China has a fake food problem.
The country is chock full of fake soy sauce, rice and eggs.
I know what you’re thinking. How the hell do you make a fake egg? Gelatine, a bit of food colouring and wax does the trick.
But the most infamous fake food in China is fake baby formula.
Back in 2004, Chinese brands sold fake infant formula to thousands of households.
Hundreds of babies developed ‘big head disease’. This is where a baby’s head grows abnormally large and the rest of their body is just skin and bones.
Sadly, more than 50 babies passed away as a result of malnutrition, liver or kidney malfunction.
Investigators later found the formula had less than a third of the nutritional value required.
It was a horrifying few months for Chinese parents.
Yet four years later, they went through the same ordeal again.
This time middlemen were substituting ingredients in formula with melamine. Melamine is a common ingredient in plastics and fertiliser.
By putting melamine into formula, it artificially boosted protein levels during quality testing. So what parents thought was quality formula was actually a toxic fake.
Not hard to see why Chinese parents love Aussie formula so much. But how can the country combat the flurry of fake foods?
Blockchain technology might be the solution…
Latest venture for biggest tech in Asia
When people say ‘blockchain’ they’re usually referring to the bitcoin blockchain.
It’s simply a digital record of all bitcoin transactions ever made.
The beauty of blockchain technology is that it can come to a consensus without a central authority.
And that’s because the digital ledger is shared across a network. This network is constantly verifying transactions, making sure each one is valid.
Meaning you and I can transact without the need of a bank.
But of course, the technology has other applications. Companies like IBM [NYSE:IBM], Amazon.com, Inc. [NASDAQ:AMZN] and Wal-Mart Stores Inc. [NYSE:WMT] are all trying to integrate blockchain into their operations.
And last year, founder and CEO of Alibaba Group [NYSE:BABA], Jack Ma said he will do the same.
You might not have heard of Alibaba before. But they are one of the largest and most influential companies in China. Think of them as China’s Amazon, minus the inventory.
Alibaba got its start as an agent. They were the bridge between Western buyers and Chinese manufactures.
Today, Alibaba is like most tech giants, they do a bit of everything. They’ve branched into food, online payments, media, health and even banking.
The only thing Alibaba is yet to do…oh wait, no, they’ve got a blockchain division too.
All eggs will have passports
The ecommerce giant will spend close to US$270 billion to rid China of its fake foods.
How will it work?
Just like an individual bitcoin, each ‘genuine’ piece of food will have its own identification. Think of it like a passport. Without it, food cannot get through multiple checkpoints.
It would be very similar to catching a flight. But instead of you, it’s an egg. And instead of hopping on a plane, the egg will pass through Alibaba’s supply chain network.
With their own blockchain, Alibaba will not only be able to track and record foods. If an item is duplicated, for example, the system will alert Alibaba of a possible fake.
According to Tech in Asia, Alibaba’s blockchain will first roll out in Australia and New Zealand. Maggie Zhou, managing director of Alibaba Australia and New Zealand said:
‘Given Australia and New Zealand’s exemplary regulatory environments, along with being home to some of the world’s most successful food and beverage exporters, it was a natural decision to pilot the program here.’
Get ready for a blockchain take off
Digital currencies…food…smart contracts. Where is this all going?
When talking about blockchain, many investors assume the sky’s the limit. And that’s because we’re in such an early stage of the technology.
It’s not a unique comparison, but it reminds me of the internet.
The internet was originally for researchers to share data. But today, that information portal is so much more. It’s transformed the business landscape. Without it there would be no Amazon or Alibaba. It’s also become a hub for people like you and I to connect.
Like the internet, future uses of blockchain might be far different from today. Right now, blockchain facilitates transactions, proves digital identities and eliminates fake foods.
Next year it could be smart contracts.
The year after that, maybe it will be cloud storage.
Down the line, we could be verifying and analysing our DNA on the blockchain.
But for now, it’s helping Chinese parents sleep a little easier at night.
Editor, Money Morning
PS: Our exponential expert Ryan Dine is all over blockchain. And in an event Ryan calls ‘The Blockchain Collision’ you could see the biggest investment opportunities of your life. But to take advantage you’ve got to act now!
You can find out more here.