Conception to Market for Georgia Beef. Retrieved from http://www.kelly-products.com/kelly-products-launch-beef-block-chain-provide-complete-transparency-conception-market-georgia-beef/ Kharpal, A. (2018, June 29). Everything you need to know about the blockchain. Retrieved from https://www.cnbc.com/2018/06/18/blockchain-what-is-it-and-how-does-it-work.html Knapp, A. (2017, July 14). This AgTech Startup Just Built A Coinstar For Coffee. Retrieved from https://www.forbes.com/sites/alexknapp/2017/07/14/this-agtech-startup-just-built-a-coinstar-for-coffee/#376fbfa243e5 Kobay akawa, S., et al. (2017). Payment systems: liquidity saving mechanisms in a distributed ledger environment. Frankfurt am Main, Germany: European Central Bank.

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Lim, N. (2018, August 23). The Blockchain Chickens Bringing the Future to Free-Range. Retrieved from https://www.sixthtone.com/news/1002804/the-blockchain-chickens-bringing-the-future-to-free-range Malmo, C. (2017, March 7). A Single Bitcoin Transaction Takes Thousands of Times More Energy Than a Credit Card Swipe. Retrieved from https://motherboard.vice.com/en_us/article/ypkp3y/bitcoin-is-still-unsustainable Marinov, M. (2018, July 31). Australia’s Government Backs Blockchain Sugar Sustainability Project. Retrieved from https://cryptovest.com/news/australias-government-backs-blockchain-sugar-sustainability-project/ MasContainer. (2018a, August 13). TradeLens: Container Tracking based on Blockchain by Maersk and IBM [Web log post]. Retrieved from http://www.mascontainer.com/tradelens-seguimiento-de-contenedores-basado-en-blockchain-por-maersk-e-ibm/ MasContainer. (2018b, January 19). Blockchain Maersk and IBM will use technology to develop a global trading platform [Web log post]. Retrieved from http://www.mascontainer.com/maersk-e-ibm-utilizaran-tecnologia-blockchain-desarrollar-una-plataforma-comercio-global/ McKenzie, J. (2018, February 4). Why blockchain won’t fix food safety—yet. Retrieved from https://newfoodeconomy.org/blockchain-food-traceability-walmart-ibm/ McLellan, C. (2018, June 1). Blockchain and business: Looking beyond the hype. Retrieved from https://www.zdnet.com/article/blockchain-and-business-looking-beyond-the-hype/ Mercacei. (2018, April 24). Olivacoin, a new B2B platform for the sale of olive oil aimed at operators in the sector. Retrieved from https://en.mercacei.com/noticia/1736/news/olivacoin-a-new-b2b-platform-for-the-sale-of-olive-oil-aimed-at-operators-in-the-sector.html Moreno, I. (2018, May 15). OLIVACOIN : The financial solution of the olive oil market. Retrieved from http://icocrowd.com/olivacoin-the-financial-solution-of-the-olive-oil-market/ Mulligan, C., Scott, J. Z., Warren, S., Rangaswami, JP. (2018, April). Blockchain Beyond the Hype. Geneva, Switzerland: World Economic Forum. Nash, K. S. (2016a, February 2). Blockchain: Catalyst for Massive Change across Industries. Retrieved from https://blogs.wsj.com/cio/2016/02/02/blockchain-catalyst-for-massive-change-across-industries/?mod=article_inline Nash, K. S. (2016b, July 14). IBM Pushes Blockchain into the Supply Chain. Retrieved from

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