Decentralized Impact Exchanges
Verifying and Trading Impact Data with the ixo Protocol
Authors: Dr Shaun Conway and Lohan Spies
In this article we introduce the concept of Decentralized Impact Exchanges that are a core component of the ixo Protocol.
Impact Exchanges provide a mechanism for producing verified Impact Data (Proof of Impact) that can be exchanged for funding or other forms of value. We believe this is a foundational concept for growing the Impact Economy.
Investing for Impact
We all try to make intelligent personal investment decisions that are based on good information. Our choices are informed by performance data from sources we expect to be trustworthy, so that we can know: Which mutual funds performed best? What’s the housing price trend in the neighbourhood? How did the company fare in its latest quarterly results? Is the fuel consumption of the car on offer going to be good value for money? Will this school award me a degree that increases my earning potential?
On the basis of this information, we decide whether to exchange our capital for the results that we hope to achieve. Then we track the outcomes of our investments to know whether these results have delivered.
In contrast, billions are invested by governments and development agencies every year, without good quality, trustworthy data. Trillions more in capital funds will be directed in coming years, towards making investments and alleviating risks by funding impacts. This need much improved ways for impacts to be measured, to optimize the returns on these investments — for both financial and societal results.
Why this matters
The rationale for investing in impact is based on the growing need to address global sustainability challenges such as climate change, political instability, healthcare, education and other development priorities for humanity to prosper. But without good impact data, these investments cannot optimise results. We need a World That Counts.
The UN Secretary-General has therefore called for A Data revolution for Sustainable Development.
An Impact Protocol for the world
Over the past 4 years we have been working on a blockchain Impact Protocol, which we refer to as The ixo Protocol.
The fundamental principle of this protocol is that impact funding should be exchanged for trustworthy impact data that provides Proof of Impact.
Like all trusty tripods, there are three core components to this:
- Decentralised Impact Exchanges enable anyone to coordinate and incentivise a combination of funders, service agents and evaluation agents to come together and produce explicitly defined, measurable impacts. This is a market-making mechanism. Impact Exchange Projects can be established without any reliance on central authorities or intermediaries. Fees paid to the network hosts of the protocol, as well as peer-to-peer payments for services to execute and evaluate projects, are transacted through these decentralised impact exchanges.
- Proof of Impact gets generated through the data processing capabilities of the protocol. This includes a semantic abstraction graph that links open data ontologies, impact claim templates and indicator definitions. Mechanisms for evaluation agents to evaluate impact claims interface with the protocol at this layer and this encodes the generic business logic for processing claims and to produce cryptographic proofs that are tokenised and stored in the Global Impact Ledger.
- The Global Impact Ledger provides the decentralised data asset storage and data sharing capabilities of the protocol. This enables tokenized Proofs of Impact to be recorded within blockchain transactions. The distributed ledger serves as a global index to a virtually shared and distributed Big Impact Data commons. This is a transparent and accountable public record of Sustainable Development impacts. It also routes to all the underlying datasets and provides a mechanism for this data to be shared. The protocol includes a built-in data governance mechanism that encodes permissions for different users and uses, which gets executed through authenticated access.
Impact Exchanges
In this article, we are focusing on the first compnent — the Decentralized Impact Exchange (DIX). Each DIX encodes in a smart contract the offer to deliver, fund or evaluate the impacts of a specific intervention project. The size of project, type of impact, number of participants, value and duration of the project are all configurable.
A DIX is set up as a unique project that initiates its own independent system of Ethereum blockchain Smart Contracts. A project sponsor initiates a project DIX and retains full control over their Smart Contracts.
The main function of the DIX is to coordinate and incentivise participants in a project to achieve expected impacts through funding, delivering and evaluating the creation of Verified Impact Data and Proofs of Impact that can be cryptographically verified.
The DIX governs and facilitates the relationships and value exchanges between project participants.
The players
Within each project, there are three generic types of participants:
- Funding Agents which includes any institution, financing instrument, or individual that contributes economic value to an Impact Exchange Project. This provides for many different ways of funding projects — for instance, through crowd-funding, bounties, liquid pledging, or other innovations.
- Service Agents include organisations and their related agents, or independent individuals, or devices, such as a vending machine that dispenses essential commodities for disease prevention.
