Home

Fish Fraud and the Blockchain Revolution

August 2018

If you sit down at a restaurant to eat some wild-caught salmon from Alaska, you'd assume that the fish was caught there, processed at a nearby facility, shipped to a U.S. distributor, and then purchased by the restaurant.

You'd be wrong. In fact, a large percentage of Alaskan Salmon is sent to China for processing, where labor costs are lower. And then it's shipped back to the U.S.

The problem is there are so middlemen in the supply chain that it's often hard to know you're getting the kind of fish you're ordering or purchasing. Studies have found that about 20% of all fish is mislabeled. That wild-caught Alaskan salmon you're biting into may in fact be salmon farmed Norway and processed in China.

In a 2015 study, DNA analysis, found that 66% of the salmon in restaurants and 20% in grocery stores was incorrectly labeled, whether wild caught vs farmed, or one type of salmon labeled as another. It could be that middlemen simply lose track of what's what, but more likely they are passing off farmed salmon as wild-caught to make extra money.

Of course, it's not just salmon: almost all varieties of fish as well products in many other industries face the same issue in our globalized world.

And since my mission is to enlighten you to the wonders of technology, of course I'm here to tell you that there's a solution: bitcoin. Or rather, the blockchain technology that underlies bitcoin.

Marc Andreessen, a leading tech venture capitalist who was instrumental in developing the very first graphical web browser, thinks that blockchain will be revolutionary. He says that revolutionary computing technologies come along about every 10 to 15 years: mainframe computers in the 1960s, PCs in the late 1970s, the internet in the early 1990s, smart phones in the late 2000s—and now blockchain.

He's not alone. Fortune 500 companies are currently investing billions in developing blockchain applications. Wall Street executives and venture capitalists are going all in.

What would be revolutionary about blockchain? It would transform the nature of transactions, increasing efficiency and reducing costs, and it would create complete transparency in the supply chain, such that you could be sure that if you purchased wild-caught salmon, you'd be getting exactly that.

A mind-boggling range of blockchain applications are currently under way. It's being developed as a solution for the confusion surrounding property deeds in India, where more than one person will often have a deed to a particular parcel. There's even a company called Civil that's building a journalism marketplace based on blockchain. It would create chains of authenticity while creating "an indelible, incorruptible record outside the reach of third parties."

Just what is this magical technology?

The keys to blockchain are transparency, the absence of a central authority, and security. It obviates the need for trust.

The anonymous inventor of bitcoin wanted a system of exchange outside of government authority that would facilitate payments worldwide. So he came up with the idea of blockchain. Every transaction would first be verified as legitimate, then added to the chain. There would be complete transparency, so that any individual could inspect the history of transactions.

In addition, it would be completely decentralized: every computer involved in mining bitcoin would store the entire blockchain. This would make it impervious to fraud, because someone wanting to make a fraudulent change to the ledger would need to enter that transaction into every computer in the world that was part of the network of bitcoin miners.

If you've used the collaboration feature of Google Docs, you've likely seen how it tracks the changes each contributor makes to the document. Blockchain is like that. It's a decentralized ledger that makes a permanent and accessible record of all the changes.

And speaking of fish, Ethereum, a cryptocurrency company, has built a blockchain application for tracking the supply chain for fish. If you bite into yellowfin tuna harvested off the waters of Fiji, you can track it from the boat to the landing dock to the processing facility and to the truck that drove it the restaurant where you're eating.

Not that you'd want to. But the restaurant, or many other nodes in the chain, certainly would in order to ensure they're getting what they paid for.

Ideally, you could trust everyone in the world, every government, every corporation. But you can't. A large percentage of the cost of supply chain management is due to trying to create mechanisms of trust, as well as the costs associated with fraud.

Kevin Werback, author of a forthcoming book on blockchain, wrote, "If every party to a transaction trusted the information involved, even though they didn't trust one another, costs could fall and performance could improve drastically."

It's an appealing vision.

© 2018 by Jim Karpen, Ph.D.

E-mail Jim Karpen