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Source: Janzen Ag law
This year the blockchain has moved from the word little known to an early adopter technology. If you're lost, blockchain is a generalized accounting tool that promises better record keeping and reduced transaction costs. For agriculture, this means easier traceability of products from the farm to the grocery store and, hopefully, more money in the pockets of the farmer due to fewer average men. Before signing up for a blockchain, however, there are some things you should know.
First of all, all the laws of the contract still apply. Blockchain supporters will tell you that their blockchain uses "smart contracts" to replace the normal contractual documents signed by the parties. These smart contracts are computer-coded versions of traditional, but simpler contracts. Blockchainers will tell you that they reduce risks because they have less uncertainty than normal contracts. But it cuts out the hype and remembers that a contract is a contract. All legally binding agreements require the same basic elements: offer, acceptance, consideration and performance. A "smart" contract of blockchain still needs to highlight these elements to be applicable.
Secondly, know your blockchain broker. Blockchain promises to reduce transaction costs by removing the intermediary. In theory, this means that money can go directly from the retailer to the farmer at the time of sale to the customer, cutting all transaction costs in the middle. But this oversimplification ignores an important fact: many blockchains are built by third parties that act as intermediaries to coordinate all parts of the chain. There is a transaction cost for this service, unless the intermediary does not provide services for free. And there is also the risk that the intermediary commits a coding error. Does the intermediary accept responsibility for errors in the code?
Thirdly, blockchain does not eliminate fraud. Blockchain can reduce fraud by requiring verification of certain contractual points, but the risk of fraud remains. For example, the blockchain can trace avocados back to their origin on a farm in California, where the journey of food began. But if the avocados arrived on that California farm after being shipped from Mexico, then they falsely entered the blockchain as "native California", the grocery store consumer would never know. Indeed, blockchain traceability would be the opposite of its intent, instilling a sense of consumer confidence in food incorrect origin.
We will see many examples of blockchain technology in agriculture in the coming years. Farmers, shippers, processors and retailers should take the necessary time to understand the contractual issues related to this new technology.
