How can NFTs help farmers — from production to distribution?
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How can NFTs help farmers — from production to distribution?

From avocado trees to blockchain, learn what utility NFTs are and how they’re reshaping the agricultural industry.

How can NFTs help farmers — from production to distribution?

What are utility NFTs and how do they work?

Nonfungible tokens (NFTs) have traditionally been associated with digital art, profile pictures and other digital collectibles. Capable of preserving uniqueness, these tokens are still popular, but there is another type of NFTs that goes one step further — NFTs. They offer tangible and real-world benefits to holders.

Utility NFTs offer immediate value upon purchase by granting access to certain privileges or exclusive experiences. For example, they can unlock premium content, provide memberships, or allow holders to redeem rewards or items.

The value of the utility NFT most often derives from the value of the real-world item or experience it represents. However, it can also have intrinsic value based on rarity and popularity.

Technically, utility NFTs are no different than regular NFTs — they leverage blockchain technology to ensure uniqueness, ownership and authenticity. The only difference is that they are directly linked to specific items or experiences. They are minted on decentralized networks using smart contract standards explicitly developed for NFTs.

How do utility NFTs relate to agriculture?

Utility NFTs are industry-agnostic, meaning they do not specialize in a specific industry and can transform many sectors and experiences, from gaming and fashion to live concerts and real estate. While it may be surprising, agriculture can also integrate these NFTs for various use cases to bring efficiency and transparency.

NFTs can revolutionize the agricultural industry by providing a more transparent, efficient, and secure way to manage the supply chain. They, like digital crop certificates, can track ownership and authenticity throughout the supply chain, from farm to consumer, and can be used to digitize and manage physical assets relating to crops, livestock, and land. This can enhance transparency, improve efficiency, and unlock new possibilities for financing, trading, and insurance in the agricultural sector.

One area where NFTs can have a huge impact is supply-chain management. NFTs and their underlying blockchain technology can certify the ownership and authenticity of assets, which makes these tokens suitable for the tracking of agricultural products.

The main difference between utility NFTs and current traceability methods is that NFTs can be traced back to the individual farm or crop where the product came from. As the NFT moves along the supply chain, all the important information about the product is always available and can be checked, making sure that the product meets all the standards from the farm to the store.

An ecosystem can mint NFTs for every stage of the supply chain, from the farm to the store. This would enable stakeholders and end users to verify where a food product came from and how it reached the market’s shelf. Utility NFTs, in this case, can grant stakeholders ownership rights over certain food products. These rights are essential for a more equitable, transparent, and sustainable food system. They empower farmers by granting them ownership of their produce, leading to fairer profits and improved livelihoods. This transparency extends to consumers, who can make informed choices about their food. Moreover, stakeholder ownership incentivizes farmers to produce high-quality food and reduces food waste by enabling direct sales to consumers.

What problems do NFTs solve in agriculture?

NFTs and blockchains are all about decentralization, transparency, proof of ownership and security. These features come to address several challenges in agriculture, an industry that still uses many old-school methods to grow and distribute food and goods. This reflects on the quality, efficiency and costs of production, eventually affecting the profitability of farmers and other stakeholders.

Thanks to NFTs, stakeholders can create a secure, immutable record on the blockchain, enabling access to real-time data related to the entire supply chain of agricultural products.

This unmatched level of transparency helps prevent fraud, ensures food safety and improves the implementation of sustainability practices. By bringing efficiency to all supply chain stages, NFT implementation can cut costs and have a positive impact on profitability.

How can utility NFTs benefit farmers and consumers in the agricultural sector?

The integration of utility NFTs into supply-chain processes and other use cases can be a win-win for both farmers and consumers.

  • For farmers, NFTs can provide a digital twin for their products, which improves traceability and eventually positively impacts their marketability and value.
  • Consumers can also benefit from using NFTs in agriculture, as they have more confidence in product authenticity and quality, helping them make safer and more informed choices.

One example of how NFTs can help the agricultural sector is illustrated by Dimitra, a leading blockchain-based enterprise system for AgTech driving productive, intelligent and inclusive farming. Dimitra helps farmers reduce efforts and improve efficiency by integrating its technology stack, including blockchain, mobile, artificial intelligence (AI), Internet of Things (IoT), drones and satellites.

Dimitra’s utility NFTs offer innovative solutions for the agricultural sector, enabling farmers to secure financing, establish direct consumer connections, and monetize valuable data to make smarter decisions. This approach aims to streamline financing processes, promote transparency and fair pricing, and provide farmers with additional revenue opportunities.

What concerns or risks should the agricultural industry address when implementing NFTs?

Despite their benefits and potential, farmers and consumers should be aware of certain limitations of NFTs and blockchain technology in general.

To begin with, blockchains are closed systems without access to real-world data. Therefore, connecting an on-chain NFT with a physical or digital off-chain asset requires additional effort. This can be achieved with the help of so-called oracles or other conditions embedded into the smart contract itself.

Eventually, stakeholders must ensure that the tokens accurately represent the underlying products, be it crops, livestock or bonds. For example, Dimitra has developed its Land Suitability Oracle that evaluates each farm based on its potential to grow a particular crop. Moreover, Dimitra already has an application that assesses farmer performance. The combination of these tools provides a significant capability for agricultural lenders compared to the available tools.

What are some examples of NFT integration in agriculture today?

NFTs can be used independently or with other blockchain applications to improve supply-chain management at all stages.

For example, Dimitra is revolutionizing farming with utility NFTs, starting with avocados. The company has recently launched an NFT series in collaboration with One Million Avocados, a Kenya-based startup. These NFTs enable individuals to sponsor avocado trees for $50, providing farmers with essential resources like seedlings and fertilizers as well as digital platform access and sensors. Dimitra is also developing a Crop Certificate program where, through a Web3 interface, investors provide a loan through a regulated crowdfunding process and get premiums repaid from the proceeds of the crop harvest.

Source: Dimitra

Source: Dimitra

This unique approach improves security, combating avocado theft in Africa. Unlike traditional loans, which are challenging for avocado farmers due to the crop’s long maturation period.

As the trees grow, investors share in the rewards. In the second year, an avocado tree may produce one fruit, but by the tenth, it can yield 300 to 400 kg (661–881 lbs), and considering today’s export prices, farmers can earn three times more than the domestic markets. What’s more, they don’t need to pay premiums on loans before generating revenue.

Dimitra’s NFT launch begins with 1,000 avocado trees as a pilot in the fall of 2023, with plans to expand into mangoes, cocoa and other crops. By implementing blockchain and NFTs, Dimitra empowers farmers, investors and philanthropic sponsors in AgTech, demonstrating the transformative potential of this technology in agriculture.

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