Australia completes world's first physical commodity transaction based on blockchain, agricultural technology reform may outperform financial technology

Blockchain is rapidly becoming the most popular technology in the financial world. Large financial institutions are finally realizing the potential of this technology. More and more people are paying attention to the development of blockchain, which is currently driving collaboration between industries and providing new opportunities for privatized systems.

In most cases, we cannot explain which industry and blockchain can form the most wonderful chemical reaction. But what is incredible is that blockchain has already set off a new revolution in the food industry.

So how can food processors, farmers, retailers, distributors, regulators and end consumers benefit from this advanced, smart technology and ultimately drive global innovation?

Australia is a leader in agricultural blockchain innovation. The country is currently at the center of innovation in agricultural technology (AgriTech). Recently, a new software called AgriDigital processed nearly 5% of the country's grain production, about 500,000 tons.

This new cloud-based trading platform provides comprehensive process management for agricultural production. AgriDigital is aimed at farmers, buyers, and agricultural machinery, integrating contract, transportation, invoicing, payment and inventory management. This month, the AgriDigital system was synchronized with a private chain computer network and successfully completed the world's first real-time settlement of physical goods on the blockchain, which also marked the beginning of agricultural technology reform.

Australian farmer David Whillock sold 23 tons of wheat to Fletcher International Exports, a meat processing plant in the east, through the blockchain network. Whillock said that the blockchain system's fast and secure payment method can ensure the liquidity of funds and manage business in a more efficient way.

AgriDigital used Ethereum private blockchain to speed up transactions. The grain purchase and settlement process was automatically executed by smart contracts. This trial proved the ability of blockchain technology to handle large-scale commodity settlements. This mechanism also solves counterparty risk (the risk of a counterparty not fulfilling its obligations).

AgriDigital is currently considering how to provide flexible loan options for food buyers through blockchain technology. In addition, the distributed ledger can ensure the immutability of ownership, so the origin of food can also be guaranteed, so that counterfeiting can be reduced in the international export market.

Emma Weston, co-founder of Full Profile, a company that makes AgriDigital, said that currently, there is a complex web of distribution, logistics and agents between growers and consumers, which increases the risk and cost of supply chains. Australian agricultural producers have long been plagued by insolvency problems, which cost trillions of dollars each year. Blockchain can completely solve this problem.

In the traditional system, the risk of the buyer being unable to repay or pay for the goods falls entirely on the grower. AgriDigital can completely change this unfair situation.

Weston said:

Distributed ledger technology can broaden people's access to financial services by bringing rich data and security. The seller can query the buyer's payment ability from the blockchain and use it as the basis for the amount of grain sold.

Brian Foley of TSSG said:

Investment in agtech has far surpassed that in clean energy technology and financial technology.

Contrary to what we might think, Australia isn’t the only country trying to develop blockchain technology in agriculture, Ireland is also looking at this area.

Many companies and governments are researching this technology. For example, the R3 Alliance, which consists of more than 70 large banks and financial institutions, has been committed to the research and development of blockchain applications with the aim of popularizing the technology.

Compared with the banking industry, the agricultural market is becoming more competitive, and a chase may be staged between financial technology and agricultural technology. Despite this, R3 member Goldman Sachs still chose to leave the organization. Although a series of discussions were subsequently triggered, it still did not affect the research progress of the organization. The Commonwealth Bank of Australia (CBA) and Wells Fargo of the United States completed a trade transaction using blockchain technology; the National Australia Bank (NAB) also completed the first real-time blockchain transfer with the Canadian Imperial Bank of Commerce (CIBC) this year, using Ripple's distributed ledger technology throughout the process.

Next year, the Australian Securities Exchange (ASX) will decide whether to move its securities clearing and settlement system to a distributed ledger, a move that would reduce administrative costs for its brokers.

2016 is definitely the year of blockchain technology. However, the technology is still in its early stages of development, and commercial use cases in the next few years will focus on reducing transaction and record-keeping costs, streamlining corporate operations, and developing new business models.