FDA Rule That Could Boost Blockchain Food Tracking Still Faces Market Challenges

The Food and Drug Administration (FDA) is working on a rule for food traceability, which may be completed by year-end, that seeks to establish additional traceability record-keeping requirements for those who manufacture, process, pack or hold some food designated by the agency.

The goal of this rule is to help the FDA rapidly identify the recipients of those foods to prevent or mitigate possible illness outbreaks or threats of serious health issues. For the moment, the proposed rule would only apply to certain foods, and it would require tracking some key data elements, but the regulator expects that these best practices would be adopted industry wide.

According to Frank Yiannas, FDA deputy commissioner for food policy and response, the proposed rule could encourage companies to adopt blockchain technology to comply. However, the rule would only require companies to keep electronic records, not to do so in a blockchain.

The idea of using blockchain — the technology behind bitcoin and other cryptocurrencies — for track and trace is not new but it has its challenges. Blockchain operates as a shared database that can be updated simultaneously in every single node of the network, and on top of that, it can’t be corrupted, so everything that is recorded in the blockchain stay there, it is immutable.

Therefore, the benefits of having such a precise database are very valuable for companies that would like to trace goods from their origins to their destinations. For food, a blockchain system would enable companies to trace, for instance vegetables, from the farm to the supermarket, with real-time updates from every intermediary. The FDA is encouraging the adoption of blockchain technology because this would facilitate the detection of possible problems that could affect the health of consumers and allow for quick action. But for companies, the benefits of blockchain goes beyond that, they could identify possible bottlenecks in the supply chain, increases or decreases in supply, improve logistics in warehouses and even they could create payments systems using smart contracts that would automatically release funds when a transaction is completed.

Yet, deploying a blockchain system in the food industry on the necessary scale to be effective is a challenge for big companies. The first problem to solve is whether to design a permissionless blockchain, this is open to everyone, or permissioned, it is open only to authorized members. For a regulator, the ideal solution would be a permissionless blockchain, with access to all the food chain from every company, but for a company, the idea that anybody, including competitors, could see all your transactions with all the suppliers and clients may not be appealing.

The second problem is scalability and reliability. A big company like Nestle or Walmart may decide to create a permissioned, private, blockchain as a huge database with all its suppliers. Yet, the challenge is to make sure that every single individual in the network has the technological means and skills to access the blockchain and to make sure that everyone records online exactly what happens offline. Additional problems may arise if the company decides to upgrade the system, as everyone needs to update, or how to deal with energy outages.

Therefore, blockchain technology is probably the future of food traceability, but there are a few hurdles that need to be addressed first. The proposed regulation encouraging farmers to maintain electronic records may be a good start, but for the next step, blockchain also needs to be simplified to become more accessible to people without the necessary IT skills. This is probably just a matter of time before it happens, the question is how long would that take?

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