Blockchainizing Food Law? A Closer Examination of the “Code as Law” Promise and Its Limits

Blockchain holds the potential to serve as an effective and efficient governance tool in the global agri-food sector. As demonstrated previously, there have been successful cases in which blockchain seems to have provided sufficient solu­tions to the regulatory problems of food safety, traceability, authenticity, and sustainability, at least in part.

Applying blockchain technologies as a regulatory tool to address problems of food safety, traceability, authenticity, and sustainability is premised upon the “code as law” approach, one of the many modalities of regulation includ­ing command and control rules, social norms, industry standards, market and architecture, and computer codes.^[326] Indeed, technology can be “regulatory” and compliance driven through different mechanisms to make “regulation sus­tained and focused attempt to alter the behavior of others according to defined standards or purposes to produce a broadly identified outcome or outcomes, which may involve mechanisms of standard-setting, information-gathering[,] and behavior-modification.”^[327] Just as information and telecommunication technology can force compliance by building in automatic braking at stop signs for self-driving cars,^[328] blockchain can de facto shape what is permissive, pos­sible, prohibited, or impossible.^[329]

Indeed, blockchain’s key features mean that food processes and production information can be recorded in a database that ensures traceability, immuta­bility, and transparency.

Blockchainizing Food Law 95 trust” may lower uncertainty between buyers and sellers,^[333] reduce transaction costs, and promote sustainable management and development.^[334] Information asymmetry can also be alleviated through blockchain systems to foster greater consumer trust. Such trust toward the food supply chain can also be enjoyed by producers and retailers, as there is greater information transparency and cred­ibility in the ecosystem. Some commentators even argue that blockchain holds the potential to “provide[] the agri-food market a trustworthy framework to store every passage of the production and distribution chain.”^[335]

Despite blockchain’s “code as law” promise, there are formidable challenges that may prevent successful implementation of such a technical fix on the ground. As analyzed in the following, while it remains to be seen what prob­lems such pilot projects have encountered as well as what models are likely to be more successful than others and why, a number of challenges such as scaling up, data protection and cybersecurity risks, standardization politics, technical capacity gap, and inherent technological limits are already salient.^[336]

A.

Technical Expertise

First, while blockchain technologies are relatively accessible to business actors due to the high penetration rate of the Internet,^[337] stable Internet service is nei­ther available nor affordable in many corners of the developing world,^[338] where the primary industry is food and agriculture. It is noted that the future diffusion of blockchain technologies in developing countries may be limited due to the lack of adequate infrastructural support. In particular, network infrastructures for public-key applications pose a formidable obstacle.^[339]

There are also significant barriers to implementation due to deficits of oper­ational knowledge and technical expertise among individual actors, especially for small companies in the food industry that follow conventional practice. It is true that for end-market players, taking advantage of blockchain primar­ily involves an application on a smartphone, but upstream suppliers will need “digital skills” to access data and navigate applications. Therefore, inadequate operational knowledge and technical expertise will be an obstacle to adop­tion, especially for small and medium players.^[340] Effective use of blockchain in the global agri-food supply chain requires operational knowledge about other technologies, such as network management, smart sensors, biosensors, and the Internet of Things (loT).

Many businesses in different parts of the agri-food sector have yet to “digi­tize” supply chain management and record-keeping, not to mention obtaining technical expertise about all of the relevant technologies to link physical food products to various blockchain data. As it is crucial for all participants at all stages to get on the blockchain for the system to ensure comprehensive trans­parency and traceability,^[341] the uneven capacity of different entities (at differ­ent nodes of the global supply chain, in different countries, of different sizes, and with different technical backgrounds) underscores just how diverse and fragmented the agri-food industry is.

