Our blockchain network is not only about the exchange of crypto-assets among holders– that is just one of the capabilities of the network. Our network is about using the attributes of the network to solve specific problems in the real- world and creating economic wealth through the network.
We have developed a framework that anchors and represents all the activities in a real-world economy on a blockchain. Our initial focus is on the agriculture economy. The same way that books, movies, music that are produced by real people went virtual, that’s the same way we are using our blockchain to make the agriculture economy go virtual.
Agrikore is a block-chain based smart-contracting, digital financial services & customer relationship management system for Agriculture. It organizes & digitizes the value chain so that the various actors – Farmers, Agro-dealers, Input producers, Produce Off-takers, bankers, commodity exchanges, warehouse receipt operators, logistic companies etc in the value chain can create & capture economic value sustainably because the economic activities are now visible in a single transparent ecosystem.
The following sections explain the principles behind how our Agrikore blockchain (Mula Network) makes this happen.
The social trust problem.
Agriculture across Africa is a $330B segment in 2015 that will grow to $1Trillion. However, this segment is perceived as “not FinTech ready” because of the intrinsic nature of the segment. Agriculture is:
- Physically intensive;
- The primary economic activity that drives the value chain occurs in remote areas over large geographical territories;
- Not digitized – it’s a cash-driven segment; and
- Based on relationships in the immediate vicinity, not contracts which enable the economic activity to extend beyond the immediate environment.
These factors make agriculture, despite its size a segment that is considered as an “out-of-view” economic segment that either can’t or won’t be integrated into the wider economy in terms of FinTech, banking & payments systems, securities & commodities markets etc. Essentially to do business in agriculture on a massive scale in a structured way, you need a huge level of social trust or goodwill capital that does not exist today.
Market participants either do not trust each other enough nor do they trust that the market will work for them on a sustainable basis. For example:
- Bankers are not sure that if they lend, they will get paid;
- Farmers are not sure that if they produce, they will be able to sell everything;
- Manufacturers & intermediate processors are not sure that if they invest in growing their industrial capacity, they will find agricultural inputs of production at the right quantities; and
- Intermediates like Agro-dealers, primary produce aggregators, warehouse operators, and transporters are not sure that if they extend services to the last-mile; they will find customers.
Therefore because of the high level of uncertainty in the sector, the sector does not realize its potential. However, Agrikore solves this social trust problem.
How Agrikore blockchain or Mula Network Solves this Problem.
We have created a programmable crypto-asset for Agriculture – the Mula- on the Agrikore Blockchain and how it enhances social trust among the ecosystem participants in such as way that agricultural productivity & economic welfare are increased.
We have taken advantages of the properties of a blockchain & introduced several new paradigms that increase the level of economic activity and social trust within the ecosystem.
We have implemented/taken advantage on the network with the following features of our blockchain:
1. Immutability of records:
The strongest feature of the blockchain that we are bringing into agriculture is the immutability property; blockchain transactions are immutable. The fact that records can change suddenly, and no-one is able to trace how, where, why & when those records changed is a major reason for the low social trust within the Agricultural ecosystem. We are now able to provide the confidence to market participants that if a record exists on a blockchain, that record is what it says it is. The reasons why the blockchain can provide this level of assurance are as follows:
- The way a blockchain works is that records, accounts, transactions etc on a blockchain exists as unique signatures called hashes. These hashes are grouped together in a block and a new block is created at set intervals, such that when new transactions are submitted they are added to the next block which includes the hash of the prior block with the content of the new block that contains the newly added transactions and hash. This is what forms the block-chain;
- This means if anyone goes back in history and changes or try to change any transaction on is block, the hash that will be computed from the altered block will be different and it will serve as a witness that this block has been tampered with and all the blocks in the chain will be rejected.
- This is what makes blockchain records immutable and is the property that increases trust within the system, because all the ecosystem actors know that whatever proof of work (input supply, produce sale, loan receipt) that is backed by the blockchain is immutable as no-one can change the records as the system automatically shows the proof of the tampering.
For example, assuming a hypothetical bank holding a loan issuing account #4234 pays $200 within the last 5secs to a farmer account 4234000FMR. The transaction is hashed into a block, given a block header and added to the ledger. Imagine that bank 4234 now performs a new transaction by crediting the farmer with more loan, this will also be added to the blockchain and converted into a hash. Hashed with the header of prior blocks and creating a new hash. This forms a new block and it goes on like that and that is why we call it to the blockchain.
If a nefarious person within or outside the bank wants to change the loan amount, so that the farmer does not pay back the actual amount borrowed, the person will not be able to, because it will require changing all the records in the blocks which will create a new hash thereby invalidating the previous hash or record. This means the mechanism to keep everyone honest is now intrinsic to the ledger.
