Investing in Humanity

How the Blockchain Can Spark Investment in Humanity

Much has been written about cryptocurrencies, but its the technology underpinning it which has the potential to change the world.

In 2017 a small social impact investment project run by St Mungo’s helped 15 rough sleepers get off the street and deal with drug addiction. It was a only a little project, but its success could have wider implications for the social impact investment ecosystem thanks to the technology underpinning it — the blockchain.

Alice.ai is a network built on the ethereum blockchain which unites donors, social enterprises, grant makers and social impact investor and helps them identify and scale projects which can help society.

This is just one of a number of blockchain based projects which suggest ways in which this exciting technology can bring the right people together in the right way and channel investment in a more humane way.

Disrupting finance

If that happens it will not be before time. The financial world has been called many things but humane is not one of them. Everything about it works against the poorest in society. The less money you have the more expensive and difficult it is to raise finance.

The problem? The banks control access to the system and unless you can make them money they don’t want to know. Transactions between countries can be expensive and take time.

Sending money to Africa is more expensive than anywhere else, so if you’re working in Europe but sending money to friends and family back home the money transfer companies take a big chunk of your earnings.

The result? Inequality is rising. The incomes of the top 1% are surging while everyone else sees wages stagnating or falling in real terms. Poverty is on the up and so too is homelessness even as economies in developed countries appear to be growing.

Millions of people around the world are denied access to the financial system for the simple reason that it makes bad business sense to provide the services they need. The financial world, in a very real sense, can be inhumane.

Blockchain throws a spanner in the work. By creating a decentralised public ledger it removes the need for third parties and creates a fast, secure and cheap way to transfer money.

It also breaks down barriers. Peer to peer lending sites are injecting democracy into the system by allowing people who need finance to connect with people who want to lend it. The results benefit everyone. Someone who would not have been able to raise capital for an enterprise has a chance to source that money. Lenders can access a better rate of return than they are currently getting from their bank.

The blockchain revolution will change the mindset of the financial world. All of a sudden those millions of unbanked people around the world represent an enormous untapped market, By providing them with affordable financial services structured around their needs the blockchain can provide the spark that ignites development and positive change.

Humane investment

The blockchain also represents a promising boom for social impact investment.

Social impact investment has been growing steadily in recent years. It’s already a £150bn market in the UK. There’s enormous appetite for growth among all parties — investors, banks and politicians, but obstacles remain in the way.

Of these, one of the biggest is seeing how capital is being used and making sure it gets where it is needed.

The transparency of the blockchain represents a fantastic opportunity to facilitate the flow of social impact investment. For all the interest surrounding impact investment the challenge of securing verifiable metrics is holding capital back.

Blockchain has a solution. It can provide that information which can show funders where their money is going and what it is doing. The Ixo Foundation is developing a proof of concept blockchain protocol which helps projects prove their worth. Every time a project achieves social impact, it can be recorded — whether it’s a child receiving a vaccination, a girl achieving a school place or a tree being planted.

Money is traceable which helps address historic leakages in funding project. With the blockchain you can see where every dollar has been spent and what impact it has achieved.

Creating digital impact tokens provides the verification data funders need and injects greater confidence into the entire system. It’s an enormous improvement on the current situation in which measuring impact is time consuming and expensive.

For all the talk about cryptocurrencies, it’s the blockchain which really matters. It could be one of the most disruptive forces in the world of finance — one which has the potential to finally make it easier to channel capital in a way which is more humane and makes the world a better place.