B. Implementation Burdens and Standardization Costs

Second, the implementation and standardization costs for blockchainizing food law are rather unpredictable and will constitute formidable legal and policy barriers. As we are still at an early and immature phase in terms of applying the blockchain to the global agri-food supply chain, the overall cost of implement­ing relevant technologies remains difficult to estimate.^[344] Further, technically speaking,

the evolution of DLTs has led to the development of both public and private DLTs, which use different consensus algorithms to validate data

Blockchainizing Food Law 97

entries. Current development efforts are implementing a wide range of different consensus mechanisms and types of DLTs.^[345]

Existing systems are like silos based on different blockchain technologies, data, and organizations, and companies usually have limited incentive to work together or share confidential information with potential competitors. The participation of new (types of ) players, from the tech sector to the broad field of business, will further complicate the dynamics and the structures of interac­tions. There may be issues regarding conflicts and repetition between different private standards, as well as divergences in existing legal frameworks governing such disruptive innovations, which will, in turn, lead to market barriers or other trade frictions.^[346]

From an information management perspective, the promise of blockchain as a technology solution for a governance framework, in particular traceability mechanisms, “requires a well-organized and standardized supply chain between all (internal and external) actors.”^[347] Practically speaking, the types of block­chain technologies and data structures must be clearly and consistently defined first before automating processes kickstart.^[348] At the cross-border level, discus­sion of whether and how to harmonize rules and standards about the interoper­ability of blockchain systems across relevant sectors will likely surface and will call for public-private governance dialogues.

C. Cybersecurity and Data Protection

Third, many commentators have pointed out the risks to cybersecurity and data protection that are generally applicable to blockchain technologies, and the agri-food sector is not immune from these. As shown by the recent dis­cussion on cyber-attacks and threats to cryptocurrencies,^[351] insufficient cyber­security or weak data protection can lead to huge losses to blockchain users. Indeed, cybersecurity risks must be addressed to ensure data integrity, promote user trust, prevent breaches of private information, and avoid economic losses.

Certainly, market transactions include some types of confidential information that need to be protected, such as personal data and business know-how. There are also other types of information that should be made available for public knowledge to foster consumer confidence and market reliability. A related and more nuanced question, therefore, concerns the proper balance between what types of data should be publicized and what types are best kept private as busi­ness secrets. This question “depend[s] on the rules of the DLT that are based on, the purpose of the platform, as well as the preferences of the users.”^[352] Such choices further call for different plans at different levels to ensure cybersecurity. Currently, what constitutes best practices and methodologies is contingent upon the future development of blockchain technologies, which are still evolving.

D. Inherent Limits of Blockchain

There are a number of inherent limits related to the technological nature of blockchain (and how it works). While ensuring food safety, authenticity, and traceability through blockchain seems promising, the integrity of the system when applied to the agri-food sector (vis-à-vis the case of cryptocurrency) should not be taken for granted. Any data, once input onto the blockchain, is generally immutable, as noted previously. However, there does not exist a verification mechanism to ensure that the process of “inputting” the data itself is free from mistakes, adulteration, or manipulation.^[353] For example, if a com­pany or an employee tampers with the production details in the first place or manipulates a sensor, such adulterated information will also be “immutable” on the blockchain without being detected.

For private blockchains, such as the Wal-Mart application, the company that holds authority and control over the entire system can alter raw information (which may be noticed by members of the private blockchain) or simply shut down the system.^[354] This concept is noted as the “garbage in, garbage out”

Blockchainizing Food Law 99 problem that applies to some DLT systems, as the use of blockchain technol­ogy per se does not stop fraudulent data being entered.^[355] Therefore, how to ensure accountability in such cases to avoid so-called “second layer information asymmetry”^[356] is of crucial importance when we delegate the trust business to machines^[357] (or, as argued by Andreas Antonopoulos, a “shift from trust­ing people to trusting math”).^[358] Would there still be a need to place auditors on blockchains, and if so, how? Identifying the optimal institutional design to minimize human error (and corruption) in linking physical product details with blockchain digital information constitutes a significant governance challenge.

Last but not least, existing blockchain systems seem to be able to operate only at a relatively low capacity. Indeed, blockchain faces a serious “scalability problem.”^[359] For instance, systems such as Bitcoin and Ethereum can process around 10 transactions per second, while conventional systems such as Visa or MasterCard can, on average, process around 5,000—8,000 transactions per second.^[360] This perhaps explains why the current blockchain systems in the agri-food sector are rather limited to a single product category or raw material. Further, just like other blockchain-based systems, energy and physical space consumption remains a crucial issue for effective and efficient implementation.^[361] The move towards “cloud-based” blockchain systems may serve as a solution that reduces the use of energy and physical space, yet it requires considerable time and investment to go forward. How much information can be input, stored, processed, and shared on blockchain systems at a reasonable cost will largely determine its place in the agri-food sector. The capacity and scalability problem would need to be addressed for the broader application of blockchain technologies.

V.