Blockchain Is Revolutionizing How Coffee Is Delivered to You — Here’s How
The term blockchain is usually associated with Bitcoin and other cryptocurrencies. But blockchain technology is increasingly being used across a variety of industries — including coffee.
Understanding the basics of this technology will make it clear how blockchain will revolutionize how coffee is delivered to the public.
How Blockchain Technology Works
Imagine an old-fashioned ledger, where all transactions are written into a notebook. It includes price, date, quality, quantity, location, and any other information necessary for a transaction.
A blockchain is a digital ledger, which records all of the transactions. Blockchain is known as Distributed Ledger Technology (DLT). And it makes it very difficult to change, cheat, or hack.
A blockchain is a series of individual blocks that are arranged in chronological order. Each block depends on the previous block. As the process continues, a chain of blocks is created, the blockchain.
The information in a supply chain blockchain is transparent. This helps with the traceability of material, reducing losses from counterfeit and improving compliance.
The main advantage of blockchain technology is the fact that it is decentralized. An example of decentralization is using a Google Doc. We can create a document, share it with others, and modify it. The document is distributed, not copied or transferred. No one in the group is locked out, and any modifications are recorded immediately, making all changes transparent to everyone.
But blockchain has the advantage that it is decentralized. As such, no one organization or computer owns it. The digital ledger is distributed via the nodes that connect to the blockchain. Nodes are any kind of electronic device that maintains copies of the blockchain.
Getting Coffee From Farmer to Coffee Shop
When we sit down to drink a cup of coffee, we don't normally think about how it got from the farmer to our cup. It is a complex process. The steps include:
- The supply chain starts at the farm. Most of these farms are small — only about 1 or 2 hectares in size. Once the coffee beans are mature, the farmers will harvest the coffee beans and dry or hull them.
- Coffee processors are growers that own the proper equipment to process coffee from start to finish. Sometimes co-ops will be formed between growers who pitch in together.
- Intermediaries are involved in the buying, transporting, and selling the coffee. Throughout this process, there can sometimes be as many as five intermediary links in this one area of the supply chain.
- In some countries, the government is involved in the process of coffee production and trade. Government agents can be responsible for buying the coffee from the processors and selling it at an auction for export.
- Exporters will buy different types of coffee beans from auctions or co-ops. Exporters are trained to pick the best coffee bean quality based on their expertise in the local markets and the growing location.
- Brokers and suppliers will then sell the coffee beans to roasters in previously agreed-upon quantities and price.
- Roasters will see the green coffee beans through the entire roasting process. Roasters often sell their coffee directly from their roastery to the public. Other roasters will ship their finished coffee product to grocery stores, restaurants, cafes, hotels, and other retail outlets.
How Will Blockchain Technology Change the Coffee Trade
Before that cup of coffee gets to the dining room table, those coffee beans will change hands many times.
Coffee farmers can face problems like limited access to their products, lack of market and product information, and unstable prices. A coffee farmer could have a great crop and still not get a fair price.
Blockchain technology brings transparency to the coffee markets, which would help coffee farmers get a fair price for their coffee beans. Organizations that work with coffee farmers, like the FairChain Foundation, report that a coffee farmer sees only about 2% of the profit from each cup of coffee that we pay for.
The main reason for this is that big coffee corporations buy low and sell high, and the middlemen involved in each step also profit from the sale of that cup of coffee.
Using blockchain technology will let everyone know where the coffee was grown, processed, and exported. Interested consumers will know if that cup of coffee in their hands was part of small farm agriculture initiatives, clean water, and fair to the farmer.
Big coffee companies might say they only engage in fair trade, but in reality, they might not know because of the large number of middlemen involved. With blockchain technology, it is clear.
The use of blockchain technology has already begun in the coffee industry. And it will only accelerate. It has the potential to create complete transparency throughout the entire supply chain. Consumers can verify the coffee’s origin, freshness, and quality, and coffee bean growers will be recognized and rewarded for their top-tier coffee beans. It will also help coffee farmers get a fair price and also build brand loyalty with consumers. This is a win-win situation for everyone involved and remedies the imbalances in the coffee delivery business trade.