Henry Duckworth: Co-Founder and CEO of Agridex.
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To put it lightly, the agriculture industry has room for significant improvement. Overall, this multitrillion-dollar sector is plagued by issues stemming from opaque and fragmented supply chains, which contribute to high transaction costs and slow settlement times.
On average, my company has found that remittance takes an average of three to seven days with fees averaging 6% of each trade. This lack of transparency creates an environment where bad actors can manipulate prices.
As the CEO of a tokenization platform looking to bring agricultural commodities onto the blockchain, here are ways I see to unlock this technology’s potential within the industry.
The Tokenization Of Agriculture
While the global agricultural sector’s total value is projected to reach approximately $14.4 trillion in 2024, I believe it’s crucial to distinguish between the industry’s overall value and its trade component.
The international agricultural trade, which represents the cross-border movement of agricultural goods and is the focus of potential tokenization, was valued at $2.32 trillion in 2023 according to the World Trade Organization (WTO) report. Thus, this is the portion of agriculture trade that could potentially be tokenized.
In the current state of tokenization, it primarily focuses on financial assets. For instance, the market size of global tokenized currency was a little over $17 billion in 2023—with tokenizable real-world assets (RWAs) projected to be worth $26 trillion by 2030.
While these numbers look impressive on paper, there’s one major hurdle: The current RWA landscape continues to lack tangible, daily utility beyond financial markets.
Ways Agriculture Can Use Blockchain Technology
As an example of how blockchain can help democratize the markets, farmers can use this technology to sell their produce directly to buyers without intermediaries. This could not only increase profit but also reduce consumer costs. Furthermore, I would encourage its use toward fractional ownership, allowing small-scale farmers to own a share of larger assets such as processing facilities or storage units.
Farmers and those in the industry can also use blockchain technology to enhance traceability and transparency. Autonomous verification and origin tracking can help combat fraud and ensure that the food we consume is safe and sustainably sourced. Consumers can have greater confidence in the quality of food they buy and farmers can request higher prices for their produce based on verified quality and sustainability metrics.
Furthermore, I see the opportunity for existing certifications like organic and fair trade to be integrated into blockchain systems as digital certificates or tokens. I recommend that leaders do this through digital representations that can be linked to specific batches of produce. As a model, best practices of the pharmaceutical industry’s track-and-trace systems could be adopted. This will not only ensure compliance with regulations but also enhance traceability.
A comprehensive, on-chain solution for the agricultural industry could offer a range of features to address current challenges. First of all, it can help reduce transaction costs by leveraging blockchain platforms (such as Solana, Ethereum or Polygon) that tend to have lower fees compared to traditional remittance methods. Secondly, the solution can help provide near-instant settlement times.
Combatting Fraud
Thirdly, like in other industries, an on-chain solution could help combat fraud through autonomous verification of documents and origin tracking—ensuring transparency and accountability throughout the supply chain. With all data stored on an immutable, publicly available blockchain, stakeholders can have greater assurance and visibility into the entire process.
As a part of this transition, I think it’s important for those in agriculture to form decentralized autonomous organizations (DAOs) collectively managed and owned by their members involved in token distribution. I think this could help promote a more democratic and inclusive approach to governance within the industry.
In order to ensure effective collaboration among different stakeholders, I think it’s important to use standardized protocols for data sharing, with existing agricultural data systems integrated with blockchain through application programming interfaces (API) and oracles. This will help ensure that off-chain data is securely brought on-chain for immutable verification and tracking.
Long-Term Sustainability
Toward long-term sustainability, the solution should also incorporate a token utility, incentivizing and rewarding users based on trade volumes, platform engagement and community engagement. I believe this would help instill a sense of ownership and encourage active participation in the ecosystem.
To further ensure the long-term sustainability of such a solution, a portion of profits could be allocated to buying back and burning tokens, creating a deflationary effect and increasing the value of the remaining tokens.
In addition to these features, I think it’s important that an on-chain solution prioritizes education and sustainability. By dedicating profits to educating farmers and promoting sustainable agriculture, such solutions can contribute to the industry’s long-term growth and resilience.
Overcoming Challenges And Encouraging Collaboration
Of course, the path isn’t without challenges. We need to address issues such as the digital divide, user adoption and regulatory frameworks. But these challenges aren’t insurmountable. By encouraging collaboration between stakeholders and investing in education and infrastructure, I am certain we can create an enabling environment for tokenized agriculture to thrive.
The impact of these changes extends beyond the agriculture industry itself. Reduction of agricultural trade friction has a direct effect on the economies of the developing world. Exports from least developed countries often generate the most friction and burden in terms of time, capital and risk.
As we grapple with the challenges of feeding a growing population, minimizing food wastage/shortage and ensuring sustainability, I believe the use of Web3 presents a compelling solution. By leveraging blockchain and incorporating a comprehensive set of features, the industry can help overcome the shortcomings of traditional supply chain systems and usher in a new era of efficiency, transparency and accountability.
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