The Future of Farming: How Blockchain Will Revolutionize Agriculture with Smart Contracts and Oracles
One distinct group set to benefit from the emerging blockchain economy will be farmers. Soon, their data will be monetized and utilized through smart contracts, which autonomously operate on the blockchain, alongside the crops their farms produce. The realization of such a situation has been hampered by an inefficient means for currently transmitting data in a decentralized manner to the smart contracts that are dependent upon information to react and transact on the blockchain. We are, however, fast approaching this new world as some of the greatest innovators in the space are set to produce what they believe is needed to transmit this data in a decentralized manner to the blockchain through what the industry has called “oracles.”
An oracle is a term that represents the various forms of middleware that report events in the physical world to the blockchain. In order for the agricultural industry to fully benefit from blockchain technology, it needs oracles. Agricultural oracles can be used to either monetize farmers’ data or utilized in the crypto-economy to benefit their farms. Here are a few examples of this:
The first is crop insurance. The ethereum whitepaper, in fact, mentions crop insurance as one of the future applications that will be made possible with smart contracts. It states,
“One can easily make a financial derivatives contract but using a data feed of the weather instead of any price index. If a farmer in Iowa purchases a derivative that pays out inversely based on the precipitation in Iowa, then if there is a drought, the farmer will automatically receive money and if there is enough rain the farmer will be happy because their crops would do well.”
This all depends on the ability for precipitation levels to be measured and reported to the blockchain. This can be done in real time by multiple IoT devices, for instance, that systematically measure and report data to smart contracts that can react to the information they are provided. This means a farmer can expect a real-time payout as the consensus of oracles would immediately determine when and if a drought has occurred. The automation of the process means less work by both human parties to achieve consensus. The farmer will know that unbiased devices are measuring and reporting precipitation levels directly to the smart contract through a multi-party consensus oracle that is transparent and distributed. The insurance company can also trust these result and can, therefore, eliminate much of the investigative and payout processes currently in place. These cost savings will translate into more competitive coverage options that can be offered to farmers.
The second aspect of farming set to change with blockchain will be the actual monetization of various points of data that are produced on a farm. For instance, the aforementioned precipitation device(s) might actually be located on a farm that would benefit from an insurance smart contract that utilizes that device as one of its data points. Various other groups, such as traders, would also want this data or other pertinent data such as real-time crop yields in order to not only better inform their decisions, but automate them. Taking a lesson from the classic movie Trading Places, there would be slim to little chance for a forged document to influence a futures market for oranges as the Dukes of the blockchain economy would have their futures contracts tied to enough data points that their smart contract would have known that the crop report would indicate a normal yield. Now the farmer can make a profit by selling data that, in this instance, would allow for more accurate and confident trading to take place.
There is, lastly, the ability for the blockchain to tokenize a farmer’s crop yields. This means that the crop has the ability to be tracked and verified along the supply chain through the immutable and transparent blockchain. This, too, requires oracles which can communicate the yields to a smart contract which will then release the corresponding tokens. This has the benefit of not only producing a more liquid crop through the creation of a digital asset but also creates a proof-of-authenticity that protects farmers and consumers alike. The blockchain will streamline these assets through the supply chain, bringing lower prices to consumers who can then verify that the food they are eating truly came from the organic farm, for instance, it is labeled as coming from.
These three examples of blockchain advancing and empowering farmers is right around the corner. Farmers can expect efficient insurance payouts, new revenue streams from their data, and to keep food distributors and competitors honest with proof-of-authenticity on the blockchain. This all depends, however, on oracles to communicate data to the blockchain. The next step in the story of blockchain and
Zap.org is one team with a potential solution, using a platform that enables the exchange of data. Their distributed and open-source platform will allow anyone to create or subscribe to an oracle of their choosing. This is the only free-market approach to curating a decentralized market for buying and selling data. They are set for Mainnet launch in January 2019 and see farmers and the agricultural industry as one of the main groups that will benefit from and adopt oracles to begin operations in the blockchain economy.
[Disclaimer: Nick Spanos, who is a co-founder of Zap, is also a co-founder of Cryptos.com]