(Photo via facebook.com/socialcapitalmarkets)
Whether you’re reading The New York Times, The Hill or Stanford Social Innovation Review, you’re probably hearing about blockchain.
This new technology is currently such a hot topic in the social impact space that there were enough blockchain-oriented sessions proposed for the flagship SOCAP conference in 2018 to warrant an entire “Blockchain for Impact” track. Each of the six blockchain sessions at SOCAP18 played to full rooms and were followed by lengthy and lively Q&A sessions.
For some social impact organizations, blockchain might be a breakthrough that would allow them to serve more people, better measure impact, reduce friction in funding and/or otherwise help them better meet their missions. But, as with many new technologies, the promise of blockchain is huge and the path and timeline to maturity are largely unknown.
Is blockchain right for your organization? This brief primer on blockchain will help you better understand the technology and give you a few questions you should consider before making any decisions about whether or not to get on board.
What is blockchain and how could it help us deliver on our mission?
Simply put, blockchain is a way to record transactions in a digital ledger. Just as the internet enables people and machines to communicate with each other, blockchain is a peer-to-peer network that allows individuals or organizations to conduct transactions in areas ranging from safe food delivery to global trade and finance to healthcare.
Blockchain is not the same thing as bitcoin or other cryptocurrencies. Blockchain provides the infrastructure for those currencies, but it has many other applications.
Blockchain networks can be public or permissioned. Bitcoin uses a public blockchain, meaning that bitcoin is an open and non-permissioned network, accessible to anyone who has bitcoin or wants to participate in the bitcoin economy. Permissioned blockchains are limited to a set of participants associated with specific business transactions and are available only to those participating in the transactions.
An application example
One early application for permissioned blockchains is food safety. The food industry is concerned with quickly and precisely identifying the sources of foodborne illnesses for effective recalls and to tackle the cost of food waste. Food waste and inefficient recalls cost hundreds of billions of dollars each year. Between the time most crops are harvested by a farmer to the time they end up at a retailer, several parties including local brokers, truckers, shippers and customs officials have been involved. Blockchain can help collect the information needed for effective food recalls within the supply chain community.
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This is because blockchain uses a shared ledger so that all parties involved in this transaction can interact. It lets parties agree on key transfers and changes in ownership as a crop travels from a farm to a retailer. It establishes trust between mutually distrusting parties, minimizes or eliminates disputes and provides visibility into supply chains. All information is kept on a permissioned ledger that only relevant parties can access.
As the above example shows, blockchain boasts some significant benefits including:
- Security — No individual can unilaterally change the information on the blockchain. The group of users jointly controls the information and all changes are recorded.
- Immutable ledger — On the blockchain, users can identify a service or good at any point in its journey. This is important in applications involving many stops many parties.
- Decentralization and interconnectivity — Blockchain can connect disparate systems. For example, two hospitals that use different record-keeping systems could talk to each other and exchange information over a blockchain.
- Frictionless transactions — Blockchain may be able to replace trusted intermediaries. Right now, for example, foundations may serve as intermediaries to build trust and exchange funds between organizations. While this is an important part of today’s social impact financial flow, it can add costs and inefficiencies. Blockchain, through its security and immutable ledger, may be able to serve that intermediary role in a more cost-effective way, providing social impact organizations with more money to meet their missions.
Since there is no free lunch, it’s also fair to mention a couple of drawbacks about blockchain:
- Blockchain requires significant computing power and energy consumption due to its distributed nature.
- While the community controls the process, there is no regulation or oversight over blockchain transactions. This issue can particularly impact public blockchains, since participants are all known in permissioned blockchains.
- There is not yet a reputation system that gives participants in the network the confidence to know that all people involved are acting in good faith. A reputation system allows participants build their reputations through “good” interactions and to vouch for other participants by association.
- Blockchain is a borderless technology and regulatory questions are being decided based on the rules in specific locations.
While some of the brightest minds in tech are working on solutions to these issues, the timeline and way in which resolutions evolve will impact whether, when and why blockchain is right for your organization and applications.
What should my organization be asking about blockchain?
As anyone who has brought new technology into their organization knows, it can impact every part of the organization from strategy through implementation and measurement. Each organization will have their own assessment. Here are three top-line questions to consider:
1. Do we really need blockchain or will a less sexy technology solve the problem?
Whenever a hot new technology comes on the scene, there is always the temptation to think that it will solve your organization’s problems. In fact, many applications that people consider for blockchain can be done more quickly and easily through existing databases.
Blockchain may be a great fit when organizations or entrepreneurs want to reimagine business models to make them more equitable. For example, Sela provides a platform that eliminates traditional barriers of entry for capital into the emerging world. Sela uses blockchain to track capital flows without centralized intermediaries. This reduces transaction costs, allowing those savings to be distributed to participants. This additional value accrues to buyers and grows as the market grows, rewarding those who come into the network early and bring their friends, rather than rewarding shareholders.
Sometimes, technology is not the answer at all. Blockchain was originally considered a potential game-changer in meeting the UN 2020 Sustainable Development goal of providing a legal identity for everyone on the planet, including refugees. Experiences shows, though, that people who do not have food, water or shelter are not yet candidates for blockchain identity systems.
2. Is the technology and user experience ready for my application?
Even if you think that blockchain is the right technology for your application, you need to decide if it is ready for your audience and your application yet.
For example, according to Raphaël Mazet of Alice: “There is still a lot of software to load onto each computer using blockchain. This introduces too much friction into the process to use blockchain for donations.”
Or, as TJ Abood of Access Ventures told me: “Blockchain is not yet ready to do direct funding with vulnerable populations, such as refugees.” While the savings in eliminating the middleman result in more money for the refugees, the technology changes the current recipient experience and makes it too difficult for them.
There are, however, early blockchain applications that are working well and delivering social impact. Ben Siegel of ConsenSys shared a bait-to-plate project they are doing with the World Wildlife Fund focused on reducing illegal fishing. Because tuna can be tagged and players in the food supply chain participate in the blockchain (which is also a permissioned blockchain similar to that used in the food safety example above, eliminating many of the trust and security issues associated with public blockchains), it is relatively easy to track illegal tuna and to take action.
The areas of human rights reporting and networked protests also show promise as effective blockchain applications.
3. How can I bring diversity into my planning and implementation?
In the testosterone-driven world of new technology, it’s refreshing to find some creative and competent women on the leading edge. We need look no further than Ruby Yeh’s excellent panel at SOCAP18, “No Woman Left Behind: How Blockchain will Uplift Women Around the Globe,” to find some experts with a different look through the gender lens.
In fact, blockchain is based on trust, transparency and efficiency, which are feminist values that empower person-to-person interaction. One example of the way feminist values come together with new technology is Lynn Liss’ new cryptocurrency called Akoin. Liss and her team created a more trusted, less volatile private exchange system with distributed applications that are built for the needs of Africa and rising economies. Akoin is built specifically for this market, including features such as a trusted currency and a marketing platform designed specifically for the fast-growing youth entrepreneur segment on the continent.
Women are also in leadership positions at companies like Unify Earth that provide infrastructure that allows social impact organizations to bring blockchain into their businesses.
Organizations that are successful with blockchain will understand its potential positive impacts on everything from business model to process to user experience, as well as the projected arc of progress in solving issues that are relevant for your application. Given the huge need for social impact in many areas and the early stage of this technology, I imagine that we’ll see plenty more blockchain related sessions at upcoming SOCAP conferences.-30-
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