Imagine losing your legal identification and other official documents in a natural disaster, as thousands of Haitians did in the deadly 2010 earthquake. Without land title, rebuilding your home or business becomes impossible: Why invest in rebuilding at all when someone else can come along and claim your property?
Imagine trying to register for school, open a bank account, secure health care or other benefits, marry, vote, get a passport, or travel without the ability to prove who you are.
Around 1 billion people live in this situation today (World Bank, 2018), many of them refugees, migrants, or children born in the poorest, most remote regions of the globe with little or no capacity to collect data and generate durable records.
Blockchain, an emerging technology often associated with the Fourth Industrial Revolution, has tremendous potential to tackle this and other challenges, accelerating development progress that truly leave no one behind.
But before we take a closer look at the potential benefits of blockchain, let's unpack a technology often perceived negatively or as "too complex" in light of the crypto-currencies it powers, such as Bitcoin.
What is a blockchain?
A block, or data record, is created every time someone initiates a digital transaction. It could be a crypto-currency, medical information, shipment history, or even a ballot.
Rather than being stored in a single vault, as paper or digital records now are, information stored in a particular block is spread over thousands or millions of computers through a peer-to-peer network that uses algorithms to verify transactions. Each validated block is added to everyone's copy simultaneously, creating a chain of blocks or a "blockchain."
Because of the distributed nature of a blockchain, no central authority 'owns' the information— lessening the risk that a master copy could be lost to hacking or a disaster. This makes blockchain not only a truly independent archive of records—a virtual ledger— but also one of the safest and most trustworthy data transportation system available today.
1. Support financial inclusion
According to the World Bank, 1.7 billion adults globally are "unbanked," or operating outside the banking system entirely. In Tajikistan, a country both underbanked and heavily reliant on remittances (40% of households depend on money transfers from family abroad), a pilot project between UNDP's AltFinLab andBitSpark company helps migrant workers transfer money through a mobile app running on blockchain.
This allows for cheaper, faster, and more direct fund transfers, avoiding the additional expense of a family trip to the nearest town to pick up money or the risk of the money transfer shop running out of cash. Users can open an account simply by inputting a phone number and digitally verifying their identity. Transactions are settled instantaneously and at a fraction of the fees charged by traditional intermediaries.
Blockchain also changes the way money moves in Serbia, where our pilot initiative in the city of Nis with AID:Tech Ltd channels diaspora remittances to socially responsible purchases and enables the creation of digital IDs that can be used for other money transfers.
And Sierra Leone will soon pilot a national blockchain-based credit bureau, that will give unbanked people access to the financial services they need to improve their lives, as well as full control over their own credit information. We are partnering with the United Nations Capital Development Fund and the technology non-profit Kiva on this initiative.
"It could serve as a model for both developing and developed nations in the future." -Xavier Michon, Deputy Executive Secretary of UNCDF
2. Improve access to energy
Combined with renewable energy and the Internet of Things (e.g. smart metre), blockchain could speed up access to electricity for 1 billion people still living without it (World Energy Outlook, 2018), allowing rural communities to produce their own, keep profits, and even provide back-up energy to the main grid.
In Moldova, where around 74 % of energy is imported and fuel prices increased by more than 50% in the last five years, we partnered with The Sun Exchange, an online marketplace that finances solar power with crypto-currency, to install 15,000 square metres of solar panels on one of the country's largest universities.
Owners of the solar cells can lease them out to hospitals, businesses, schools, and private residences, and then receive SolarCoins based on the amount of solar energy produced. The recipients are charged for every unit of electricity they generate, covering the cost of the equipment, installation, and maintenance over a period of up to 20 years.
"This alternative finance mechanism will help cities, businesses, and potentially private homes to meet their basic needs, knocking off several Global Goals targets at once."
-Dumitru Vasilescu, UNDP Moldova programme manager
3. Produce and consume responsibly
Because almost every country in the world relies on global supply chains, efficient and transparent chain management should be a priority for all. By offering end-to-end tracking, security and low transaction costs, blockchain technology can change production and consumption habits globally.
In Ecuador, where generations-old cocoa farming businesses are on the verge of collapse because they don't receive fair pay for their work, UNDP, AltFinLab and Amsterdam's FairChain Foundation are developing one of the world's first blockchain shared-value chocolate.
