The year 2021 has undoubtedly been marked by the soaring prices and democratization among the general public of crypto-currencies. Indeed, the year ended with a second “bull run” (prolonged bullish phase) that allowed Bitcoin, the pioneering and market-leading cryptocurrency, to reach its all-time high price of $69,000 on November 10. Despite this meteoric rise, views remain polarized on the subject, between revolutionary technology for some, misunderstanding or false promises for others. While blockchain has already demonstrated its benefits for the agrifood sector with multiple use cases (supply chain traceability and transparency, smart farms, etc.), what about cryptocurrencies themselves in agrifood? Can they have an impact on the agrifood sector? That’s the question Alcimed asked itself! After having conducted our investigation, we propose to discover 5 use cases of cryptocurrencies in agribusiness.
The adoption of cryptocurrencies is stronger in fast food, compared to other sectors. In fact, the sector comes in pole position in a March 2021 ranking of the number of businesses with a crypto-currency ATM or offering crypto-currencies as a payment method in-store.
Even if the phenomenon has not yet been democratized in Europe and France, it is now possible to pay with cryptocurrency in many establishments around the world. These payments can be made in store or online via specialized payment applications. As such, it is possible to pay with cryptocurrency in Starbucks in the United States, via the Spedn app, using the Flexa payment gateway. This app also allows you to pay with cryptocurrencies at restaurant chains such as Baskin Robbins, Jamba Juice and Amazon’s Whole Foods Market. The meal ordering website Takeaway.com also supports such transactions through the crypto payment gateway Bitpay. On the one hand, this allows retailers to eliminate bank fees while keeping the same security in the payment. On the other hand, it allows cryptocurrency holders to be able to use them in their daily lives, and go beyond a speculative use.
The interoperability of the blockchain facilitates the creation of loyalty programs within a brand, or even different brands of the same group, with a common cryptocurrency that can then act as a loyalty point. The main advantages of this system compared to previous loyalty programs are
Since 2018, Chanticleer Holdings, a U.S.-based restaurant group, has successfully implemented this system within its fast food brands Burgers Grilled Right, Little Big Burger and American Burger Co . Their system is based on the MobivityMind platform, which powers the loyalty program with the Mobivity Merit cryptocurrency.
Burger King’s Russian branch, meanwhile, had launched a similar initiative, distributing WhopperCoin via checkout receipts for every ruble spent. Based on the Waves blokchain, the WhooperCoin token allowed owners of at least 1,700 whoppercoins to receive a sandwich in exchange. Despite the success of this initiative launched in 2017, it had to be abandoned due to protests from public authorities, highlighting the regulatory issues related to cryptocurrencies in Agrifood.
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Further up the value chain this time, we see cryptocurrencies in Agrifood being created in the wake of agricultural trading, with the aim of financing crop advances for farmers. Initiatives of this kind that are being launched are highlighting, among other things:
Turbo Cereal, a French start-up founded in 2015, offers an instant financing, collection and payment platform aimed at “deleveraging the agricultural industry.” Turbo Cereal has launched the “Cereal coin”, a cryptocurrency allowing farmers to finance advances up to 70% of the harvest and repayable within five years. Even though Turbo Cereal becomes the owner of part of the harvest, the farmer is then free to resell his production to whomever he wishes, as long as the transaction is made with the cryptocurrency on the said platform.
On the investor side, this crypto-currency has an operation close to that of a stock. They receive dividends once a year, with a guaranteed rate of return of 2%, and participate in decisions at general meetings. The farmer on his side pays between 4% and 8% of fees to the platform, depending on his commitment to a green transition (calculated notably on the basis of the standards set by the ADEME), and on the other hand commits to share data with Turbo Cereal. Indeed, the start-up wishes to work on agricultural data with AI tools in order to define which are the most interesting agricultural strategies.
While these examples work around a single crypto-currency, it is nevertheless possible to consider going further in the future and why not see each farm having its own crypto-currency.
Indeed, the latter could then be used by farmers to raise funds from investors who would support the working methods of certain farms (production method, breeding, respect for the environment, regional know-how…) by investing in the cryptocurrency of the said farm. In this way, cryptocurrencies in Agrifood would bring a unique value to each farm, without being altered by commodity traders and outside influences.
Beyond this financing use case, true alternative marketplaces for food products and/or agricultural commodities are emerging, replacing the current commodity markets. Examples include the Agrolot, Herbalist Token and 1000 EcoFarm projects. The latter aims to create a global market for organic food and agricultural products. Open to all players in the value chain – from producers to consumers – they exchange FoodCoin tokens.
Some even see the possibility of creating a single currency for each crop, which would ensure a fairer trade of commodities, allowing small farmers to offer their crops a similar value to that of large agricultural companies. In this sense, the Spanish olive sector has seen the launch of Olivacoin, a B2B platform for trading olive oil. This platform reduces overall financial costs and risks, ensures quality control, increases transparency and facilitates access to global markets.
Although these initiatives can offer many benefits to farmers, their implementation is delicate with governments often skeptical about the implementation of such systems that are free from trade regulations and customs duties on the one hand, and prudential rules related to the financial and banking system on the other.
Finally, let’s look at a type of application related this time to cryptocurrency mining. “Mining” a cryptocurrency means providing a service to the network of the said currency, checking the validity of a set of transactions, and in exchange being rewarded with the mined cryptocurrency. It is true that mining is often criticized for consuming a lot of energy and releasing CO2. Even though a recent study by the BMC (Bitcoin Mining Council) claims that nearly 56% of Bitcoin mining is done with renewable energy, the fact remains that its annual energy consumption alone would exceed that of Argentina…
This disadvantage has been cleverly turned into an advantage by the startups Heatmine and MintGreen, decentralized and ecological “cryptomining” companies. The latter propose to valorize the externalities of their processors by recovering the heat spent by cryptomining to heat agricultural greenhouses. Heatmine promises to provide nearly free heating to the places where it operates, as the startup gets paid through the cryptocurrencies it mines. By reducing production costs, farmers can then hope to gain competitiveness. Crédit Agricole, meanwhile, advises farmers producing excess renewable energy to use it to mine cryptocurrencies, in order to optimize energy use and provide an alternative income.
Thus, there is a growing adoption of cryptocurrencies in the agrifood sector, as evidenced by the many use cases that are flourishing at different stages of the value chain. While downstream, cryptocurrencies offer new possibilities in consumer acts, upstream they are mainly employed as a new mode of financing for farmers. Moreover, we must distinguish between existing “classic” crypto-currencies (bitcoin, ether…) that could be used to pay for purchases or mined to provide an alternative income, and new crypto-currencies that are created to meet a specific need (loyalty point, alternative means of financing, means of exchange on new market places).
Nevertheless, classic crypto-currencies still raise legitimate concerns, from the current financial and political bodies but also from citizens, due to their volatility and the bubbles they can create. New crypto-currencies, on the other hand, may be of greater concern to current financial and political bodies, who may fear being overridden, especially in the case of new food marketplaces.
In the wake of cryptocurrencies, NFTs (Non-Fungible Tokens) are now making news. These are based on blockchain technologies like crypto-currencies, but their purpose is to identify unique tokens that allow a digital object to be individualized. The first use cases are appearing in the food industry, especially downstream of the chain. Pringles, McDonald’s and Burger King have launched NFTs for their iconic products this year. To be continued…
About the authors,
Sami, Consultant and Mathieu, Projet Manager in Alcimed’s Agribusiness team in France
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