Blockchain in Agriculture

With 40% of the global workforce, agriculture sector presents 6.4% of the entire world’s economic production and its total worldwide production is $5,084,800 million. If you have ever visited a farm, you would have seen that farmers have complicated ecosystems with seasonal financing structures, careful timing and a lot of moving parts.

After the food leaves the farm for the market, it becomes a part of the vast supply chain involving a lot of intermediaries. Everyone would like to know where the food has been produced before it is served on the plate. What if you could check the quality of food before you eat it? It could become possible with the use-cases of blockchain in executing contracts and tracking information transparently. Blockchain agriculture is one of the compelling use cases that makes the process of growing and supplying food simpler. The agriculture supply chain can provide all involved parties with a single source of truth.

Applying Blockchain to Agriculture

According to ReportLinker, the blockchain in food supply chains and agriculture is estimated to be USD 60.8 million in 2018 and is projected to reach USD 429.7 million by 2023. The Dutch Ministry of Agriculture, Nature and Food Quality financed the first research project, “Blockchain for Agrifood” that has been proposed to explore blockchain implications for agrifood. Pilot studies indicate that blockchain technology enabled food to be traced from farm to grocery store in just a few seconds.

Blockchain also helps to keep tabs on abundant commodities and reduce cases of illegal harvesting and shipping frauds. The United Nation reveals that food frauds cost the global economy around $40 billion per year because of illicit trades.

Procurement Tracking

The challenge for the agriculture sector is to track and pay for the delivery of foods. Nowadays, the process depends on a third-party for coordinating the goods delivery. The sellers usually have an agent who ensures that the goods are delivered safely and buyers have an agent to recommend payment and audit the delivery. The involvement of multiple agents adds high costs to the system and makes the entire process time-consuming. With the blockchain, the whole process can be simplified to a single distributed ledger. Commodity buyers can directly interact with the supplier that speeds up the process and reduces the time to settle a payment. Also, the companies can save on additional agent fees and farmers can receive a larger share of sales directly with a blockchain based solution.

With the features like traceability and auditability, farmers can directly sell crops or food to the restaurant or individuals without the need for intermediaries.

Crop and Food Production

With the help of smart farming, IoT sensors could fetch important information like the temperature of the soil, water level, fertilizer details and more and send it to the blockchain. Based on the data saved in blockchain, smart contracts could trigger and execute the specific actions. It will help in enhancing the quality of the farming process as well as produced crops.

Weather crisis control

Farmers have to face the issues of unpredictable weather conditions throughout the year. Monitoring and predicting such factors can be crucial for better crop survival. Due to excessive rains, it becomes difficult for grown crops to tolerate flooding. Consumers are never aware of when did the crops suffer bad weather conditions and why did market face high surge pricing. As it is possible for the involved members to trace the weather conditions from the blockchain solution, farmers can quickly request and receive insurance claim through smart contracts.

Managing Agricultural Finance

Lack of transparency in credit history and agreements are some of the significant problems confronting between smallholders and financial inclusion. Today, financial services do not only allow smallholders to invest in farming but also help them in resolving liquidity constraints.

As a result, it becomes challenging for buyers to pay farmers, restricting smallholders to sell crops at comparatively lower rates. With blockchain, the agricultural finance process becomes more transparent and fairer, yet enables shared control accessibility.

The agriculture industry needs to do a lot of work to maintain and build consumer trust when it comes to the food quality check. A blockchain based agriculture solution holds a lot of promise for the agribusiness industry with its ability to bring transparency in the system.

Options Contract Explained

An options contract is an agreement between two parties to facilitate a potential transaction on the underlying security at a preset price, referred to as the strike price, prior to the expiration date.

The two types of contracts are put and call options, both of which can be purchased to speculate on the direction of stocks or stock indices, or sold to generate income. For stock options, a single contract covers 100 shares of the underlying stock.

The Basics of an Options Contract

In general, call options can be purchased as a leveraged bet on the appreciation of a stock or index, while put options are purchased to profit from price declines. The buyer of a call option has the right but not the obligation to buy the number of shares covered in the contract at the strike price.

Put buyers have the right but not the obligation to sell shares at the strike price in the contract. Option sellers, on the other hand, are obligated to transact their side of the trade if a buyer decides to execute a call option to buy the underlying security or execute a put option to sell.

Options are generally used for hedging purposes but can be used for speculation. That is, options generally cost a fraction of what the underlying shares would. Using options is a form of leverage, allowing an investor to make a bet on a stock without having to purchase or sell the shares outright.