Consumers will be able to trace every single ingredient that goes into a chocolate bar and ensure it has been sourced fairly and sustainably. The price will reflect the impact on the ecosystem and the real costs of production and export, with farmers receiving a significantly greater share than through any other method.
"We believe traceability through technology will positively influence consumers' purchasing behavior, directly helping the livelihoods of thousands of farmers."
-Carlo Ruiz, head of UNDP Inclusive Economic Development Unit in Ecuador
4. Protect the environment
In Lebanon, a serious environmental crisis is unwinding, with 9.6 million trees burned annually and only 13% of forested area remaining. Our Live Lebanon crowdfunding platform focuses on generating awareness of the problem and raising funding from diaspora citizens to help with development projects including reforestation.
We are now looking at blockchain to take the initiative a step further and upgrade Live Lebanon to an impact investment platform, allowing the diaspora as well as private sector companies and individuals looking at reducing their carbon footprint to become investors in green and low-carbon development.
For each new tree planted, CedarCoins will be distributed to investors but also to local communities hosting the trees, encouraging reforestation efforts and rewarding environment-conscious behavior. Future options would enable token holders to choose the tree, its location, and gets its GPS coordinates.
"We hope that with CedarCoin we will be able to make Lebanon green again by providing an investment opportunity in environmental initiatives using blockchain technology and a digital impact currency".
-Rawad Rizk, Project Manager, UNDP Lebanon
5. Provide legal identity for all
In crisis or extreme poverty situations, moving away from danger and accessing aid, healthcare, and legal protection is extremely difficult without proof of identity.
Blockchain can assist ID-less people, for example refugees or migrants in transit, and make receiving aid more efficient and dignified by creating a universal and irrefutable digital identity that allows access to essential and sometimes life-saving services around the world.
In 2017, the World Food Programme tested a blockchain platform to enable Syrian refugees in Jordan to pay for food using an iris scan instead of cash or e-vouchers. The scan is authenticated and recorded on a blockchain, enabling beneficiaries to establish their identities without sharing unnecessary personal details.
Another crucial aspect of establishing one's identity is the ability to show what we own. But a land registry, for example, can be destroyed during crises or disasters or tampered with through fraud and corruption.
In India, where 70% of district civil disputes are land-related, we partnered with the city of Panchkula, in the state of Haryana, to build a permanent, reliable, and transparent land registry using blockchain technology.
" Records are permanently linked to the system so no one can ever tamper with them or forge a record of their own; and these records can be seen by any party, at any time." -Alexandru Oprunenco, innovation advisor for UNDP in Asia and the Pacific.
6. Improve aid effectiveness
As a global development organization, UNDP transfers and moves large sums of money around the world. Identifying inefficiencies, optimizing effectiveness, and combating corruption are crucial to secure funding to achieve our work and keep the trust of our donors and partners.
By providing transparency and accountability without the need for costly intermediaries, blockchain offers opportunities to increase funding and tap into new financing venues such as philanthropy.
"We firmly believe that blockchain technology will bring transformative solutions to social problems and help bridge the UN Sustainable Development Goals funding gap in fast and innovative ways"
-Helen Hai, Head of Blockchain Charity Foundation
At #NextGenUNDP, we are constantly looking at ways to maximize opportunities for social good and technology and innovation are a big part of that. We believe that, as Secretary-General Guterres said when he announced the launch of a Task Force on Digital Financing of the Sustainable Development Goals, that digital technology "can be a game changer" in delivering progress on the SDGs.
Challenges certainly remain.
As UNDP Administrator Achim Steiner said in a blog:
"The speed and ubiquity of technological change offers unparalleled opportunities for sustainable development, but it also comes with the risk of rising inequalities within and between countries. It is up to policy makers to leverage this transformation for good, and to mitigate their risks."
- UNDP Administrator Achim Steiner
And indeed, blockchain technology means little unless strong legal institutions and conflict resolution mechanisms are in place.
Then there is the digital divide: it is the most marginalized, the poor, rural populations, and the displaced who are the least likely to have access to reliable internet connections.
Even if some blockchains can use basic commands via SMS messages, the amount of processing power and energy required to add new blocks to all of the computers on a chain will need to be addressed before sustainable, cost-effective and long-term solutions can be adopted.
And while technical and environmental barriers can be and are being lifted as the technology matures, what it does mean for us is that understanding the risks and managing them is indispensable to unleash the potential of blockchain for good.