Cryptocurrencies Break Into Argentina’s Agricultural Sector
Argentina, one of the world’s leading food producers, is a pioneer in creating cryptocurrencies backed by agricultural assets.
The phenomenon is possible through a process called tokenization, which is the “transformation” and representation of a real object in the digital world through blockchain networks.
Blockchain is the key to each of these initiatives. The technology is designed to manage a shared online recording of verified, secure and non-editable data. It is a common and immutable register that can revolutionize the world economy.
The use of this technology also allows other innovations in agriculture, in particular by making the production chain more transparent and traceable.
The first step towards issuing cryptocurrencies in Argentina’s agricultural sector was taken in 2020 by BitCow, a company that has launched its own digital currency featuring heads of cattle. This year has come Agrotoken, proposed for major agricultural commodities, such as soybeans, corn and wheat.
The main difference between these types of cryptocurrency and other well-known and popular forms – such as Bitcoin and Ethereum – is that they are backed by real-world assets. The latter operate with no real asset behind them, so their prices can be very volatile, depending on changing market moods.
“Cryptocurrencies from projects such as BitCow or Agrotoken are ‘stablecoins’, the value of which is linked to another asset through a parity relationship,” said Federico Orsi, head of finance at company at FinEco consulting firm.
For Orsi, this type of initiative is “here to stay”, because it is only one of the potential applications of the “blockchain revolution” in agriculture.
“What is recorded on the blockchain is never altered again. It changes the landscape of many industries and sooner or later it will eventually be adopted by all, ”said Lisandro Lapunzina, director of innovation at Grupo América, a business association based in the city of Rosario.
BitCow, its website promises, allows anyone to “become a breeder without leaving their home”.
“Our goal is to democratize investment,” said Guillermo Villagra, one of the founders of the cryptocurrency. “There are a lot of people out there who would love to get involved in the farm business, but because it is a big business, they are being left out. We open the game, giving the opportunity to participate up to a tenth of a real asset, which in this case are head of cattle.
To date, the company has already tokenized 2,000 cows – a marginal amount of Argentina’s total herd, which is estimated at 52 million heads.
Each animal represents a BitCow, because the cryptocurrency was playfully named. The company functions as an intermediary, guaranteeing the link between the investor and the real holder of the asset. Therefore, it requires agreements with agricultural producers, which are executed through smart contracts established under blockchain technology.
It changes the landscape of many industries and sooner or later it will eventually be adopted by all.
For now, the service is only available in Argentina, but their business plan details their intention to reach other major breeding countries soon, including Brazil, Uruguay, Australia and New Zealand. “Since we have been operating, we have already reached 10,000 people who have passed through our platform,” added Villagra.
The price of the cryptocurrency is based on an index that takes into account the same variables that apply to the traditional market, from the price of live cattle to the costs of upkeep. At the time of this writing, a BitCow was worth 180,000 Argentinian Pesos, or approximately US $ 1,770.
Cereals and oilseeds
Agrotoken is the first tokenization platform for agricultural products. It currently has two cryptocurrencies – SOYA and CORA, backed by soybeans and corn, respectively – and is about to launch a third, linked to wheat.
“Each token represents one ton of the same grain,” explained Patricio Greco, COO of the company.
When delivering their produce to a collection center, growers can choose to receive SOY (in the case of those who work with oilseeds) in a virtual wallet, which will be used in a transaction with the one of the companies that use the system. These are, for example, the fertilizer manufacturer Rizobacter and the fuel supplier Puma Energy.
tonnes of tokenized cereals have so far been processed by Agrotoken
At the current stage, participation in the platform is limited to national agricultural actors: producers, stockers and suppliers. “To date, transactions have been made for the purchase of vehicles, energy costs, seeds and virtually all services associated with the sector,” said Greco, who explained that he had already accumulated some 10,000 tonnes of tokenized cereals. And there is a lot of potential for growth: according to Rosario Stock Exchange projections, the 2021-2022 growing season could see a total of 140 million tonnes of grain produced in the country.
“In the Argentine countryside, the concept of grain exchange is very widespread,” explained Lisandro Lapunzina of Grupo América. “It’s hard to see from the outside, but producers often think of their inputs or their purchases in terms of a number of grain trucks. Ultimately, the currency is the grain. Technology allows us to perfect that.
The value of the cryptocurrency is associated with indices published by the Matba Rofex group, which is in charge of calculating and publishing financial and agricultural indices. They follow, in real time, the price of cereals on the Rosario stock exchange, the main commodity exchange market in Argentina.
Like BitCow, Agrotoken plans to expand its borders in the near term. The plans include not only an expansion beyond the borders – Brazil and the United States are the first places targeted – but also with regard to the type of assets tokenized: “We are already in discussions with several strategic players in the sector of minerals and energy, ”said Greco.
In addition to these two initiatives, in recent months there have been reports of other cryptocurrencies, with less media impact, associated with vinification and sugar production.
For Juan Pablo Aguado, CBO of Bitex, who specializes in providing financial services running on blockchain technology, the cryptocurrency phenomenon is just the tip of the iceberg, in terms of what will happen in the industry. agricultural. “With blockchain, you can certify the quality of food, at extreme levels,” he said.
This new technology is a large decentralized database, which generates greater trust between all parties because it is unalterable.
Food companies are starting to adopt blockchain in their production processes, to take into account the origin of their goods. Its use is increasing due to new requirements that could be established by countries facing increasing threats of Deforestation.
According to Food and Agriculture Organization United Nations, between 1990 and 2020, the world lost 420 million hectares of forests due to the expansion of the agricultural frontier. As a result of this alarming figure, the European Commission recently proposed a settlement require that certain products be free from deforestation.
“The blockchain is the vehicle that could show the traceability of production,” said Diego Heinrich, founder of Carnes Validadas, a technological platform for players in the meat industry, which is already used by more than 200 breeders in Argentina. . In 2022, the company plans to land in Uruguay, Mexico, Bolivia and Paraguay.
While the world has yet to fully embrace the bitcoin phenomenon, it continues to produce disruptions that some say herald a fourth industrial revolution, and all this in the wake of the impact of the blockchain network. And even the agricultural sector – one of the most important sectors of Argentina’s economy – is starting to feel its effects.