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Digital Impact Alliance (DIAL)

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May 18, 2017

GUEST BLOG: Blockchain’s Potential Applications in Developing Economies

Note from Kate Wilson, DIAL CEO: DIAL was established to support the digital development community becoming more efficient and effective. I have defined part of this role as looking at disruptive technologies that may be well understood technically but struggle with specific use cases for our field. One technology, blockchain, has captured the attention of our community and is starting to be a focus for a number of organizations and governments. We asked Greg Adamson, Chair of the IEEE Blockchain Special Interest Group, to help us explore potential use cases and questions that blockchain could help address in international development, conscious that there are no “silver bullets” and that this technology still needs more tangible use cases. We invite you to contribute your comments and use cases to deepen our collective understanding and we thank Greg for his great contribution to this debate!


Greg Adamson_headshot

Greg Adamson

Today the only proven use case for blockchain technology is as an enabler of Bitcoin, the crypto currency that has grabbed headlines since its introduction less than a decade ago.

While banks and other financially related entities show avid interest in further applications in “fintech” or financial technology, blockchain’s characteristics invite rigorous exploration into its potential applications beyond fintech – including possible applications that could boost developing economies.

Blockchain as an enabler for new applications seems likely, given its simple but elegant characteristics. As an Internet-based, distributed ledger that enables multiple cooperating but non-trusting parties to have a single source of truth, it precludes the need for a centralized or third-party arbiter of that truth. And because each successive block or record in the chain is linked to data from previous blocks, a blockchain ledger is virtually immutable and, therefore, trustworthy and transparent.

These unique characteristics offer both opportunities and risks when considering blockchain’s potential applications in emerging markets. In this blog I’ll provide three distinct examples of these opportunities and risks, with a few points on the context for their consideration.

Too Soon to Tell

In terms of context, it is important to state upfront that more than eight years into blockchain’s introduction, we are still in an early phase in developing its potential applications. Evangelists tend to perhaps overstate their case, while skeptics can point to Bitcoin as the only commercially vetted application. As is often the case, the reality lies in between.

Because blockchain itself resides on the Internet, it may also be important to state that it does not appear to have an application in closing the global, digital divide. But if it can enable applications or services that then make Internet access meaningful, then as Internet access spreads, blockchain could play a role in economic development in emerging economies.

The Challenge of Identity

The first potential application for people in emerging economies addresses the notion of identity. First, it is important to realize that something as simple as a birth certificate – taken for granted in Western countries as a core identity document – often do not exist in many developing countries. If such a document does exist in paper form, a natural or human-made disaster may destroy the document or make access to it impossible. A refugee then is unable to establish the simple facts of their identity: where and when they were born, their nationality, the identity of their kin. Their identity and citizenship suddenly evaporate.

One of the great opportunities for blockchain is to remedy that identity issue by forming an immutable record of births and related identity data. The risk here is that in a country that discriminates based on ethnic identity, for instance, blockchain provides a permanent reference that could ensure that discrimination is enabled or enforced. Blockchain could become the means for social control of a vulnerable population. Or a malicious actor could steal another person’s identity and be first to enter that false information into a blockchain ledger, forever leaving the rightful owner of that identity out in the cold.

Ownership claims

The challenge of documentation in developing countries extends to the ownership of land, water and other assets. Blockchain has the potential opportunity to register the proper owner of such assets and track the transfer of those assets, if and when they are sold or bequeathed to another individual. The potential for a malicious actor to usurp that ownership by being first to enter false information in a blockchain still exists.

It is not too difficult to imagine wholesale theft by powerful individuals or organizations by using blockchain to disenfranchise the legitimate owners of such assets. That is a very real threat, particularly in countries experiencing natural or human-caused disruption.

Product Provenance

My third example rests on a tenuous assumption. We should not assume as a given that integrating developing countries into the global commodity economy is always the best way to go. That approach has its own strengths and weaknesses.

But suppose a country is indeed so integrated and it wanted to sell its organic coffee beans into a European market, which offers a premium for that soft commodity. How would purveyors establish that their particular coffee beans come from an organic farm?

Blockchain could offer the opportunity to register an organic farm as meeting an organic farming standard, then facilitate the tracking of shipments at each stage in the supply chain – from the farm to the aggregator to the packer to the shipping to the roaster and so on. This is a traditional concern for the sale of soft commodities that can benefit the producers rather than the proverbial middleman.

However, if success in such an endeavor triggered an adverse reaction by established interests that would be bypassed by such an arrangement, those established interests might have a motive to interfere with that success. It’s not inconceivable that established interests or the proverbial middleman being cut out of the equation would seek to disrupt such a process of registering and tracking those soft commodities.

Anyone or any party not directly benefiting from the technology improvements offered by blockchain would probably be net losers and seek to reverse others’ gains. So the advantages of blockchain and the opportunities it presents could have unintended consequences.

Caveats

As alluded to earlier, one general caveat is that in any early technology development path, there’s a learning curve and a substantial amount of experimentation. Only some efforts will bear fruit. Business models are important and cannot always be worked out ahead of time.

In all three potential applications described above, it would be critical to have the pertinent authorities recognize the lawfulness of a person’s identity, asset ownership or commodity quality as established by blockchain.

To cite an example, the United Nations might have to recognize and support human identities as recorded by a blockchain. A developing country would have to explicitly incorporate into its national or local legal structures and laws the recognition of asset ownership established by blockchain. European markets that pay a premium for organic products would need to recognize blockchain ledgers as the basis for truth in claims of organic origins.

Conclusions

In any potential blockchain application, success will come from matching blockchain’s characteristics to the application and business case at hand. Blockchain technology doesn’t eliminate power imbalances, but it can be an effective means of embedding socially beneficial solutions. And the legal underpinnings that recognize blockchain-embedded data is just one example of possible, external factors that would legitimize blockchain’s use. Surely there are others.

My instincts tell me that the tougher the geographic and jurisdictional problems that blockchain solves, the more value it will provide. Vigorous exploration of potential applications may be needed to establish blockchain’s efficacy in any specific use case so that this promising technology delivers value for all of humanity.

Greg Adamson is an associate professor at the Melbourne School of Engineering, University of Melbourne, Australia. He is also an IEEE senior member and chairs the IEEE Special Interest Group on Blockchain.

 

 

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