Where blockchain and farmland commodities intersect: LandX and other projects

If the stars align, the merger between farmland commodities and an immutable public ledger could shake up the world. Think about it, a blockchain could optimize the farming business in a number of ways. For example, tracing the origin of food is paramount to food manufacturers, and that information is hard to come by, especially on a global scale. Or consider insurance. If a farmer is affected, the claims process could take months.

A decentralized-but-always-updated blockchain could solve both of those problems. For the whole world. Food tracing would be just a search away for everybody. A global database containing products, their history, and their current price and location is not a pipe dream. The technology is right there. Farmers could get access to much-needed capital and sell their products at competitive prices.

Of course, there are also difficulties. A blockchain is entirely digital and farmland commodities live in the real world, where grain spills and everybody doesn’t fill out their forms. And governments everywhere might not agree to disclose information about such a sensitive topic. A global solution would require a global arrangement, which might prove hard to come by. However, the incentives are there, with the ultimate prize being food resiliency for all of humanity. 

In Smartblock’s blog, we’ve been discussing the tokenization of real estate at length, but farmland commodities are a whole different animal. This industry is also ripe for disruption but in an entirely different way.

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Rapid fire: projects innovating in the farmland commodities space

Standout projects innovating in this space include:

• FoodLogiQ: A traceability-focused solution, they promise: “Our technology enables supplier management, food safety compliance, quality incident management, recall management, and whole chain traceability – all on a single cloud platform built exclusively for the food industry.”
• Agrichain: To improve the supply chain, this platform will “eliminate unnecessary paperwork and dockets, reduce supply chain inefficiency and risk, open markets and increase their bottom line, all on one easy-to-use platform.”
• Covantis: They define themselves as “an industry-led platform set to modernize the way we manage post-trade execution processes.” The problem they want to solve is contained in the question, “how can we make the international commodities shipping process faster and simpler?”

About the intersection of blockchain and farmland commodities, Covantis CEO Petya Sechanova told Feedstrategy: 

“There are good reasons to adopt blockchain, or any technology, for digitalizing the upstream or downstream supply chain of agricultural commodities. There are already such applications existing today for field level data mapping, crop data, traceability, sustainability, warehouse receipts and order payments.”

• To build “long-lasting trust and confidence in our food supply chain,” Ripe.io is building a platform “where everyone can access transparent and reliable information on the origin, journey, quality and sustainability of their food.”
• In Argentina, Agrotoken is issuing tokens that “allow commercial and financial transactions directly backed by the grains. Its value is linked to the price of soybeans, corn and wheat.”
• For their part, GrainChain accelerates payments to farmers and provides availability information. Or, as they put it, GrainChain is “capable of managing all pre- and post-harvest processes through a cloud-based, blockchain and IoT-enabled platform consisting of a suite of complementary products.”

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About the intersection of blockchain and farmland commodities, GrainChain CEO Luis Macias told Forbes: 

“By pulling the agriculture supply chain onto blockchain technology, we’re helping every participant in that ecosystem — from farmers to bankers to grain elevators — get fairer value, faster payment and a bigger participant pool.”

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Let’s focus on LandX Finance

This product’s promises to investors are “perpetual commodity vaults” that will “provide investors an inflation-hedged return backed by a legal contract secured on underlying farmland.” Their promise to “real-world farmers” is that LandX will provide them with capital “in exchange for a legal share of their crop in perpetuity.” If everything goes right, the product launches soon, Q1 2023 promises their website.

The protocol will issue ERC20 tokens backed by real-world farmland commodities. The xTokens come in four flavors so far: 

1. XCorn
2. XSoy
3. XWheat
4. XRice 

And an Arabica Coffee one is already suggested in the project’s documentation. According to the website, “xTokens provide exposure to farmland commodities and act as a natural long-term hedge against inflation.”

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Farmland commodities and perpetual commodity vaults

In LandX’s litepaper, the creators further elaborate on the perpetual commodity vaults, for the investors they represent a “blockchain-based token that trades for a market-determined principal price. The holder of the staked token receives a daily yield of the underlying commodity in perpetuity.” This is important, the yield comes from an outside source. It’s a farmland commodities yield that makes all the sense in the world. 

For the farmer, on the other hand, LandX provides “upfront capital in exchange for a percentage of their land’s future harvest. Simply put, farmers use LandX to tokenize a portion of their future crops to receive money today.” That’s why farmers are also referred to as “borrowers” within the documentation. “To access the upfront capital, farmers sell their xTOKENs on-chain to interested investors. Their farmland’s output is then given to xTOKEN holders. Each xTOKEN entitles its owners to receive 1 kg per year of the commodity yield (CY) in perpetuity, paid out in cTokens.”

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Yield and cTokens

So, each staked xToken yields one cToken per year. The cTokens are “pegged to the price of one kilogram of the underlying commodity,” and “at any time, the holder may convert accumulated cTokens into USDC, at market price.” Plus, “crop yield is added daily” Another way of looking at it is that “each xToken adds 0.0027 kg of the underlying crop per day, equating to 1 kg per year.”

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The LandX Governance Token 

The LandX DAO will make crucial decisions, but to participate in that, people would have to acquire LNDX, which they define as “the native token of the LandX protocol.” Its price is “driven by speculation and the performance of LandX as a company. Its price is also impacted by the demand to participate in LandX’s system.” Besides voting “on governance decisions for the LandX platform,” members of the DAO would also “earn a percentage of trading fees” within the protocol. 

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Buy/ No Buy Recommendation

All in all, most of these projects seem amazing. There’s also considerable overlap between them. The competition will be ferocious because the rewards for the winners are almost immeasurable. However, all of these projects are about to be released or in the initial phase. It’s too early to call the winners. Our recommendation is to wait and see but keep a close eye. The reward for investors who call this right will also be almost immeasurable also.