The Real Impact of Blockchain in Development and Why Supporters and Critics Have Both Got it Wrong
The widespread use of blockchain technology in the development sector is both inevitable and desirable. Just as the nascent tech is beginning to confer efficiency and transparency benefits on the private sector, distributed ledgers stand to enhance development activities as we look to achieve the SDGs by 2030.
Innovation is nothing to fear and blockchain technology promises to transform the way development actors manage data. As Humentum’s Cynthia Smith recently wrote:
“… technology and innovation are driving changes in how, when, and where we undertake development and deliver assistance. Thanks to both, we live in an increasingly transparent world, where donors, recipients, and stakeholders in development and assistance can glean real time the successes and challenges that arise in our delivery of aid.”
But the implementation of blockchain tech in all its use cases has been marred by a combination of advocates without communication skills and critics without an understanding of what the technology is and how it might best be deployed. Without getting into which is the chicken and which the egg, it is worth finally examining in clear language what a blockchain is and how it is valuable.
Where It All Began
The first use case for blockchain was, of course, bitcoin, in 2009. Since then, it has largely been deployed within the cryptocurrency industry. Over the past two to three years, however, there have been signs that the benefits of blockchain are becoming increasingly recognized in non-crypto settings.
Supply chain management is an obvious fit: why litter the physical passage of goods with paper trails when one single, shared ledger can track digital records of physical objects? How do I know where the bad batch of tomatoes came from, given all the boxes look the same? The RFID tag and the blockchain entry point me in exactly the right direction. Not in days or hours. In seconds.
How do I know that is the right direction?
Blockchains don’t go backwards. Entries can’t be changed.
As the private sector is beginning to realize the efficiencies blockchain affords it, the development sector is considered an obvious next use case industry. The reason is simple enough, but has been bogged down by bad applications, bad explanations, and chronic misconceptions.
The technology is knocking on the door of the development sector and a number of projects are already among us. Characterized by a global footprint of organizations often working in challenging environments and facing growing calls for more transparency, the development sector stands to benefit from virtually all of the features and advantages of blockchain technology.
If only the critics would learn a little bit about it and the advocates got better at explaining it.
So let’s start with the basic question:
What is Blockchain Technology?
All events can be digitized. From cross-border payments, medical supply handovers on a supply chain, to the collection of impact data… we are already attuned to a world in which events and activities are digitized for record-collection purposes.
A blockchain is little more than a chronological record of digitized events.
This record is a database that is structured around a rather simple architecture: a chain of blocks. Copies of the chain are stored among multiple parties, giving blockchain technology its unique advantage over traditional databases: absent the unfeasible collusion of a majority of those parties storing records of the blockchain, it cannot be altered.
Blockchains are efficient because they gather multiple events into single blocks.
Blockchains are secure because they are stored by multiple parties.
But of primary interest to the development sector: blockchains are transparent. They do not travel backwards. They cannot be altered by any single party. They are immutable.
A blockchain is a time-stamped, consensus-audited data trail. Data veracity and authenticity is secured by having copies of the ledger managed by a number of parties. Nobody is in control of a public and decentralized blockchain.
Parties recording data to a blockchain are incentivized to be honest because misrepresentations cannot be altered and will live in digital format, under no one party’s control, forever. To lie to a blockchain is to submit unalterable records open to public scrutiny permanently.
So Why is the Tech Inevitable in Development?
Trust in institutions is eroding. The era of provable truth is upon us. Increasingly, institutions in all areas of endeavor are being called upon to demonstrate their impact and activities by presenting it to their supporters as verifiably accurate.
Critics have labeled blockchain as an over-hyped spreadsheet, largely due to an abject misunderstanding of its most salient features. Thomas Dichter’s criticism of the technology in a Forbes op-ed, while well-considered and thought-provoking, depicts a fictional aid organization suddenly beholden to undue rigidity imposed on it by blockchain technology.
