Should Malaysia Use Blockchain Technology To Certify Halal Products?

In 2018, Malaysia accounted for only 1 percent of the global halal demand – proving there are substantial opportunities and room for improvement to develop a transparent and trusted halal hub in the country.

Despite the projected increase in the global Muslim population to 30 percent by 2050, which is one of the driving factors for the expansion of the halal industry all over the world, the recent halal meat scandal in Malaysia is a major setback to the booming halal industry in the country.

One proactive measure that could be implemented immediately to certify halal meat in the country may be to use blockchain technology.  It is recommended by EMIR Research, an independent think-tank focused on strategic policy recommendations based on rigorous research.

There seems to be a lot of hype about blockchain technology. Technology journalists and writers are reviving the utopian fantasies of the early Internet era. According to these people, blockchain technology is a disruptive technology that is expected to change the way we work and live in the coming years.  According to the proponents of the concept, blockchain technology replaces the trust of persons with the trust of computational systems. However, we, the editorial team at The Halal Times, sincerely believe that the recommendation may not work the way Malaysia seems to suggest.

According to The Financial Times, a respected UK-based newspaper, ‘Blockchain does not create certificates or public registers or agreements. In the bitcoin version of the blockchain, it does automatically generate a record of a transaction. But it does not create a digital record aside from a string of 1s and 0s. That record has to be put into the blockchain, either manually or by some other means, but the blockchain in and of itself does not create the record. So, the element of error can never be ruled out even if we start using a perfect blockchain-based system.

In fact, the system can be misused if the operators of the system want to.

According to the proponents of the technology in Malaysia, it will disrupt all the devious and cunning strategies of the cartel to achieve their fraudulent objectives.

Through smart contracts, DLT could digitally prescribe processes and requirements according to a halal standard, verify halal compliance, and enforce the performance of halal food supply chains.

A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties.

Because blockchain is a decentralized system that exists between all permitted parties, there’s no need to pay intermediaries (Middlemen) and it saves you time and money as well.

The supporters of the technology further argue that Although DLT has its problems, it is undeniably faster, cheaper, and more secure than traditional systems, which is why banks and governments around the world are turning to the technology in droves.

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

Once verified, the transaction is combined with other similar previous transactions to create a new block of data for the ledger, which is then added to the existing blockchain, in a way that is permanent and unalterable. The transaction is now complete while waiting for another transaction.

As an encrypted ledger database, blockchain is almost impossible to hack, making its records or blocks permanently verifiable.

As a decentralized 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.

Through blockchain technology, a halal network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. It is not stored centrally but distributed on many servers throughout the world as cryptographic proof.

Blockchain removes the need for a trusted third party to ensure an independent assessment of the integrity of a product or its network, as the longest chain serves as proof of the sequence of events witnessed.

This technology could enforce end-to-end halal assurance and alignment based on specific halal market requirements, supported by automated smart contracts in its process execution and control. A halal blockchain could provide full transparency of all halal supply chain transactions that have ever been executed.

The blockchain has complete information about the addresses and their supply chain path right from the source to the point of consumer purchase, giving the much-needed assurance for Muslims that the “halal-ness” of the food on their table can be traced back through all the locations of the halal supply chains that began with the original halal farm or livestock farm, including the identity of the farmers or livestock breeders.

Blockchains inject trust into a halal supply chain and value chain of a brand owner who would be better able to guarantee halal integrity. They could also be integrated into wide sustainability and corporate responsibility systems to extend the brand market beyond Muslim consumers.

One of the most significant real-world applications of blockchain is data provenance – the documentation of where a piece of data comes from and the processes and methodology by which it was produced. It creates a single, secure chain of custody timeline, designed to be tamper-proof.

The system can be used to provide customers with a “story” about each product, covering materials, locations, processes, ingredients, and suppliers, and enables businesses to substantiate claims about their products using real-time data. With such a system, provenance tracking of where each piece of data comes from and whether it is still up-to-date becomes a breeze.

It is high time Mafi adopts this system in the issuance of its AP for exporters to bring in imported halal meat into the country and rope in other government agencies such as the Royal Malaysian Customs Department, the port police, the Ministry of Domestic Trade & Consumer Affairs, and Jakim to be part of the network in this system of provenance based on blockchain technology.

In fact, blockchain technology’s design gives it many features that are desirable. Because it is decentralized, it cannot be dominated by a single power. Because it is tamper resistant, it cannot be used fraudulently. Because the information it stores is distributed to every node in the network, it is resilient in the face of damage or destruction. In many contexts, such as unstable political environments, these qualities make the technology especially valuable. (There have been efforts in Honduras and the former Soviet republic of Georgia to register property or land titles using blockchain.)

But, because blockchain is essentially autonomous, it is inflexible, which leaves it vulnerable, once it has been set in motion, to the sort of unforeseen consequences that laws and regulations are best able to address. Fortunately, though the absence of a central authority can make it seem as if blockchain offers no “object of regulation,” there are in fact many entities the government can target to influence how blockchains are run, including internet service providers, hardware manufacturers, software developers, and the many supplementary services (like “wallets” and currency exchanges) now being run on these networks.

For Malaysia to successfully use this technology to minimize the existing system of halal certification of food products, it has to study the processes and try to fix any loopholes it may have. Only then, we expect to have a vibrant halal certification system that can cater to the growing needs of the halal certification system in the country.