5 Instances of How Blockchain is Changing The Halal Industry

Much has been said about blockchain and how it could change the way we do things. Before we go into the nitty-gritty of things, let’s break down what exactly is blockchain and why it is hailed as “the next major disruptor”.

When someone requests a transaction, the request is broadcasted to a peer-to-peer (P2P) network consisting of computers, also known as nodes. The nodes validate the transaction and the user’s status using known algorithms.

A verified transaction can involve cryptocurrency, contracts, records, or any other information of value. Once verified, the transaction is combined with other similar transactions to create a new block of data for the ledger. The new block is then added to the existing blockchain, in a way that is permanent and unalterable. The transaction is now complete.

In other words, a blockchain is a time-stamped series of immutable record of data, managed by a cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) are secured and bound to each other using cryptographic principles (i.e. chain).

As an encrypted ledger database, blockchain is almost impossible to hack, making its records, or blocks, permanently verifiable. As a decentralised system with no single owner, any retroactive changes to a record must be verified by the majority of potentially thousands of “nodes” or members in a chain. Put simply, it is a technology that is secure by design.

While Bitcoin and other cryptocurrencies are the most popular examples of blockchain usage, this “distributed ledger technology” (DLT) is finding a broad range of uses. Data storage, financial transactions, real estate, asset management, business models, operating processes and many more uses are being explored.

For Halal industry, blockchain has the potential to revolutionise the entire Halal supply chain, by revamping the way traceability, smart contracts and Halal certification is traditionally being implemented. Here are five instances of how Blockchain is changing the industry.:

1

Track & Trace 1: Halal Trail
TE-Food, a food traceability solution company, has partnered Halal Trail, a UK-based startup to offer the ability to track Halal livestock and fresh food, from the farm straight to one’s table, providing software and identification tools to make livestock and fresh food supply information transparent.

This means complete and verifiable traceability of your Halal food, from the type of animal, from which farm, to its point of ritual slaughter, packaging, and final delivery to consumers.

The Hungary-based company already has over 6,000 customers for its trace-and-track platform, including Asian giants like Aeon, Lotte Mart and CP Group. Their solution includes physical identification materials, B2B mobile app, and a mobile app for consumers to check the history of the food they intend to buy.

“We needed a technology that ensures food-related data cannot be corrupted or modified in any way. This led us to blockchain,” according to its website. TE Food aims to improve the end consumers’ trust in food-related information. Watch the following marketing video and see if you agree.

2

Track & Trace 2: HalalChain
Another blockchain track and trace application are the HalalChain, a platform developed by Dubai-based HLC Technologies, co-founded by Dr Sulaiman Liu.

Using the Internet of Things (IoT) devices such as radio frequency identification (RFID) sensors and smart cameras with artificial intelligence, Liu said HalalChain can track and monitor each step of the upstream supply chain.

Aside from traceability of Halal and healthy products, HalalChain is also implementing blockchain technology within the Islamic financial industry, where it can help increase transparency and traceability in not just Islamic financial products and services, but also zakat and donations, heritage and property registration, cultural communication etc.

Built on the newly distributed ledger called Directed Acyclic Graph (DAG), HalalChain can guarantee security and decentralisation by achieving “High Throughput” using the new underlying technology.

“By combining the advanced DAG technology with unique application scenarios, we are able to build across the multilayer payment system within the Islamic economy ecosystem,” according to its website.

Watch a recent interview of Abdullah Han, Co-Founder of HLC Foundation on the potential of HalalChain to be used as a solution for the Islamic finance sector.

3

Agriculture: Penang & France
In a more recent development, Malaysian Deputy Agriculture and Agro-based Industries Minister Sim Tze Tzin announced last March 1, 2019, that the Malaysian government is also looking into utilising the blockchain to track and control agricultural and Halal products.

The Deputy Minister also said that the technology would come in handy during emergencies such as when there is a disease outbreak such as the bird flu or swine flu, as it enhances the government’s tracking and operations capabilities as well as provide raised levels of awareness over the industry. This should, in turn, lead to a higher quality of products and services the Malaysian population receives when it comes to the agriculture industry, he added.

Sim’s call came around the same time when French President Emmanuel Macron also called for increased use of data technologies such as blockchain in the EU, as a way to boost the union’s agriculture industry and address concerns over food traceability.

Macron spoke of the need to authenticate and track agricultural products amid growing consumer concerns over issues such as the recent Polish beef scandal. He also proposes the EU to take advantage of technology to revamp Europe’s agricultural policy.

He argued that the policy should be based on the protection of farmers and consumers against climate change and market risks, more ecological farming, and using technology and innovation to help to solve industry challenges.

If there is support from the EU member nations, Macron also said he would propose the establishment of a European task force to ensure the standards of agricultural products and fight food fraud.

4

Halal Certification: POCertify
Another major beneficiary of blockchain is in the fields of certification and compliance. For consumers facing uncertainty over Halal certification, South African-based POCertify is offering a new solution: verification via blockchain.

Based on a new decentralised application, or dApp, POCertify uses blockchain and smart contracts technology to publish Halal certificates. It is the brainchild of IT entrepreneur Shabeer Shaik Abdurahaman, who explains that the design is on a transparent, secure and decentralised platform, with verification provided via a digital hash signature.

“Blockchain technology, together with Islamic principles, will digitally encrypt the Halal Certificate in its PDF format, and verify the Halal Certificate on the blockchain,” Abdurahaman explains. “If it is correctly verified, it proceeds to be used, and if not, the producer or supplier is not given the Halal certificate.”

This reassures users that the certification is both more secure and more independent. The method also provides anonymity and privacy, which limits modification by third parties such as by governments or businesses. With no central authority, Blockchain also allows for the Halal certificate to be available at all times, unlike when a website is down for maintenance or other reasons.

Abdurahaman believes trust is an essential component of why Halal has found a home in the blockchain. “Certifications have been a complex task right from the very beginning. What makes it even more difficult is the trustworthiness of it. In the case of Halal certification, strict guidelines need to be maintained, given that the Muslim population is dependent on it.”

5

Funding: Islamic financial institutions
Islamic financial institutions are increasingly using blockchain for complex financing terms, Shariah-compliant transactions and Islamic and Shariah-compliant alternatives to conventional insurance, helping with KYC (Know Your Customer), back-office automation, and underwriting of micro-insurance.

The Emirates Islamic was the first Islamic bank to test blockchain in 2017 when it integrated blockchain into its cheque-based payment processes, strengthening authenticity and minimising the potential for fraud.

UAE-based Al Hilal Bank meanwhile, became the first Islamic Bank to complete a Sukuk transaction on blockchain for the Abu Dhabi Global Market Financial Centre. Based on the Ethereum blockchain, the system was developed by Dubai-incubated fintech startup Jibrel Network.

This company provides currencies, equities, commodities, and other financial assets as standard ERC-20 tokens on the Ethereum blockchain. Islamic financial institutions are also using blockchain for:

      • Smart contracts – used for the management of profit-sharing agreements, agency arrangements, and partnerships;
      • Verification – of Islamic financial transactions to avoid conflict, facilitate client partnership and increase transparency;
      • Integration with mobile technology, in countries without legacy banking infrastructure; and Banking and transactions through smartphone apps, whilst maintaining traceability and transparency of banking deals for all clients.

** As published in the H MAG 2019, a special edition print in conjunction with the Global Halal Summit (GHaS 2019), Kuala Lumpur Convention Centre, April 2019. For further inquiries or insights, kindly get in touch.
Image by xresch from Pixabay