Farmers Could Soon Be Hedging Their Risks With Decentralized Weather Data

Arbol, a platform that allows farmers to hedge weather risks, is integrating Chainlink data oracles.

Arbol's CEO, Siddhartha Jha, told Cointelegraph that the company uses blockchain technology to solve a problem that affects billions of people around the world:

“It's crazy that so much of the world's livelihood, it's about two to three billion people, they estimate, is affected by weather day to day.”

Farmers are likely the hardest hit by weather unpredictability. For many, severe weather conditions can lead to the loss of their livelihood, or even starvation. Although farmer insurance has been around for decades — if not centuries — according to Jha, it is unaffordable for the vast majority:

“If you had less than two hundred thousand dollars in premium to spend, you actually had no real access.”

Arbol blockchain infrastructure. Source: Arbol.

Jha claims that Arbol both lowers the entry barrier and makes hedging less expensive. With blockchain, settlements and payouts can be instant, whereas in the centralized world, participants may have to wait weeks, if not months. 

Farmers can hedge against various adverse weather conditions having a negative impact on their crops. They can buy a hedge — for example, if a temperature in their region reaches a critical level, which will trigger an automatic payout. By adding Chainlink’s oracalized weather data feeds, the company’s platform has become more decentralized and resilient. 

Jha said that the platform went live in February and has already experienced significant real-world demand:

“We have done over 210 transactions, about $13 million of notional risk. This is with farmers growing a huge array of crops from corn, soybeans, to fruits and other specialty crops. We have worked with agribusinesses hedging their supply chain risk.”

Although Jha emphasized that the platform is meant to provide real-world utility, he believes that in the future, it may become a highly attractive decentralized finance product:

“These weather portfolios are excellent investments for the DeFi community, if you have it in tokenized form, if you tokenized the weather risks; these portfolios, the yields are quite attractive. Risk — reward is great because it's very diversified and also not correlated to stock and bond markets.”

Jha said that the company has had a few payouts transacted in stablecoins, but the vast majority prefer good old-fashioned fiat for now.