Blockchain Revolution

BLOCKCHAIN HUMANITARIAN AID
Can blockchain fundamentally transform how NGOs, governments, and individual
donors deliver foreign aid? Hundreds of billions of dollars of aid flow annually into
developing nations, yet the macroeconomic effects of aid are not always clear.
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There
is ample evidence to suggest that corrupt officials, local strongmen, and other
intermediaries steal much of it long before it ever reaches its intended source. More
troubling, according to the Journal of International Economics, an “increase in
government revenues may lower the provision of public goods.” The report concluded
that “large disbursements of aid, or windfalls, do not necessarily lead to increased
welfare.”
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Organizational bloat and leadership corruption combine for lots of waste
and greater disparity between haves and have-nots in the poorest countries. This is
true for direct foreign aid from government to government but also for NGOs that put
boots on the ground in hard-hit places.
We touched briefly on the question of foreign aid in our introduction. Let’s
explore it further. Recall that the Red Cross came under fire in the aftermath of the
2010 Haiti earthquake after a study conducted by ProPublica, an independent, not-for-
profit news organization, and National Public Radio found the organization
squandered funds and did not fulfill many of its commitments such as building
130,000 new homes. It built only six.
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In its defense, the Red Cross argued that
Haiti’s shoddy land title registry hindered its efforts: nobody could figure out who
actually owned the land. As a result, the Red Cross improvised a less desirable
solution. Could a blockchain-based land title registry improve this situation by
providing clear title and perhaps prevent unlawful expropriation?

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Foreign aid is perhaps the clearest example of the ineptitude of many
governments and the rent-seeking behavior of unethical intermediaries, and is thus
excellent grounds to explore blockchain solutions. The 2010 Haiti earthquake was one
of the most devastating humanitarian crises of the past hundred years.
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While the
government was paralyzed and the crisis raged on, thousands of “digital
humanitarians” converged on the Internet to help first responders collect, triage, and
visualize pleas for help from mobile phones of devastated Haitians. Originally formed
online by like-minded volunteers, these ad hoc groups became increasingly organized
and effective amid the crisis. One in particular—CrisisCommons—made a real
difference. CrisisCommons exemplifies a global solution network, an emerging
nonstate network of civil society organizations, companies, and individuals,
collaborating to solve a major problem. The digital revolution has enabled new
networks to connect and collaborate across borders and can solve problems and
enable global cooperation and global governance. The Internet makes all this possible.
Never before could people organize collectively to create a public good as they did in
Haiti. This information layer of the Internet proved vital—providing critical
connections, know-how, and data for people in need and volunteer organizations
alike. Imagine if there was also a value layer. What kind of possibilities could that
enable?
The blockchain can improve the delivery of foreign aid in two ways. First, by
disintermediating the middlemen who act as conduits of large aid transfers, it can
reduce the chronic problem of outright misappropriation and theft. Second, as an
immutable ledger of the flow of funds, it compels large institutions, from aid groups
to governments, to act with integrity and abide by their commitments. If they don’t,
people will be able to see their malfeasance and hold them to account.
One could easily imagine UNICEF or the UN’s women’s initiative using the
blockchain to get funding directly to women and children without having to go
through local power structures. Individuals in poor countries could sign up for certain
benefits through a distributed ledger managed by a network of different aid groups
acting as nodes on the network. When particular aid is delivered—say, vaccinations
from the Red Cross or school supplies by UNICEF—those “transactions” can be time-
stamped on the ledger. This would reduce or perhaps prevent aid groups accidentally
double spending on particular people or communities, thus spreading the benefits of
aid more equitably.
Indeed, UNICEF has begun exploring cryptocurrencies. In June 2015, UNICEF
announced the launch of Unicoin, a digital currency that children can “mine” by
submitting an inspirational drawing to the program. The coins are then exchanged for
a notepad and pencil.
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This is a small start, but the opportunities are limitless. It’s not
far to imagine the hypothetical we posed in chapter 1—orphanages in villages all

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around the developing world working with UNICEF to set up accounts for each child
from the moment they arrive. Donations could be split on a pro rata basis into each
kid’s personal individual account. Governments, strongmen, and other corrupt
officials simply couldn’t access it. The poorest and most vulnerable children in the
world would have the funds to start a life when they move into adulthood. This is
attainable with blockchain.
Natural disaster relief or provisions for the poor cannot all be peer to peer, of
course. Oftentimes, institutions are not only desirable but also essential. But the
blockchain can radically improve the transparency of how those organizations, and
other institutions in the foreign aid value chain, function. Every dollar donated to the
Red Cross could be tracked from its starting all the way through the value chain to the
individual it directly benefits. Recall our hypothetical in chapter 1—the Red Cross
could run crowdfunding campaigns for each of its most important initiatives—
delivering medical aid and fighting the spread of disease, water purification, the
rebuilding of homes—and when you donate you would know whether your dollar
went to a plank of wood, a gallon of water, or a gauze Band-Aid. If funds went
missing, the community would know and could hold these organizations accountable.
Smart contracts could be employed that hold the aid groups themselves accountable.
The funds for major projects—from housing initiatives to the implementation of a
water purification scheme—could simply go into escrow and be released only after
the successful completion of key milestones—securing title for a site, importing raw
materials, signing a contract with a local supplier, building the finished product,
installing a certain number of clean water access points—is achieved. The result?
Radically improved transparency and accountability in the delivery of foreign aid, and
thus significant improvements in the end results.
Foreign aid is the second-largest fund transfer from developed to developing
nations, after remittances. Blockchain technology can enable transparency,
accountability, and more efficient operations for well-meaning NGOs and better
delivery of critical services in times of crisis and in normal circumstances. Of course,
there are a multitude of implementation challenges—things that must be overcome.
People on the ground will need to know how to use this technology. Mobile phone
networks could fail in the midst of a crisis. Crafty criminal elements and corrupt
governments might still find ways to defraud the poor and destitute. But are these
reasons not to explore this technology? No. The situation today is dysfunctional and
in many cases plainly broken. Empowering individuals and holding aid groups
accountable will mean more aid in the hands of the right people. Alleviating poverty
and addressing catastrophic crises is the first rung of the ladder to global prosperity.
Let’s take a chance on blockchain.

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