IBM (IBM) has convinced a slew of big-name grocers and consumer brands to try blockchain, the technology that originated with the digital currency Bitcoin in 2009 but is now being applied in a number of business contexts that have nothing to with Bitcoin.
Walmart (WMT), Kroger (KR), Unilever (UN), Nestlé, Dole (DOLE), Tyson Foods (TSN), Golden State Foods, and McCormick (MKC) have all joined the collaboration to use IBM blockchain to track food shipments and monitor food safety, IBM announced on Tuesday.
This is the second blockchain trial Walmart has done with IBM; the first, nearly a year ago, was to track shipments of pork in China. This time, many more companies have signed on, and the scope is much larger. “I think the fun has begun,” says IBM’s blockchain exec Jerry Cuomo.
Why does this matter? Skeptics of Bitcoin, and of blockchain, have dismissed these burgeoning technologies on the argument that the average person doesn’t understand how they work (and in the case of Bitcoin, many people think it exists mainly for crime). Bitcoin and blockchain believers have long retorted that non-techies don’t need to understand them in order to use them. They reason that people could end up using these technologies without knowing how they work, a la HTTP, the protocol on which the internet runs, or SMTP, the e-mail protocol.
This IBM trial backs up that argument.
Customers of Walmart (or Kroger, or Nestle, and so on) won’t know that a blockchain had anything to do with the papayas, or mangoes, or pork chops they buy at the market. But if IBM is to be believed, shoppers will benefit from it, because the use of a blockchain to track the shipment and supply chain can “trace contaminated product to its source in a short amount of time and ensure safe removal from store shelves,” according to a press release.
In other words: the success of blockchain tech (which Wall Street is also embracing for faster back-end trade settlements) does not rely on consumers understanding what it is.
‘There is a new style of blockchain’
Still, you may wonder, what is blockchain? It’s a distributed, immutable ledger for recording data or executing smart contracts. The Bitcoin blockchain is a peer-to-peer, permission-less, anonymous ledger that records every transaction done in Bitcoin; “miners” upload records of transactions in bundles called “blocks” and receive a small reward in Bitcoin for their work. (For more, watch this video.) But the IBM blockchain, and the blockchains that many financial institutions are building, are slightly different: permissioned, closed, and usually minus cryptocurrency.
“There is a new style of blockchain, and it’s permissioned, and it’s good, and it works,” says Cuomo. “Each of these members, while they are permitted to transact privately, their identity is known through a sort of digital membership card that is given to each member when they onboard the network. And this allows for audit scenarios.” (And so the hype around “blockchain without bitcoin” continues, even as the price of Bitcoin as a speculative investment soars.)
IBM’s blockchain is built on top of the Hyperledger Project, an open-source group created by the non-profit Linux Foundation in which IBM, Accenture, Intel, JPMorgan and Wells Fargo were founding members. Hyperledger now has more than 40 member institutions.
To be sure, this is all a bit of “look at what we’re doing” PR for IBM and these clients. “Tracking food safety” is a broad and vague purview. For a specific example of what this trial will actually do, Cuomo gives papaya. “Say there is a salmonella outbreak on papaya. Right now, you run the risk of regions shutting down papaya whether they are affected or not.” From tracking shipments and supplier records closely on a shared blockchain, grocers can pinpoint issues and prevent importing from certain areas, cut down on spoilage, and target demand.
But wait a minute. In many markets, Walmart is a competitor of Kroger. Aren’t they hesitant to share information with each other? Yes, Cuomo says: “There is hesitation almost across the board. It’s only human that when you’re sharing, you step back and think, am I going too far in sharing unique corporation information here? And there is a chance that you might lose some edge in the small. But you’ll get greater gain in the end.”
The members of this blockchain trial pay to be a member, so they are beginning to demonstrate a belief in the power of the tech. “There’s legitimate framework and substance in terms of the product,” Walmart VP of food safety Frank Yiannas told Coindesk. “It’s substantial and real.”
Of course, all of this is still in the trial phase.
The pork chain trial with Walmart “showed the art of the possible,” Cuomo says. “And as soon as we opened up the invitation to others, they wanted to come in for the good of food safety.”
Daniel Roberts closely covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite.