Sustainable agriculture in the twenty-first century faces a dual challenge: ensuring long-term ecological balance while simultaneously improving economic viability for farmers and rural communities. Agroforestry systems, particularly those centered on high-value tree species such as sandalwood, have emerged as a promising solution to this challenge by integrating ecological conservation with income generation. However, despite their potential, agroforestry value chains remain constrained by issues of traceability, transparency, policy misalignment, inefficient monitoring, and limited trust among stakeholders. In parallel, rapid advancements in digital technologies—specifically the Internet of Things (IoT) and blockchain—have demonstrated transformative impacts in agriculture, supply chain governance, and resource management. This research develops an integrated theoretical and conceptual framework that synthesizes agroforestry economics, sandalwood production systems, and blockchain-enabled IoT architectures to address systemic inefficiencies across the agricultural value chain. Drawing strictly from established literature on sandalwood history and markets, traditional agroforestry practices, public policy impacts, and emerging digital agriculture technologies, this article offers an extensive analytical exploration of how decentralized ledgers, smart sensing, and edge-cloud coordination can enhance sustainability, accountability, and farmer empowerment. The study adopts a qualitative, systems-oriented methodology, emphasizing descriptive analysis and interdisciplinary synthesis rather than empirical experimentation. The findings suggest that blockchain-based IoT infrastructures can significantly improve traceability, reduce transaction asymmetries, enhance policy compliance, and support long-term resource stewardship in agroforestry systems. Furthermore, the integration of these technologies aligns with broader goals of digital agricultural democratization by enabling smallholders to participate more equitably in global markets. The discussion critically examines implementation challenges, including governance complexity, energy consumption, and socio-technical adaptation, while outlining future research directions for scalable and inclusive deployment. The article concludes that the convergence of agroforestry and decentralized digital technologies represents a foundational shift toward resilient, transparent, and sustainable agricultural economies.