- Evaluation Agents are the organisations, individuals, or software algorithms that process impact claims to evaluate whether these claims meet the requirements for issuing a Proof of Impact.
As the ixo Protocol is fully decentralized, the relationships between these parties can be many-to-many. One or more funding agents can finance a project; One or more service agents can submit impact claims; And one or more evaluation agents can verify claims.
These roles are also interchangeable. For instance, a Service Agent could choose to set up and fund their own project, thereby acting in the Funding Agent role, to generate Proof of Impact credits that they can subsequently use to recruit new investors by demonstrating the impacts they are already delivering.
How this works
In the most simple form, a decentralised impact exchange can be conceptualised as a multi-party escrow Smart Contract. This requires a deposit of value, in the form of IXO tokens, that is only released by the Smart Contract during state transitions, when participating signatories approve transactions.
Let’s look at a simplified example of how this works in practice:
- A project sponsor is typically the Funding Agent, but in some contexts this could be the Evaluation Agent, or Service agent. Using the ixo Portal, the project sponsor specifies the details for a new Impact Exchange Project. In this, they define the project description, authorised participants — including any capabilities the participants must demonstrate, and the Impact Claims Templates to be used.
- To initiate the DIX that will run this project, the sponsor submits a deposit of (let’s say) 100,000 IXO tokens from their IXO Wallet, to the project’s DIX address.
- Service Agents connect with the project using a mobile application, to accept the terms of the project and download the project’s Impact Claim Templates. They will use the application to record delivery of their service by digitally signing and submitting their Impact Claims. These claims are messaged to a node on the ixo Network. Third-party developers produce specific end-user applications that interface with the ixo Network, for their specific use-cases.
- An Evaluation Agent connects with the DIX and accepts the specific terms of the project. Using Agent Software to evaluate the claims that have been submitted, the agent verifies the claim if the evaluation criteria have been successfully met. The agent produces a Proof of Impact for the claim. The agent automatically receives a defined number of IXO tokens for each claim they process, as payment from the project sponsor.
- The Proof of Impact is recorded as a transaction in the Global Impact Ledger.
- The Service Agent is paid by the Funding Agent for the successful Impact Claim. This payment can be made off-chain, using an acceptable payment method , or peer-to-peer, through the DIX. Proof of Payment is submitted to the DIX and this triggers a transfer ownership to the project sponsor, who now controls the Proof of Impact Credit and access to the related data assets.
- A small fixed value transaction fee in IXO is automatically paid to the network node host that received and validated the transaction request.
- If the project is processing a Qualifying Impact Claim type, the DIX will mint a new IXO Token as a protocol reward. The project sponsor receives these new tokens for each successful Proof of Impact the project produces.
Executing Impact Exchanges
Anyone should be able to set up an Impact Exchange Project. The ixo Protocol is agnostic as to who initiates and sponsors a project. This could be a service agent, evaluation agent, funding agent, or any other third-party. There are many use-cases that require each of these sponsorship scenarios. The main prerequisite is that all the entities must at least be identified with their own universal decentralized identifier (DID).
To participate in a project, entities must match the identity and demonstrate that they have capabilities, such as qualification credentials, that are specified in the project’s DIX smart contract. For instance, the project might specify that any service agent that has the credential of a qualified health professional in a specific jurisdiction, based on a verifiable claim that has been issued to them by a recognized credentialing authority. This is why the ixo protocol is rooted in a decentralized identity network. It is a powerful feature of ixo that all claims resolve to authenticated identities and are based on provable credentials.
The entity that sets up the project (project sponsor) pays the ixo Network fees for the project to be executed. At a minimum, this covers the computation costs of evaluating the Impact Claims through the DIX and the storage costs of the resultant crypto-asset Impact Credits, that will be permanently recorded in the Global Impact Ledger.
The DIX can be configured for any combination of evaluation agents and mechanisms. Users will interface with their Impact Projects through a web-based portal.
The criteria for Evaluation Agents to participate in a project can be restricted to specific identifiers, or to matching identity credentials (authenticated against verifiable claims of identity). For Evaluation Agents that call external services to retrieve oracle data or services through DApps, or using web APIs, the flow of value using IXO tokens should allow for increased automation in payment processing. This should become a powerful driver for growing an open marketplace for Impact Evalution services.
