GrainChain is an exciting agritech blockchain platform providing farmers the ability to take a commodity from the ground and sell it to the market almost instantly
As with any industry, the food growing and trading industry is repeatedly transformed by technological innovations, making food safer, more accessible, varied, and cheaper. In the 1850s, advancements in refrigeration and food preservation dramatically lowered food prices and increased availability. In the 1940s innovation came in the form of gasoline tractors replacing horse-drawn plows.
Today, blockchain technology is poised to play a major part in the agricultural revolution of our time.
The UN reports that, “up to 50% of crop value vanishes between harvest and the point of sale and by eliminating the wholesale middlemen, farm profits are higher and consumer costs are lower.”
One of the biggest issues we have in today’s agricultural industry is that farmers are getting the smallest percentage of the actual money in the total ecosystem.
Let’s take a simple look at some of the steps involved in a commodity sale:
- Farmers purchase seeds, fertiliser and goods, often by taking out loans or using lines of credit before the start of the season.
- The farmer deposits the crop at the silo and receives a certificate, rather than actual cash.
- The farmer needs to deal with and wait for multiple parties to receive final payment for their produce.
- The commodity buyer must then wait for independent verification directly from the silo.
All the while, the farmer continues to cover their expenses by taking out lines of credit and loans even though they have already delivered the agricultural goods to the silo.
Looking at the simple steps involved in a commodity sales, it is clear that;
- Sellers need better payment security.
- Buyers need better access to the supply chain.
- GrainChain, a blockchain-based company is trying to resolve this.
GrainChain’s patent-pending solution utilises blockchain technology to address numerous issues present within the soft commodities market, such as fraud at all stages, large and small-scale corruption, payment delays, access to futures commodities market, and a cycle of debt that is difficult to escape.
GrainChain allows a farmer to directly interact with buyers within their own ecosystem and most importantly guarantees an ‘instant payment’ to the farmers on everything they harvest.
A blockchain, originally block chain, is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data. By design, a blockchain is inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.Blockchains are secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. Decentralised consensus has therefore been achieved with a blockchain. This makes blockchains potentially suitable for the recording of events, medical records, and other records management activities, such as identity management, transaction processing, documenting provenance, food traceability or voting.
Revolutionary Blockchain Platform for the Agricultural Business Ecosystem
Enabling Verified, Instant and Secure Transactions for Real Commodities
Farmers throughout all of the world have significant issues with financial liquidity, and slow-pay/no-pay as one of the biggest issues, which is having a major impact on how they operate.
What GrainChain has created is a comprehensive platform which allows the farmer to interact with anybody throughout the world. It tracks every aspect of farm products from initial storage, to their own exchange on financial markets and provide the farmer with a guarantee to sell his crops and above all, a guarantee of payment.
Let us take a look at a real world situation.
In a county in the United States, a global washout of grain production caused a shortage, and this resulted in new buyers coming to the county offering 25% above spot-rate, in order to secure a supply of grain.
None of the farmers wanted to sell their grain, because they didn’t know or trust these new buyers and they were afraid that they would not get paid/No-Pay, or when crops don’t fulfil contracts, slow-pay which causes a significant liquidity problem for the farmers.
The System is Broken.
How does GrainChain Platform work?
Reviewing GrainChain’s white paper, the company says; “The GrainChain system greatly increases transparency and accountability within the agriculture business by eliminating disparate and wasteful paper trails, greatly eliminating the opportunity for fraud and dramatically reducing time and costs. It ensures the prompt and secure execution of contracts between farmers and buyers, by both automatically facilitating payment to the farmer and making available the corresponding financial instrument for trading on commodities markets while verifying it is backed by only real assets in the system.”
Lets look at the following example; If a farmer has 1 million pounds of corn and he wants to sell it on the market, the farmer inputs his crop into GrainChain’s platform. The farmer can even place a variety of different terms which may not be related to terms of payment, but could include logistics, storage, pest control and any, or all types of variables directly into those contracts.
When a buyer picks up the contract, the buyer effectively accepts ‘those terms’. Similarly the buyer can add multiple variables to that contract too.
GrainChain’s blockchain solution is designed to interface with any existing software systems that utilize its API. Using data feeds provided by this software, the GrainChain platform records the crop delivery in an immutable record that is linked to the commodity and participants perpetually.
Smart contracts provides the highest level of security and accountability by recording all transactions, commodity data and tracking information on an immutable record on the blockchain. This enables trust between all parties in the transaction by automatically executing a programmable contract based on preset parameters.
GrainChain has enhanced the solution and can be integrated with multiple systems. For example, these systems could be to measure the weight, volume, the chemical composition and the overall quality of the grain, and this added data, can be executed on the contract, which previously was human-based.
GrainChain’s platform uses the GrainPay utility token to calculate a ‘net value’ for the contract, and using GrainChain’s Transaction Platform this allows agricultural sellers and buyers to instantly convert GrainPay tokens to their local fiat currency, cutting out international banking and transfer fees.
Benefits in the ecosystem for Farmers:
- Instant payment processing for farmers
- Reduce use of credit lines and cash reserves saving the farmer money
- Blockchain audit trails for every grain going into the system and how its paid
- Conversion of tokens to FIAT or Cryptocurrency to avoid devaluation or lack of appreciation
- Reduces fraud and corruption at intake and payment levels
- Token Exchange available 24 hours a day via app and web – no banking hours here
- Ability to sell to ANY buyer without the risk of not getting paid or slow pay (expands marketability of commodity)
- Keeps farmer in regulatory compliance with traditional banks and government authorities.
Now the farmer has a guaranteed payment scheme, and when they are purchasing seeds, fertiliser and goods, they know that they’re going to get paid.
Currently many buyers around the world pay for insurance products, to guarantee 90% payment of their contracts.
GrainChain is providing a guarantee to the farmer, and those farmers will receive 100% of the contract paid instantaneously on deliver.
This is taking the sale of commodities to the next level. Farmers can now sell their products to new ‘buyers’ and with this ability to deal and trust everyone, it will begin to close the gap of inequality.
The farmer can now approach all of those buyers who attempted to purchase his crop in the past, or he can now look to international buyers.
Buyers have significant benefits too as they now have the ability to expand their farmer base, and this allows them to drop a little bit of the profit as they have a much much wider base farmers to select from, and most importantly an instant chain of custody
Benefits in the ecosystem for Commodities Buyers
- Instant payment processing
- Reduced staff and workload
- Instant access to commodities for sale and drop ship
- Blockchain would reduce the fraud of “Disappearing” commodities
- Blockchain live audit trail would keep buyer in regulatory compliance with traditional banks and government authorities.
- Web and App based live reporting of all inventory at multiple locations
- Lower Payment Fees
- Ability to write smart contracts with all commodity variables for perfect deliverables
The advantage of a distributed ledger is that it allows buyers/farmers to not only change the title instantly, but it provides a document of all this data.
Farmers are producing a tremendous amount of by-product data, which gives full traceability down to 10 feet within fields with certain farmers.
What this means overall is not only are we giving the ability for the buyers to have a very open method, of purchase, traceability, the ability for government agencies and insurance agency to be able to trace the exact payment of where the grain went, how it was paid, and where it was delivered.
It’s giving farmers a total control over the harvest.
“Today guaranteeing payment, tomorrow we’re giving the farmer a marketplace and in the future we are levelling the prices of overall grain in the overall market”