Blockchain for Social Impact: Project Unblocked Cash Case Study
An Ethereum-based Cash and Voucher Assistance humanitarian solution enabling more speed, efficiency, and transparency in financial aid for disaster relief.
When disaster strikes, getting aid to those who need it, quickly, is a priority. In recent years, Cash and Voucher Assistance (CVA) has increasingly become the chosen method of aid delivery within the humanitarian sector. A CVA program provisions the transfer of cash or vouchers directly to individuals or households within a community to spend at their discretion, rather than giving money to governments or other state actors.
In 2016 alone, it’s estimated that $2.8bn in humanitarian aid was disbursed through cash and vouchers (Global Humanitarian Assistance Report 2018; p6). However, the CVA model can be expensive, inefficient and opaque; often a long process, requiring many volunteer hours of administrative work during a time-critical period.
Problem Statement
Vanuatu is considered to be one of the world’s most vulnerable countries to natural hazards. Positioned within the earthquake-prone “ring of fire” and at the centre of the Pacific cyclone belt, Vanuatu experiences a high frequency of volcanic eruptions, cyclones, earthquakes, tsunamis, and landslides. The surrounding sea-level is projected to rise and cause more extreme weather
events as a result of climate change, warranting improvement to current CVA programs.
How can NGOs provide cash aid instantly, decrease transaction costs, and extract real-time insight to drive program optimisation?
Requirements for Success
Certain conditions are necessary for a CVA program of any kind to be effective. For the pilot to be successful, it needed to meet Oxfam’s feasibility criteria: Access, Market Capacity, Acceptance, and Appropriateness.
Additionally, a successful solution should be operatable in low-connectivity conditions, and accessible to recipients with minimal to no technical literacy. The program should also be embraced by the community, easily deployed, and apt to support the most vulnerable members of the community during a time of crisis.
The Ethereum Solution
Oxfam engaged Sempo and ConsenSys Solutions to assess the time, cost, and quality of digital cash-based transfer programs. Together, they launched Project Unblocked Cash: a Cash and Voucher assistance pilot built on the Ethereum blockchain mainnet in May 2019.
The initiative successfully connected people in disaster-prone communities with “cash” aid faster, while providing real-time visibility into the flow of funds. The pilot aimed to provide Oxfam with a new model for deploying a more rapid, efficient, and transparent CVA for future disaster relief
programs.
The solution enabled capital distribution in the form of Near Field Communication (NFC) cards that held a balance of funds. Participants were then able to use the NFC cards with participating vendors throughout their communities. The solution consisted of three main components:
- Pre-funded NFC cards given to each of the recipients
- Smartphones were issued to the shopkeepers with the Sempo mobile phone app installed
- An Ethereum blockchain backend built to control the flow of digital cash
Project Unblocked Cash in Action
Onboarding
Registering recipients to the system took only a few minutes. The Sempo system collected a name, phone number (where recipients didn’t own a phone, the ID of their issued card was used), and location (in this case, the village name). Once the data had been collected, the recipient was issued their NFC card.
Vendor onboarding required an additional KYC (Know Your Customer) step. Vendors were required to bring forms of identification, take a photo, and provide their bank account details. Further, they signed a vendor agreement with Sempo, agreeing that: (i) they would provide goods to recipients using the NFC cards in exchange for ‘tokenized cash,’ and (ii) that Sempo would
repay them in their local currency at a later time. Once the process was completed, the vendors received a mobile phone with the Sempo app preloaded onto it and their own NFC cards to use.
Disbursement
The Sempo administrative dashboard allowed easy disbursement of value to all registered recipients by simply entering the desired amount. After disbursement, each recipient’s card contained a balance of tokenised funds intended for use within the program ecosystem.
Shopping
Aid recipients were issued a funded NFC card to make purchases at local participating shops. The NFC cards themselves held a balance in the form of an encrypted sequence of deposits and withdrawals. Recipients presented their NFC card to one of 28 vendors of their choice to purchase items. The vendor entered the purchase balance into the Sempo app and selected the category of the goods (for example ‘Long Life Food,’ or ‘Medical Supplies’). The recipient tapped their NFC card onto the vendor’s mobile device and performed the transaction. Once the transfer was complete, the Sempo app displayed the remaining balance in the recipient’s digital wallet.
Cashing Out
To cash out, vendors selected the ‘Withdrawal’ feature from the Sempo App, triggering Sempo to perform a bank transfer to the vendor in exchange for tokenised funds. To combat the high bank transfer fees (AUD $20), the ‘super vendor’ system was introduced. A village shopkeeper qualified to become a super vendor if they held enough cash funds to cash out multiple smaller vendors.