The ixo Portal
The ixo Portal is a self-hosted browser interface that provides the tools for users to configure Decentralized Impact Exchanges as new Impact Exchange Projects.
Users can also view and manage their IXO wallet transactions and interact with the Global Impact Ledger. The portal includes a secure messaging channel, to interact with project participants and for signed messages, such as Impact Claims, to be securely passed between trusted participants.
The portal is used to set up Impact Exchange Projects by following a sequence of logical steps. This starts with a user registering a new project identity, purpose and scope. The parameters of the project are defined — including the data model for the impact claims that will be accepted and the evaluation criteria to be applied. The project is initiated with a deposit of IXO tokens to a smart contract transaction. This records the blockchain address of the DIX smart contract in the project document. This information can be displayed on any web browser and broadcast through all available communication channels, including decentralised protocols such as Whisper and Swarm. The project data uses semantic standards, so projects are easily discoverable and can be matched to suitable participants.
Through the Project Portal, users view the status of their projects and manage communications with the project participants. The portal enables entities to register, manage and fund their IXO wallet.
Earning protocol rewards
A protocol rewards mechanism is built into the DIX. This incentivises bottom-up use of the ixo Protocol. A limited set of specific impact claims are designated as Qualifying Claims. These are prioritised because they will promote the delivery of high-priority Childhood Development impacts. For each successfully verified Qualifying Claim, the DIX will mint a new IXO token as a reward that is transferred back to the wallet address of the project sponsor on completion of the project. We elaborate further on the mechanism in a future article.
What’s really cool is that any project sponsor or external parties can similarly incentivize the delivery of projects that are important to them, by adding a bounty, performance bonus or simple reward.
A standardised Impact Data model
The DIX smart contract system codifies what impact claims will be evaluated, which entities are eligible to submit, evaluate and finance the project; the mechanisms and terms for payment; links to the legal terms; validity period and other conditions. These parameters are semantically defined within a JSON document and contextualised to open schema definitions, using linked-data specifications. The conceptual structure of a project definition document is shown in the Project Template diagram below.
The manifest of each project sets out the terms under which the DIX will operate, such as the project duration. This also defines who is eligible to participate in the project. Participation is restricted to specific authorised Funding Agent, Service Agent and Evaluation Agent capabilities. To transact with the DIX Smart Contract system, these agents must be able to cryptographically authenticate that they have the required Object Capabilities — for instance, they must be able to sign the transaction with the valid cryptographic private key associated with their identifier.
P2P payments for Impact services
DIX Smart Contracts can transact payments for services that include the services delivered by Service Agents and Evaluation Agents. Each payment is specified by the type of payment (e.g. Crypto-token), method of payment (e.g. out-of-band or crypto-transaction), terms of payment (e.g. Bounty or fee-for-service) and condition of payment (e.g. minimum number of claims to be submitted or due-date to be complied with).
To begin with, ixo could be used more as a coordination and accounting mechanism, with only a fraction of evaluator fees being transacted through the DIX, to incentivize evaluation agents to use the protocol. However, over time we see the full payment for evaluation services being transacted peer-to-peer through the DIX — especially when these evaluations are conducted by software agents.
A decentralized Impact marketplace
IXO provides an open utility for coordinating and incentivising the trade in Impact Data and associated Proofs of Impact. The protocol is accessed through a low-cost decentralised network of computational nodes. This provides the data processing, storage and payment mechanisms to run a truly decentralised, multi-sided marketplace for the Impact Economy.
The future of Impact
Using the ixo Protocol should dramatically reduce the costs of collecting and evaluating Impact Data through automation and crowd-sourcing. The performance of impact evaluations and resource matching will become increasingly augmented by machine intelligence that learns from growing Big Impact Data commons.
Use of the protocol should spread through coordinating and incentivizing networks of service-providers and providers of capital to come together. These new information and value flows will optimize how Sustainable Development impacts are delivered and funded through decentralized networks, to accelerate progress towards the Global Goals.
Decentralised Impact Exchanges will be possible at all levels, as well as through local and global exchanges.
In future articles we will describe how this is already beginning to happen using the ixo Protocol.
