An asset-backed decentralised finance instrument for food supply chains – A case study from the livestock export industry

Abstract

Decentralised finance (DeFi) has emerged as a blockchain-enabled innovation in supply chains that makes use of supporting infrastructure to transform financial services by reducing or removing the need for intermediaries. While an increasing number of pilot projects have been exploring DeFi applications for use by small and medium enterprises (SMEs) in various finance scenarios, there is not yet a real-world adoption of DeFi beyond these projects to unlock their potential for progressing the digitisation of supply chain finance (SCF). This paper reports on a university-industry collaborative study to leverage the use of blockchain-based DeFi technology in two ways: (i) to benefit SMEs by reducing their cost of finance and increasing ease of access to funding, and; (ii) to address the prevalent asymmetric information risks and costs in a supply chain finance context. The research informed the design and development of a DeFi architecture for asset tracking in agricultural supply chains implemented and evaluated in a real-world pilot adoption with a producer in the Australian livestock industry. The use case shows that there are numerous risks pertaining to the adoption of DeFi for SCF. In response, the paper suggests new ways for supply chain SMEs to secure benefits from their investment in DeFi based on the key findings derived from evaluating our use cases.