Agriculture is the most maligned industry in the world, which is strange when you think about what it does. Agriculture provides most of the world's food and clothes, which are two of the most important necessities of life. Even though it is very important and has a big impact, it is the industry with the least funding and the least innovation.
Even though it seems like every industry was "blockchain-ified" or "tokenised" in 2017 and 2018, there is still a healthy undercurrent of putting trendy buzzwords in whatever and just going with it when it comes to cryptocurrencies. Most companies don't even have ideas, let alone something real that could add value to the balance sheet. But there may be a way for blockchain and sustainable agriculture to work together in a way that checks off several key boxes, solves known problems, and uses real-world agriculture "infrastructure."
An active rethinking of agricultural incentives is taking place along the value chain in an effort to make it more long-term sustainable (e.g., reduce greenhouse gas emissions and CO2 emissions) while reducing any potential short-term losses. This is a difficult task that runs counter to recent agricultural trends that have effectively pushed crops and livestock production systems toward hyper-efficiency. It is possible that any disruption to these hyper-optimised systems could have a detrimental impact on production and the accompanying income. Shocks to the agricultural supply chain, which is particularly vulnerable, can be felt throughout the wider economy in the form of higher prices for foodstuffs, clothing, and other necessities.
The following is an overview of how cryptography can help with sustainable agriculture and how it addresses several current issues while also addressing limitations: Non-fungible tokens (NFTs) may be an option. NFTs have been used in a wide range of applications, from sports tickets to art, to approximate or replicate real-world objects (or proof of art ownership). An acre of land is a natural analogy for NFTs in agriculture. Agricultural land, like an NFT, can be viewed as a unique combination of space and time. The value of a piece of land fluctuates with the state of the economy in which it is situated.
The idea behind using NFTs to encourage sustainable farming practices is roughly this: Nigeria has about 200 million acres of cropland. Since each calendar year is unique, we will mint a new token for each acre every year. People or businesses that want to offset carbon emissions, improve water quality, or do other things that are good for the environment can buy tokens that meet their standards. The value of each token (or acre) will be set by the rules of the free market. Every token that is minted but isn't bought in the year it was made is burned at the end of that year. So this is different from how "ArtBlocks", "CryptoPunks" or "BAYC" NFTs usually work, where only a few "tokens" are minted. This goes against the general idea behind NFTs, which is to make fewer tokens and let their scarcity and rarity determine their value. Here, we make a lot of tokens that don't have any real value because so many acres of Nigerian farmland don't have the right qualities for sustainability. Better yet, the attributes of agricultural land will be valued differently by almost every market participant, which is different from traditional NFTs, whose attributes are mostly hardcoded or generative.
Using an NFT structure mimics the dynamics of evolving agricultural techniques in the current world. Even within the same acre of land, no two years are the same, and no two acres are identical even in the same year. This characteristic is already generally accepted in agriculture because land values, production, and cultural traditions vary greatly by location. Each acre possesses inherent values (or traits) based on its past agricultural practices, native soil characteristics, proximity to other land or natural resources, etc. Rather than employing an algorithm to generate these traits, it is the responsibility of a human to use whatever resources are available to determine or speculate on their worth. To clarify, there are currently technologies available for estimating the value of land. However, the sustainability scores will vary amongst customers. One group may appreciate the continuous growth of plants per acre, whilst another group may value a variety of plant species growing on each acre.
Double counting, verification, and scarcity are all avoided when sustainable agriculture is implemented using an NFT framework. In the absence of a central database, farmers might theoretically double dip between two or more companies that are competing for a limited number of acres. The double counting problem can be solved by any well-established blockchain (Ethereum, Polygon, and Solana are a few good examples). Carbon offsets may be validated on the blockchain once an entity purchases and claims them. Even while verifying land-related qualities is still a difficult task, using DAOs or programmatic means to do so isn't that far off in terms of technological development (there are sophisticated remote sensing capabilities that can verify properties of land today).
One of the more difficult issues in sustainable agriculture is rewarding those who have been practicing these methods for the longest by utilizing the native features of an NFT solution (because sustainable value is associated with longer timeframes). It's difficult for people who care about the environment to make a financial investment in agriculture. If you've already embraced sustainable methods, you won't get a penny back from any new entrants into the market. The majority of these firms (Bayer, Pepsi, Corteva, Indigo, Syngenta, FBN, etc.) are for-profit and aspire to gain new customers, which they can then use to generate further money. Tokens with long-term features may be more valuable than those with short-term ones in the future, thanks to this sustainability NFT, whose value will be determined by the market.
What to do with the 400 million tokens that are made every January 1 is a separate thought experiment. Does one just post these 400M tokens on OpenSea and add attributes to acres that can be verified through code or "trusted" third parties (Ministry of Agriculture)? Don't we want farmers to be able to make money by using more environmentally friendly methods? Do you invite all Nigerian farmers to take part in this NFT token? So, how do you reward people who take part in the market (market makers, speculators, farmers, and landowners)? To me, the answer to how to encourage a healthy market is:
Farmers get the keys (not tokens) to the acres they are currently in charge of for that year.
On January 1, 2004, 400 million NFTs are made. From January 2 to December 30, people can list items for sale and buy them. On December 31, any NFTs that are not part of a transaction are burned.
Who gives the "trust" in this situation? For tax purposes, the Ministry of Agriculture keeps a close eye on everything that is grown in agriculture. No for-profit farming is done without the government knowing who is doing it (the operator), who owns the land (the owner), and what is being grown (the product). You can use this information as a sort of "proof-of-(agriculture)-production." Unintentionally, the government gives the farmers the proof they need to get the private keys to the land they have made valuable by using sustainable practices. This idea will also help both farmers (who run farms) and people who own land. In this system, landowners would have an implicit reason to prefer operators (farmers) who can pay the highest rent and use sustainable practices that carbon buyers will pay more for.
This post describes a general way for landowners, farmers, and governments to use an NFT solution to encourage sustainable farming practices. There are some crypto solutions that don't use NFT, but I think this NFT solution might be better in the long run (although more complicated).
More to come