Call Option Contracts

The terms of an option contract specify the underlying security, the price at which that security can be transacted (strike price) and the expiration date of the contract. A standard contract covers 100 shares, but the share amount may be adjusted for stock splits, special dividends or mergers.

In a call option transaction, a position is opened when a contract or contracts are purchased from the seller, also referred to as a writer. In the transaction, the seller is paid a premium to assume the obligation of selling shares at the strike price. If the seller holds the shares to be sold, the position is referred to as a covered call.

Put Options

Buyers of put options are speculating on price declines of the underlying stock or index and own the right to sell shares at the strike price of the contract. If the share price drops below the strike price prior to expiration, the buyer can either assign shares to the seller for purchase at the strike price or sell the contract if shares are not held in the portfolio.

Blockchain and Digital Identity

Technological advancements in the digital space has revolutionized every aspect of our lives, from shopping to collaborating with colleagues to keeping in touch with friends to entertainment to managing our finances. Since the dawn of the Internet, identity management has been a key concern, with billions of dollars being spent on usability, security and privacy.

The identity and access management market is expected to grow from $8.09 billion in 2016 to $14.82 billion by 2021, representing a 12.9% CAGR. Despite this huge investment, managing digital identities continues to be plagued by three Cs – Cumbersome, Costly and Challenging.

With data driving the world today, digital identity is critical to most business and social transactions. This governs the interaction of users in the digital world. But traditional identity systems continue to be highly vulnerable, with single points of failure, attracting continuous attempts to gain access to the complete repository of high value data.

And, with companies prioritizing cybersecurity, identity protection and compliance management, while customer experience is significantly compromised. As individuals, we shoulder the burden of managing multiple online IDs and passwords, while also handling a host of documents, including passports, driver’s licenses, Social Security cards and medical insurance cards.

Blockchain has evolved significantly from the distributed ledger technology created to track bitcoin ownership. This technology can replace traditional systems with a highly trusted mechanism of managing identities. Blockchain can empower users to have greater control over their own identity. Organizations can use the information only with customers’ consent and no central entity would be able to compromise a consumer’s identity.

Blockchain has facilitated the so-called self-sovereign identity, which is inherently unalterable and more secure than traditional identity systems.

This has the potential to completely change the way we use identities to connect to different online services. Individuals would use their self-sovereign ID to verify their identity, removing the need for passwords. As with every lifechanging innovation, there’s been an extended period of evolution, with experts exchanging ideas and little consensus on what self-sovereign ID means!

It’s a concept that stems from the belief that an individual must have control over the administration of his identity. The ID cannot be locked into one site and there needs to be interoperability of the ID across multiple platforms, with user consent. Experts have been contemplating the summation of various identifying information like demographic and employment related data and even information about the individual revealed by other people.

Financial Crisis of 2008

The 2008 financial crisis is the worst economic catastrophe since the Great Depression of 1929. It happened notwithstanding Federal Reserve and Treasury Department goes through great lengths to prevent it.

It led to the Great Recession. That’s when the cover prices fell 31.8 percent, more than the price plummet throughout the Depression. Two years afterward the slump ended, unemployment was still above 9 percent. That’s not as well as disheartened workforces who had given up observing for work.

The first sign that the economy was in distress happened in 2006. That’s when covering prices began to fall. At first, realtors celebrated. They thought the excited housing market would reappearance to a more justifiable level.

Realtors didn’t comprehend there were too many homeowners with dubious credit. Banks had permissible people to take out loans for 100 percent or more of the value of their new homes. Many liable the Community Reinvestment Act. It broke banks to make investments in subprime areas, but that wasn’t the fundamental cause.

The Gramm-Rudman Act was the real villain. It permitted banks to occupy in trading lucrative derivatives that they sold to investors. These mortgage-backed reservations needed home loans as guarantee. The offshoots fashioned a voracious demand for more and more mortgages.

Hedge funds and other financial institutions around the world owned the mortgage-backed securities. The securities were also in mutual funds, corporate assets, and pension funds. The banks had chopped up the original mortgages and resold them in tranches. That made the derivatives impossible to price.

Why did stodgy pension funds buy such risky assets? They thought an insurance product called credit default swaps protected them. A traditional assurance company known as the American International Group sold these swaps. When the derivatives lost value, AIG didn’t have enough cash flow to honour all the swaps.

The first signs of the financial crisis appeared in 2007. Banks panicked when they grasped, they would have to absorb the losses. They stopped offering to each other. They didn’t want other banks giving them worthless mortgages as guarantee. No one wanted to get stuck holding the bag. As a result, interbank borrowing costs, called Libor, rose. This mistrust within the banking community was the primary cause of the 2008 financial crisis.

