Food fraud in the global food industry involves $50 billion in annually and endangers public health. Blockchain can prevent such dark crimes when deployed strictly and realistically.
question? It comes with a high price tag. Scalability, cost, interoperability and integration pose significant barriers. Not to mention privacy issues, regulatory uncertainty and the long way to adopt stakeholders.
But there is no place for food fraud. As David Carvalho, CEO of Naoris Agreement, observed:
“Most people will be surprised to hear that food fraud is a problem, but it is a major problem, with the global food industry costing between $30 billion and $50 billion a year. This is a small part of the total value of the industry (more than $12 trillion), but it is still equivalent to the GDP of small countries like Malta.”
So, what should I do? How to truly implement blockchain?
Food fraud is deeper than we realize
United Nations Food and Agriculture Organization (FAO) Outline Food fraud involves purposefully defrauding customers of the quality or content of food they buy.
Essentially, it is intentional substitution, addition or removal of materials to obtain financial benefits.
There are many types of fraud. These include labeling, theft, forgery and dilution.
Real examples abound. Melamine was added in China to forge the protein content. Horse meat is sold as beef in Europe. Olive oil is usually diluted with cheap vegetable oils.
The economic losses are shocking. However, the actual cost is much higher when considering reputational damage, regulatory compliance, legal struggles and erosion of consumer loyalty.
In some cases, human costs can be more devastating. The 2008 melamine scandal in China hurt more than 300,000 babies.
Wanchain CEO Temujin Louie highlights the vicious cycle caused by food fraud:
“Fraud events lead to health panics that erode consumers’ trust. This reduction in trust can translate into reduced sales involving brands and broader product categories, economically harming legitimate businesses.”
The damage is not calculated as the sum of individual losses. It should be calculated as a systematic weakening of the food industry foundation.
Cracks in the supply chain bother food fraud agents
The complexity and opacity of global supply chains creates fertile ground for fraud. The cold chain is particularly fragile.
Failure in cold chain logistics can lead to deterioration. These failures allow fraudsters to misrepresent storage conditions or sell compromised goods.
Fraud is not limited to high-profile cases or luxury goods. Dairy products, spices, seafood, organic products, Honey Juice and juice are common targets.
Carvalho added that fragmented data systems are deadly heels:
“Many companies maintain their own internal tracking systems, but these companies often lack interoperability with suppliers or customers. This leads to “information islands” that prevents a holistic, end-to-end perspective of the supply chain.”
Fraudulent products are entered and run through the system without sharing reliable data.
Blockchain bite
Blockchain technology can serve as an antidote to this growing crisis. However, Louis warns that attempts to build blockchain-based accounting have faced challenges.
“In the more than a decade since the launch of Ethereum, we have not witnessed any real disruption,” Louis warned. “One of the reasons why the promise of blockchain in the supply chain has largely not yet been realized is that early adopters have committed the crime of oversimplifying the issue.”
The core principles of blockchain technology can create a more transparent and trustworthy system. Decentralization ensures that no entity controls data. Invariance ensures that once data is recorded, it cannot be changed or deleted.
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The benefits are not over. Selective transparency allows sharing of relevant information with authorized stakeholders without the need to expose sensitive business data. At the same time, smart contracts can automate processes and execute protocols.
Ultimately, cryptography ensures the integrity and security of the ledger. To further integrate it into the blockchain, the audit trail of environmental conditions remains unchanged, which is crucial for cold chain integrity.
Real-world implementation begins to take fruit. Working with IBM, Walmart uses Hyperledger Fabric to track pork in Mangos in China and the United States, reducing trace time from days to seconds. TE Foods and Sources provides blockchain-based traceability solutions that improve food safety and transparency. Major food companies such as Nestlé and Carrefour, as well as platforms such as Seafood Souq, are exploring blockchain to increase supply chain transparency.
Louis (Louie) highlights the paradigm shift:
“Traditional food supply chains have relied on paper documents, third-party certifications, and intermediaries that trust the words of various actors along the chain. By contrast, blockchain is moving towards systems based on verifiable data.”
Carvalho explains the deterrent effect:
“A well-implemented blockchain system can act as a powerful deterrent because increased visibility and auditability make fraudulent activities more risky and more likely to be exposed.”
Decentralized transactions
Despite the hope, blockchain is not a magic bullet. Scalability, cost, interoperability, and integration with older systems pose significant barriers to adoption.
The “garbage, garbage” issue remains a basic limitation. Blockchain can only ensure the integrity of the data after the data link – but cannot be responsible for the accuracy of the data entering the chain.
Oracles and IoT devices feeding external data to the blockchain are susceptible to tampering and technical failures. Manual data entry is also susceptible to errors or manipulations. Perfect traceability records do not prevent a compromised Oracle from feeding false data or colluding a party from entering fraudulent details from origin.
Privacy issues, regulatory uncertainty and stakeholder adoption are additional barriers. The food supply chain involves sensitive data and companies are unwilling to be exposed.
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Licensed blockchain and selective transparency provide solutions. However, these do require careful governance and clearance of data access protocols. Regulatory frameworks are developing and broad stakeholder participation is critical to success.
Louis advocates a pragmatic approach. “Start with a well-defined use case where blockchain can provide proven value, rather than trying to implement a broad, unfocused implementation,” Louis suggests. “A strong governance model, especially for consortium blockchain, is crucial.”
Carvalho highlights the need for industry standards, training and collaboration:
“Technology alone is insufficient. Success depends on redesigning basic business processes, investing in training and change management, and fostering a culture of collaboration and data sharing.”
The comprehensive future of food integrity
The convergence of blockchain with IoT, AI and other innovations provides a promising path. IoT sensors provide real-time data about product journeys, creating tamper-proof records.
AI algorithms analyze large data sets to detect anomalies and optimize logistics. Rapid testing methods, smart packaging, robotics and digital certificates further enhance food integrity.
The infrastructure built to combat fraud has brought wider benefits. These include increased operational efficiency, reduced food waste, and sustainability claims.
Blockchain and its complementary technologies are also attractive to companies that are not directly affected by fraud. Pilot projects are providing valuable courses. Industry consortiums are forming and standards are beginning to emerge.
Potential rewards are beyond the scope of reducing fraud to improve food safety, reduce waste, enhance consumer confidence, and a more sustainable, equitable and resilient global food systems.
Invisible food fraud may be common, but it is not invincible. If thoughtfully deployed and integrated, blockchain could be the layer of trust that ultimately solves the $50 billion food fraud problem.
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