Hype surrounds cryptocurrencies and their potential to liberate the unbanked and create a new model of finance for the world. Yet, the potential for the underlying blockchain technology to revolutionize farming does not seem to find its way to the news rounds. The agricultural sector benefits from blockchain technology with the help of names like IBM.
One-third of the world’s food is lost or wasted every year. As the loss of food continues, population growth shows little sign of decreasing as projected figures indicate the world will be filled with just under 10 billion people by 2050. More and more blockchain projects are innovating to ensure food security demands are met.
Blockchain Innovation Meets Agriculture
IOHK (Input Output Hong Kong), Pavo, and Blockgrain are among several agriculture-focused blockchain projects which could help improve food security and provide value for their investors.
Ethiopia has partnered with IOHK’s company, Cardano to apply its blockchain technology to the coffee supply chain of the nation. Blockgrain is working to improve the grain supply chain in Australia. PavoCoin uses IoT (Internet of Things) blockchain solutions to improve almond and walnut farms in California.
The many different types of applications of blockchain technology show potential reasons to purchase tokenized assets which could eventually be linked to a significant portion of the world’s over 570 million farms that contribute to a $2.4 trillion market. For investors, tokenized assets in agriculture could be a safer prospect than directly engaging in farming activities.
ICOs for Blockchain Agriculture Investments
According to the National Council of Real Estate Investment Fiduciaries’ Farmland Index, returns in agriculture could be 11.5%. While ICOs haven’t got the best reputation, growing numbers of players in the agriculture industry are trying to fund blockchain-powered agriculture ventures which if successful, could provide similar returns to investors.
90-95% of ICOs fail. This is due in part to the technical difficulties of implementing blockchain solutions for projects. Agricultural projects are likely to add even more layers of complexity due to the fact artificial intelligence and more varied data collection techniques will be required. Regulatory uncertainty is also of great concern.
Enter STOs
STOs could be the solution for agriculture projects in crypto. As a security token holder, one may have the same rights as an asset holder. The regulatory hurdles required of a security token issuer would ensure that a project has certain risk management frameworks in place to protect investors. The issue with depending on STOs is that many regions where farms exist are in developing countries where regulations lag behind innovation. It may take a long time before STOs are mandatory for agriculture projects in Africa and South America.
For the investor looking to invest in an agriculture ICO, the team behind the project will be the greatest indicator of red flags and green flags. Many agriculture projects in the ICO space are experienced in farming but not in blockchain technology.
Reducing the Risks
Crowdfunding alternatives may be far safer than the many ICOs and STOs. Many projects in Africa offer 15% returns for investments. In the future, they may look to blockchain technology to provide greater returns. They have evidence of yields and have insurance which many ICOs don’t have.
Projects like Cardano and IOHK are setting the foundations for a new era of agriculture in regions like Ethiopia could also be potential investments. However, there are other factors to consider such as the fact that Cardano is not solely involved in farming projects. There are other projects which its cryptocurrency could derive its value from.
Conclusion
For now, many blockchain projects involved in agriculture are in their infancy. Good projects understand the long-wait required to implement simple solutions for more productive methods of farming. Investors in many projects will face significant uncertainty due to the high capital risks that many projects take. Unlike other blockchain projects, farming is very capital intensive. The use of technology and blockchain doesn’t necessarily lessen the burden. It simply makes data collection and analytics far more easier than it has ever been.
What do you think about blockchain farming? Share with us in the comments below!
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Calvin Ebun-Amu is passionate about finance and technology. While studying his bachelor’s degree, he found himself using his spare time to research and write about finance. Calvin is particularly fascinated by economics and risk management. When he’s not writing, he’s reading a book or article on risk and uncertainty by his favourite non-fiction author, Nassim Nicholas Taleb. Calvin has a bachelors degree in law and a post-graduate diploma in business.