The Federal Reserve began pumping liquidity into the banking system via the Term Auction Facility. But that wasn’t sufficient.

How It Could Happen Again

Many legislators blame Fannie and Freddie for the entire crisis. To them, the answer is to close or privatize the two agencies. But if they were shut down, the housing market would collapse. They guarantee 90 percent of all mortgages. Furthermore, securitization, or the bundling and reselling of loans, has spread to more than just housing.

The government must step in to regulate. Congress approved the Dodd-Frank Wall Street Reform Act to prevent banks from taking on too much risk. It allows the Fed to decrease bank size for those that become too big to fail.

But it left many of the procedures up to federal regulators to sort out the details. Meanwhile, banks keep getting bigger and are pushing to get rid of even this regulation. The financial crisis of 2008 proved that banks could not regulate themselves. Without government oversight like Dodd-Frank, they could create another global crisis.

The South Sea Bubble: An Introduction

The South Sea Bubble was formed by a more multifaceted set of situations than the Dutch Tulip mania, but has nonetheless gone down in history as an additional classic instance of a financial bubble. The South Sea Company was formed in 1711, and was promised a monopoly by the British government on all trade with the Spanish colonies of South America. Expectant a repeat of the achievement of the East India Company, which had a flourishing business with India, investors snapped up shares of the South Sea Company. As its directors circulated tall tales of unconceivable riches in the South Seas (present-day South America), stocks of the company gushed more than eight-fold in 1720, from £128 in January to £1050 in June, before crumpling in the succeeding months and instigating a severe financial crisis.

The South Sea Company‘s foundation in 1711 followed the normal joint-stock company model. A joint-stock company held a royal charter which allowable it certain privileges which other companies did not have. Joint-stock company shareholders were protected by limited liability. This meant that they could not be pursued for debts owed by the company. Secondly, joint-stock company shares were readily assignable, i.e. they could be passed easily to another holder by sale or gift. This was an important feature not shared by many other early financial instruments. For instance, government annuities were not readily assignable and could not be sold quickly if the holder required cash urgently. Joint-stock companies such as the South Sea Company sometimes performed debt-for-equity swaps for the government. They would offer their shares in exchange for government debt such as annuities. A debt for equity swap was supposed to benefit all parties. The government would reduce its costs and the complexity of managing its debts. The company would gain the right to increase its capital and gain bargaining power. The former government debt holders would have a more liquid asset with the possibility of higher returns.

The government had issued a large number of annuities as part of its war-financing programme. Annuities were supposed to pay a fixed sum each year, but the government’s payments often fell into arrears. Holders of annuities might prefer to swap their claims on the government for some other sort of investment. A debt-for-equity swap allowed them to exchange their annuities for joint-stock company shares. They would still be paid an annual fee which would now be administered by a company. Their new shares would also give them the possibility of dividend payments or capital gains (by selling the shares on). The shares were easy to sell or bequeath, which was a valuable feature in itself. It was difficult for a large number of small creditors to pressurise a government. By joining together under the aegis of a joint-stock company, small creditors could have a stronger voice. This might make it more difficult for the government to fall behind with payments.

The government could also benefit from a debt-for-equity swap. The bureaucratic costs were reduced as it could now deal with one company, rather than a myriad of small creditors. It had to pay a single fee to the company, rather than different fees to different people. Government debts had often been arranged on a short-term and ad hoc basis and were highly complex to manage. One type of debt contract which was particularly onerous was the so-called ‘irredeemable debt‘. Irredeemable were annuities which the government had no right to redeem, i.e. the government could not compel the holders of this type of debt to sell it back, so creditors often did not receive all the payments they were entitled to. This has to be taken in deliberation when likening annuities with South Sea shares.

Ideally, the government would have the option to redeem its debts. If market interest rates fell, then the government should borrow money cheaply in the market and use it to pay off its more expensive debts. For example, suppose that the government borrows £100 at an interest rate of 5 per cent. If the market interest rate drops to 2 per cent, then the government should borrow enough money to pay back the principal of £100 plus any interest owed and any bureaucratic fees. It now must pay 2 per cent rather than 5 per cent on its debt, but this should still constitute a saving. The government could not automatically take advantage of a fall in the interest rate when dealing with irredeemable debt. Therefore, it was important to persuade the holders of irredeemable annuities to relinquish their claims in exchange for joint-stock company shares.