Betraying a highly narrow understanding of the tech and a misunderstanding of its nuances, every entry on Dichter’s blockchain involves money. Not all data — on a blockchain or not — relates to money. He also bemoans the fact that blockchain technology makes it “impossible to fudge… fact[s]”. That is not only incorrect, as the oracle problem explains below, but also represents an unfortunate mindset that the glory days of intransparency might be coming to an end.
There is not a single problem Dichter raises that blockchain technology causes if used appropriately.
Advocates of blockchain have failed miserably to mount an effective argument for the technology. Those failures are directly attributable to an inability to explain its virtues and a gross misunderstanding of its single point of weakness — the point where it interacts with people.
This is called the oracle problem by some. Even if there is nothing stopping data on the blockchain from being altered, what is stopping it from being false in the first place?
Advocates of the technology tend to glance over the oracle problem. Just because it is on a blockchain does not make it true. Node operators do not verify if data is accurate in the first place. Blockchain technology incentivizes honesty in data submission by rendering those who record to a chain accountable for their data. It doesn’t require data to be true in order for it to be recorded on a blockchain. No technology can do that.
This misunderstanding appears to have created the most pressing misgivings about the technology’s transformative promise. Wayan Vota, co-founder of ICTworks, was scathing about the Rohingya Project’s use of blockchain technology to create a digital identification system for displaced Rohingya:
“We don’t have ironclad uses for blockchain that anybody is using at scale, and there’s a lot of worry that we’re experimenting with something we don’t really understand.”
Vota not only failed to reach out to the grassroots organization — which, incidentally, is agnostic when it comes to choosing solutions to the myriad humanitarian problems the Rohingya people face — he also failed to ask the most important questions:
Which blockchain did the project use? Was it permissioned (private) or permissionless (public), and what are the consequent implications for its relationship with provable truth? If the latter, was the data encrypted and represented by hashes? If so, where is the actual data being stored? What inviolable rights does the blockchain confer that another form of data collection wouldn’t? How would data entry on alterable databases have been better?
The Rohingya Project was also involved in the establishment of the Rohingya Football Club, again, with the sole aim of social upliftment. The team is a member of CONIFA, the Confederation of Independent Football Associations, the international governing body for association football teams that are not affiliated with FIFA.
If Vota saw football as an imprudent idea or one without a purpose for the Rohingya people, his own logic would follow that football itself is a bad idea.
It’s time for a lightbulb moment.
The Real Impact of Blockchain in Development
Distributed ledger (blockchain) technology does not create truth. It produces transparency through the incentivization of honesty by making people accountable for holding up fiction as reality.
With all due apologies to private blockchains, fundamental to blockchain technology is decentralization. And fundamental to decentralization is the concept of ‘Don’t trust. Verify.’ The growing public mistrust of our institutions, rightly or wrongly, is not going to reverse course. Blockchain technology is becoming the primary driver of the movement away from trust and toward verification — removing the element of trust entirely.
And that’s where distributed ledger technology stands to benefit the development sector and those who financially support it. Swiss startup Havuta is deploying blockchain technology to its impact data collection app with enormous success. The company’s data collection tool is powered by the Telos blockchain.
The company’s ability to help nongovernmental organisations and social impact funds to collect more, better, and longer-term impact data more affordably than ever before is one benefit of the tech. The tokenized incentivization of beneficiary-driven data is another. But the primary benefit blockchain technology has conferred on the tool is its signature feature: data immutability.
Data immutability, despite what most blockchain advocates will tell you, does not create truth. It simply amplifies the consequences of mistruth by creating accountability. This is an important — and often overlooked — distinction. Blockchain proponents and critics alike would be well-advised to recognize that.
Paul de Havilland is the Director of Strategy & Communications for Havuta LLC, a Geneva-based data consultancy company that offers tech-based data solutions to NGOs and social impact funds, with the aim of empowering them to prove and improve their impact.
Website | LinkedIn | Twitter | Medium | Telegram | OpenSea | YouTube