2. Decentralization of record keeping
One of the things we have done to enhance trust is to introduce the paradigm known as process centralized replication or decentralized verification of processes. It enables us to increase the fidelity of business processes by reducing the chances of the process getting compromised because there is a single point of compromise. Blockchains are hacking resistant because they are decentralized. There are many copies of the ledger known as nodes that are independent of each other, which processes transactions on the blockchain. The implication is that anyone with a bad intention needs to compromise all the blocks on all the nodes at the same time. Since no-one knows where all the nodes are & how many they are it becomes very difficult to compromise the ledger. Our network is a permission node system in that only authorized or registered nodes can host & write on our ledger.
Our authorized nodes are governments, financial institutions, corporate commodity buyers; Input suppliers, Warehouse receipt operators, while community-based produce aggregators /certifiers, agro-dealers, mobile money agents & farmers are data points in the ledger. We are a network of participants in the National African Agriculture Systems.
3. Reserve Backed Ledger & exchange system
We have also implemented our blockchain as a reserve-backed system so that any node that joins the network brings some amount of cash into the network and that goes into the reserve. This means every node has an interest in preserving the integrity of the network otherwise they simply compromise their own economic security in the network if they behave in a manner that is inconsistent with the network rules. Within Agrikore are nodes that are not allowed to process transactions in excess of their balances in the reserve. Essentially before you can write a record, your writing must be underwritten by value or economic activity in the real world. For example, Jacky Mills Nigeria can write on the ledger because they have produced fertilizer but Bolaji who did not produce anything but has an account on the ledger cannot write on the ledger.
This reserve backed system prevents the creation of crypto assets out of thin air and links the growth of the crypto assets to real-world economic activities. For example, a crypto asset can only be created because someone either put in money, sold an agro-produce/ input or issued a loan, unlike the current construct where crypto assets are created because of computer processing speeds.
4. Smart Contracting & Integrated Digital Payments System
The blockchain allows us to enforce the concept of Ricardian contracts. The idea is that the blockchain hosting the contract is also enforcing the contracts because the medium by which the agreement is made also enforces the terms. We have made it possible for everyone within the network, to deal with each other based on a set of smart contracts. Because the network enhances trust, the current processes within the agriculture value can now scale, as we can represent the web of relationships and activities on smart contracts, and at the same time give everyone access to the digital payment system that allows them to exchange services among each other. We have done this by creating a programmable crypto asset ‘The MULA’ which has properties that physical Agric produces, cash or e-money. Our network is one of the few blockchains to introduce that concept where you can program how the asset would behave. For example, a farmer can deliver some crops to a primary aggregator or bundler in the community, who have promised to pay him after selling the produce in the open markets or to a commodity buyer. The farmer is concerned about getting paid in maybe a week or two week’s time and all he or she has is a sheet of paper as the proof.
What we have done on the blockchain is to convert this piece of paper into a smart contract on the blockchain which not only stands as a proof or receipt but most importantly enforces the terms of the trade. We have thereby solved the problem of ‘fear of getting paid’ for the farmer. Unlike before that the bundler can change prices on the farmer or underpay the farmer or even swap the goods delivered for the farmer; he or she cannot do that now because the bundler can only exist on the blockchain if they are signatory to a set of contracts that enforces commercial penalties, benefits & behaviors on them. This means a farmer knows that if someone exists on the network, you can trust the person. We can program this asset to behave in a multiplicity of ways, in essence, we have introduced the concept of derivatives on a blockchain.
5. The creation of convertible derivatives
Agriculture as a sector has a feature that makes it unique amongst all other economic sectors. The fundamental assets that drive the creation of value upstream /downstream across the entire value chain have a short lifespan, even though the finished consumer goods have a long shelf life. For example, once you produce Maize, you have to produce again in 4 months. This means the underlying market automatically corrects or zeroes itself out, but the value created still exists at other layers of the value chain. The implication is that for a blockchain to support agriculture, it must support derivatives of the fundamental assets that are time restricted and converts them to the pure crypto asset or token after a time. This unique construct that we have created means that in our blockchain, the convertible assets are what drives value creation. Rather than mining worthless crypto assets we have created real crypto assets linked to real-world economic activity. Our network is now a network that goes beyond just a medium of efficient economic transactions to a network that creates real economic wealth.
6. Segregation of roles
We have separated the governance arrangements of our network from the operating arrangements. Our network will eventually be governed by a Foundation, which would consist of eminent personalities, development partners, governments etc, they will set the monetary policy or network rules. Messers Cellulant operates the network on a daily basis for economic wealth creation. This is separate from the entities that operate the marketplace for Agriculture & the exchange where people can trade this crypto-asset if they want to.
Note: This article is part of a series of 7 articles on Features & Attributes of the Agrikore Blockchain; authored by Cellulant‘s Co-founder, and CEO of Cellulant Nigeri, Bolaji Akinboro. In following articles, he will explain more about each of the above-listed components to ensure understanding of what makes Agrikore unique and transformational.