Using blockchain for development solutions
Managed responsibly, it could result in more resilient supply chains and fairer governments, among other benefits
Everyone’s talking about blockchain. The shared database technology has been hailed as the next big thing, with many staking their reputations and personal fortunes on it. Claims have been made about its ability to help end poverty, fight crime and save lives, and even halt or reverse climate change.
Here in India, whilst cryptocurrencies have proliferated and dominated headlines, they recently hit a brick wall, as the 2018 Union budget categorically rejected them as legal tender. Yet, in the same speech, Union finance minister Arun Jaitley signalled strong support for other applications of blockchain. The technology also received rare endorsement from Prime Minister Narendra Modi in February.
The message seems clear: Cryptocurrencies are out, but blockchain is crucial for the future. Three key applications stand out.
The first is increasing trust and transparency in supply chains. The lack of visibility in supply chains has led to myriad issues, such as environmental damage, worker exploitation, staggering waste and product fraud. Customers and governments today demand more transparency from businesses, and blockchain can enable this, by recording data for price, location, quality and more, up and down the supply chain.
Enormous efficiency gains are possible: Akshaya Patra, which runs the world’s largest school lunch programme, is able to provide a million more meals per year after using blockchain to improve its service provision. Better tracking of complex supply chains can stimulate more sustainable and ethical practices. Being able to provide proof of origin and responsible management can lead to premiums, and the identification of shared challenges that need to be tackled collaboratively.
But there are concerns about the greater administrative burden and exploitation risk for smallholders. As businesses look to clean up supply chains, they need to collaborate to set up a governance model that guarantees protection and equity for all.
Second, blockchain can help to create a peer-to-peer sharing economy. Imagine an Uber-type service without Uber actually being involved. Could it mean more equitable pay or greater safety for riders if we’re all accountable to everyone? Implementing blockchain technology in the burgeoning shared economy, through elements like smart contracts, public digital identities and digital currency payments, could reduce the need for central regulation. This could fast-forward the creation of a more resilient, equitable peer-to-peer economy, in which middlemen and time lags have been expunged.
For example, Digital Asset Holdings is banking on blockchain to reduce the life cycle of a stock trade down to zero. This could save banks billions a year in costs, reduce the risk of fraud, and cut out the need for traders.
More decentralized, self-organizing networks could redistribute economic power, regulate excessive wealth accumulation and provide greater, trustworthy choice. But the change could be disruptive, as middlemen organizations are cut out of transactions. Governments will have to play a role in easing the transition.
Third, blockchain could play a role in governance, self-organization and decentralized collaboration. As blockchain removes the need for central human agency, it could reduce political intermediation and the potential for corruption, inconsistency or human error. This is an attractive concept for governance, promising more efficient management and service provision.
Start-ups such as Democracy Earth Foundation are promising open-source, decentralized governance protocols for any organization. Meanwhile, Andhra Pradesh has become the first state in India to adopt blockchain for governance. It’s not hard to imagine the positive impact it could have on land and construction disputes, accountability and bureaucratic process.
Critically, it could help reshape the dialogue between civil society, business and government. It will build trust as actions are recorded and proven, not just at home but also in international commitments such as the Paris Agreement on climate change.
There are challenges however. Blockchain contravenes the European Union’s “right to be forgotten”, which requires true expunging of records. Wrongly recorded data remains unchangeable, with permanent signs of editing even if corrected. Given the number of mistakes on my electricity, phone and Aadhaar records, this could either stimulate better data entry or require constant large-scale administrative corrections.
There’s no doubt that blockchain has disruptive potential. But the technology is still in a gestational stage, and largely remains unproven. Some big barriers to scale remain.
Various infrastructure options are currently fighting for market dominance, and it’s difficult to predict what applications and solutions we will see in the next two-three years. There are many implementation challenges: voracious consumption of storage, electricity and bandwidth; and difficulty in widespread adoption due to its complexity. It is also evolving so quickly that creating a governance system that covers all permutations and required protections is a hard task.
But the advantages of blockchain, if managed responsibly, are worth striving for. It’s time for us to actively nurture blockchain’s advantages and mitigate its implications.
Anna Warrington is director of India at Forum for the Future.
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