Inclusive Tokenized Economy：Blockchain for Impact Measurement, Social Finance and Social Development
Introduction
Impact investing has emerged as an important source of development finance in recent years. It has successfully demonstrated that investment can achieve both a positive social or environmental impact and a financial return, hence, achieving a more inclusive and sustainable society. According to a latest survey conducted by the Global Impact Investing Network (GIIN), 226 respondents have currently managed USD 228.1 billion in impact investing assets (view the survey)by 2018. Although the market of impact investing has been growing in a vigorous pace, the idea is still new to many investors and market players in Asia.
The co-founder and Chief Social Scientist of the Impact Oxygen Foundation (iO₂) Dr. Tat Lam was invited by the CUHK Alumni Charity Foundation to host a symposium featured Blockchain Technology and Impact Investing to offer participants food for thought on renovating social development by technology advances.
Read more👉: Why Do We Need Blockchain for Social Finance and Social Development ?
Impact investment to close SDG funding gap
In 2015, the United Nations advanced 2030 Sustainable Development Goals (SDG) to overcome the world’s most pressing social, environmental and economic problems. According to our research, there will be an estimated US$35 trillions funding gap of SDG until 2030 — not for a lack of capital, but because of a lack of social finance data and infrastructure to assess risks and impacts for SDG projects, creating high barriers for investors and projects to participate in social finance opportunities as outlined by the SDG.
The World Bank estimated that between 50 and 80 percent of what’s required for achieving SDG will come from government, while about 10 percent of the remaining infrastructure investments will be initiated by the private sector. Unorthodox impact investors have been trying to apply new technologies, such as blockchain, to drive the progress towards the achievement of the Agenda 2030 and the global SDG.
A recent report by the Business & Sustainable Development Commission estimated that achieving the SDG can open up US$12 trillion of market opportunities in food and agriculture, cities, energy and materials, and health and well-being alone and create 380 million new jobs by 2030 (view the report). However, as is often the case with new ideas, the conception of impact investing is not without its challenges.
How do we know if the investment is making impact?
In crafting an investment thesis, we might ask ourselves: What existing need in the market does my investment thesis address? What is the evidence that the need exists, and what is the extent of the need? What underlying assumptions does the thesis imply? Do the expected returns and exit strategies seem realistic and appropriate given the market, investee potential, and investor expectations? These questions are also applicable when making a impact investing decision.
The lack of mechanisms to connect capital and impact investment opportunities renders high impact investing intermediaries fees and transaction costs. What was intended to be a gesture of moral integrity has now become a problem of transparency-economics, where neither the investors nor the investees feel any incentive to absorb the costs. Some investors are discouraged by impact investing because of the difficulty involved in measuring positive social and environmental impacts generated by the said projects.
To resolve the problems bottlenecking social finance, we shall establish a metric to answer the following questions:
- How to identifying the right problems and solutions
- How to find the right types of funding to the right types of projects
- How to carry out Impact Due Diligence
- How to structure an impact deal: choosing how to Measure success, using what metrics, and setting what milestones
- How to collect quality data needed to measure the metrics and validate milestones
- How to validate that the data is what it says it is
Applying AI & Blockchain to Lower the Cost to <0.5%
We hold a view that blockchain technology can relieve impact investing from the current predicament. Taking into consideration the complexity of the data ecosystem in developing regions, big data is not the informational panacea and AI will not work without quality inputs. To ensure frontline data quality, implementation efficiency and timely actionable insights for decision makers and end-beneficiaries, we highlight the critical role of intelligent agent(AI), an autonomous agent either machine or human or both that has the ability to learn and adapt within the systems of AI. It is important to build the capacity of IA at the frontlines of social development programs and empower them to engage with AI in the larger data ecosystem.
Intelligence Agents & Artificial Intelligence
Impact Data Readiness Index (IDRI) is metric allowing us to understand data literacy level of users, regions and organizations, so that we can develop specific solutions at the frontline to adapt to local conditions. We need to understand local infrastructure and local data literacy of end-users to design capacity building programs to people to interact with the database.
There are two dimensions of IDRI, namely local data infrastructure and local data literacy. The two dimensions create many typologies of oracle solutions for data technology implementation based on slightly different combination of AI and IA.
We define IA as the local providers of information, it can be a frontline worker or an end beneficiary, the information “algorithms” are kept in their minds, culture, lifestyles, place, and sensibility, from which we rely on to gather relevant information augments our artificial intelligence in the cloud or is augmented by artificial intelligence on the ground.
Credit to the rapid development and increasing availability of digital devices in recent decades, digital literacy has become less of an issue. However, data literacy divide remains serious, especially among the grassroots communities. Therefore, we have developed a Data Literacy Calculator, a tool for understanding how ready a community or program engagement is able to utilize digital tools and data to create bilateral data flows. We have further built an infrastructure that leverages IA to improve data literacy in the community to fundamentally solve the problems of data quality and ownership.
Application of IDRI: A Case Study in China
The China Development Research Foundation (CDRF), a policy think tank initiated by the Development Research Center of the State Council aims to advance good governance and public policy to promote economic development and social progress in China, recognized that measuring the impact of its Early Childhood Development Home Visiting Program played a key role on whether it would be relevant to scale the program across China. However, gathering quality data from the frontlines posed a big challenge to move the program forward.
To address this issue, we have developed DAPP for Social Development (DAPP)- a mobile device-enabled field kit based on blockchain technology.
DAPP for Social Development is a special class of Decentralized Applications designed specifically to collect, create, measure, validate, and manage social development and social impact data needed to execute P4S smart contracts. Game theory-driven incentivizes beneficiaries to increase participation in accurate data generation and social program engagement.
It enables the CDRF to identify and empower home visitors to be the IA to collect lean data for reporting. All home visitors, parents and guardians are able to use their own DAPP to cross validate early childhood development outcomes after every home visit. Digital vouchers are rewarded after they use the DAPP.
The cross validation and incentive mechanisms not only cut down layers of supervision, but also allowed for outcomes and impact generated to be evaluated in a centralized database. All online activities are stored on a blockchain database. Parents of children with Decentralized Identification (DID) can access children’s personal data while ensuring data privacy and data ownership. In addition to the tremendous improvements in data accuracy and engagement, the program has also led more mothers to apply to be home visitors and increased their household income.
Application of DID: A Case Study in Brazil
Since 2018, we have been working with the Ministry of Social Development in Brazil to come up with data collection solutions in an effort to improve the delivery of early childhood development services to children from underprivileged households.
The major challenge in “onboarding” these vulnerable communities to provide data is the lack of trust. Families fear their data will disqualify them from participating in national social development programs or getting flagged for informal activities.
We designed a solution that enables household members to have control over which part of their data to disclose and to whom. By separating their personal data from their needs data, there was more buy in from the community and households were more willing to participate in the data collection process.
Read more 👉:Decentralized ID for Vulnerable Children and Households in Brazil
Conclusion
In the past years of working on digitally automating impact measurement processes, we clearly recognize the urgency of developing data infrastructure able to penetrate different cultural and community systems. We attempt to solve impact measurement from the ground, because we believe that creating the most appropriate data solutions need to understand the needs of grassroots communities.
About iO₂
The Impact Oxygen Foundation (or iO₂ Foundation) is a Decentralized Autonomous NGO to create the governance, infrastructure, utilities, and community to facilitate the disbursement and management of Impact Oxygen Tokens (iO₂). iO₂ Tokens decentralize the transparency mechanisms of social finance, to provide trust in a trustless environment, and gradually lowers costs by distributing the transparency economics with the increase of users and scale of projects over time.
