WhitePaper Series: Blockchain and Impact
Hey ChangeMakers, it’s Proof of Impact here. We will be coming out with posts and articles called the WhitePaper Series. This series is meant to outline, define and explain the issues in impact investing, POI’s solution and application that we believe are necessary for the impact industry to bring forth the Purpose Economy and promote measurable and transparent progress in our world. In this final installment, we’ll be discussing the benefit of using blockchain and tokens to certify impact.
Blockchain’s Value Add
We explained the importance of verifying unique, individual events. Once verified, and in order to make them attributable, these unique events require a digital confirmation that contains all the unique variables. A digital representation to the real life, verified event. This digital representation is called a Token.
Each time a child is vaccinated there is a new token issued. Every time a TB case is treated or a pound of plastic is taken out of the environment, there are corresponding tokens issued.
However, digital entries into a ledger is not enough — simple digital entries can be copied, multiplied or tampered with. This would be an unacceptable risk in our model, where the corresponding events are priced and monetised and therefore need to maintain unity.
Some of these risks can be addressed with checks and balances, audits, governance etc. and if our purpose would be simply to track these events (as a smarter alternative to traditional Monitoring and Evaluation), centralised, public databases (such as DHIS215) would be the best model to adopt.
But since these tokens are valued and monetised, in order to make trading possible investors need the option to hold impact tokens — essentially holding full attribution for unique events — without having to have any relationship with any organisation or entity, or having to understand/ evaluate reliability of any one monitoring database16. As long as they prove token holding they prove attribution. This means that they can trade these tokens, essentially taking their money out and passing the attribution to someone else. And because all tokens are listed on a public, immutable ledger, they can trust that they are genuine and they can even track their history if trading on a secondary market. This will accelerate the emergence of global impact capital markets accessible to anyone, anywhere in the world.
Which Is The Best Blockchain For Impact?
Proof of Impact is an impact company, not a blockchain company. As such, we regard the blockchain as a critical tool in our infrastructure, but not our core business. We see ourselves as agnostic to blockchains and keen to integrate any/as many blockchains as necessary to deliver on our core business.
Currently 4k+ developers contribute code across 2.8k public blockchains every month17, globally. This is just core development. Further resources are dedicated to building permissioned layers and infrastructure on top of these blockchains. Many of these developers are best in class and they are members of active communities building a global infrastructure that changes every day. They solve complex problems that transcend technology and touch upon security, governance and game theory.
As a first-principle company in this emerging space, it is our responsibility to build on top of the existing infrastructure — and indeed evolve with and contribute to this infrastructure as it is growing into a global force. We chose to build our prototype on the Ethereum Blockchain out of convenience. Ethereum has the biggest developer team in crypto, by far. On average, 216 developers contribute code every month to Ethereum’s repos (not including hard forks and secondary layers). This is more than 4X the number of active developers that contribute to Bitcoin’s repos (ca 50 developers per month), the second most active project18.
Although we are working on Ethereum, the POI architecture is designed such that we can easily integrate any other blockchain or token: for example, a token issued on a different platform can be easily integrated into the PoI protocol and structured into an impact product, connected to a payment or any other transaction.
The value of public blockchains
Our value proposition to investors and the wider impact space is around transparency, attribution, traceability and investability. A public blockchain’s immutability is a critical argument in favour of using blockchain (vs. a centralized database) for our model.
Do we need a native token?
POI does not have a native token. Verified individual events have corresponding tokens on our platform that can be traded (either as digital confirmations of value/ attribution or as securities), but there is no native token used for payments across our platform. Some of our impact tokens are fungible, others are non-fungible.
We decided against issuing a dedicated token for two important reasons:
- We would like investors to be able to pay directly with cash and invest only in the sort of impact that they want to; We do not want to “lock” buyers or sellers into our platform, or create an additional transaction layer necessary to participate in the marketplace;
- Some of our user segments should not be expected to be blockchain literate. Among others, we work with low income and low tech users and we also work with large, traditional partners (governments, large Non-Profits, multi-nationals). We believe that as much as possible, we should “hide” the blockchain component from users. We believe that the winning model has the blockchain solving specific problems at a platform level, without hampering the user experience.