“It is a fast system to use. During disasters, it will be very helpful. Giving cash gives choice to the recipients.”
— Project Unblocked Cash participant
How they worked together
The NFC cards held a balance in the form of an encrypted sequence of deposits and withdrawals. The mobile phone app stored a local database cache of the cards and their balances, which allowed offline operation.
The Sempo infrastructure served as a simple UI for viewing the Ethereum public blockchain and for facilitating bulk transactions (for funds disbursement). The backend also provided a local sending mechanism, which, means that when it received a transaction from the mobile app, it performed its own verification of each transaction. It updated the balance on a database and sent a reply back to the phone, prior to pushing the transaction to the blockchain. Additionally, the Sempo backend dashboard provided a user-friendly interface for viewing the Ethereum blockchain and for facilitating bulk transactions, empowering Oxfam to make decisions faster and optimise disbursement.
There was a one-to-one mapping of the NFC card IDs to Ethereum addresses. The transactions were put onto the blockchain by a single Ethereum account, which was effectively the Sempo admin account. The Sempo admin account was authorised to do so by the individual user accounts because they had triggered a token “approve” function for their balance amount. The “approve” permission was triggered when the NFC cardholders had their balances disbursed to them.
This “approve” function was equivalent to permitting Sempo to process debit and credit transactions when those engagements occurred in real life between the NFC card owner and a participating vendor. Sempo’s solution typically held balances in a token called DAI, a stablecoin that exists on the Ethereum blockchain. The token used within the Oxfam Vanuatu program was a “Crypto Collateralized Voucher” (CCV) which “wrapped” the DAI token.
This step ensured that these tokens were only used by participants within the Sempo system. The tokens could only be “unwrapped” into their original DAI form by those on the whitelist. The CCV mechanism was introduced as an AML mechanism, which further bolstered the security and regulatory considerations of Sempo’s solution.
The balances shown on the mobile app’s user interface, and in the Sempo backend, were all in the Vanuatu national currency of Vatu (VT). The conversion was automatically executed in the software against a fixed VT to USD exchange rate.
Outcomes
The blockchain-based Sempo solution was found to be much more efficient than cash, cheques, or voucher methods. The program received positive feedback, high community engagement, and reported ease of use, from both the program organisers and the community, suggesting that this solution may have a role in delivering aid in future disasters. ConsenSys is now making
key recommendations to Oxfam to refine and expand the program.
Easy onboarding
In traditional models, each recipient received a manually set disbursement date, which kicked off a lengthy four-step process before the recipient could utilize their funds to buy essential disaster relief items. The recipient returned at a later date, re-identified themselves, and received a cheque. Recipients would then need to travel to a bank to cash the cheque. In the blockchain-based Sempo solution, recipients were onboarded with a single registration step.
Instant cash disbursement
Oxfam administration preformed the disbursement of the funds to the cards via a single button click in the Sempo backend. The recipients accessed their relief funds instantly.
Unprecedented transparency in the flow of funds
The blockchain-based solution provided real-time analytics and a statistical overview of how the money was utilised.
Operation in low-connectivity environments
As data is distributed over many entities on the Ethereum public chain, Project Unblocked cash prooves to be ideal for programmes ran in low-connectivity environments, as recipients and vendors do not require a constant connection to access the program.
Cost efficiencies: administration
This solution also cuts down on excessive administrative hours. As a comparison, five fulltime staff were required to reconcile every transaction during the food and hardware voucher payment program in Vanuatu by Oxfam in 2015. In the blockchain-based solution, transactions are automatically reconciled and instantly available.
Cost efficiencies: transfers
This method of transfer is also significantly cheaper for smaller donations. For instance, bank transfers to Vanuatu from Australia cost approximately $20 AUD. An Ethereum transaction, by contract, averages less than 10 cents AUD.
Reduced intermediaries
The Sempo solution demonstrated that made direct donations without any intermediaries or administration are possible utilizing distributed ledger technology.
Traceable donations
Due to the transparent nature of the system, the Sempo solution allows for transparent direct donations. If Oxfam published the Ethereum address of the program operator, any individual or organisation capable of sending DAI could donate directly into the program, and trace their donation from the program operator directly to the participant addresses.
Conclusion
This pilot successfully demonstrated how a blockchain-based CVA significantly improves aid deployment in the case of disaster. Oxfam’s regional teams can utilize this solution going forward to deploy aid efficiently and effectively.
Disclaimer: The views expressed by the author above do not necessarily represent the views of Consensys AG. ConsenSys is a decentralized community with ConsenSys Media being a platform for members to freely express their diverse ideas and perspectives. To learn more about ConsenSys and Ethereum, please visit our website.
Originally published at https://consensys.net.
