Michel-Daniel Cojocaru
15 May 2018
Blockchain Technology
for Development
ICT4D Essay
Blockchain technology has the potential to solve development problems by improving existing instruments as well as creating new ones. Blockchain-based applications particularly address institutional weaknesses, subject seriously affected by deception and corruption.[1]
In the “Poverty and Shared Prosperity Report 2016”[2] it has been acknowledged that poverty is still a problem that must be tackled. With over 766 million people living on less than $2 per day in 2013, many Sub-Saharan African as well as South-East Asian countries are still labeled as underdeveloped. As in the past years progress has been made, a small well-educated middle class arose which can now influence the adoption of technological innovations. In this essay, I intend to present various blockchain based applications which aim to overcome institutional weaknesses. These technological solutions are assessed based on the impact scope, implementation feasibility and the likelihood of adoption.
One of the main problems in underdeveloped countries is corruption which often occurs in poor regions due to lack of law enforcement. Other issues such as low social trust generated by the unreliable legal institutions as well as the poor education due to lack of proper facilities propel these regions into vicious cycle of poverty-education trap. Moreover, the shortage of capital gains of these regions is complemented by the lack of access to basic financial services such as deposits and loans. In regard to this matter the micro-finance institutions could aid financial inclusion but is often avoided due to its high level of trust implied because zero or little collateral is being deposited.
Institutional weaknesses have impact on multiple layers of underdeveloped countries. The lack of legal registries and proper documents often exclude citizens from executing their rights or partake into economic trades. Without immutable documents, the system is more susceptible to corruption and power concentrated elites, which leads to low social trust, complicating the economic exchanges and ultimately limiting development progress.
To counteract all these problems I lobby three blockchain-based applications: a property registry, basic legal digital documents and a monitoring system for governmental and institutional spending.
The blockchain-based property registry is a public ledger where all real estate can be legally registered, therefore incentivizing people to invest in their own property. Although the implementation of registries is technically possible without blockchain, it is easy to see the benefits of using a blockchain-based approach. Due to the absence of control entities, local administrative representatives can corrupt the registries, which is impossible in a blockchain-based solution, making the property rightful owner the only one able to transfer ownership by using his/her private key. Another issue in the matter consists of the outdated or not properly handled physical registries which in term generate dispute, further dividing communities or individuals. Nonetheless, many communities have their own records, implying their awareness of registries advantages. In the physical registry scenario, governments have to promote the solution and train the users with regard to the process (which has to be also easy and transparent). Another aspect worth taking into consideration is whether people should access the registry with their own mobile devices or should the employees of local administration access the registry from their computers? In contrast to the existing complex registration process that requires significant effort and time, a digital solution would reduce transmission borders dramatically, encouraging people to use the service. The digital solution is only feasible as long as the people have access to technological devices.
A blockchain-based property registry has a high probability of being adopted since Bitland NGO, together with the Land Administrative Project[3], governments representatives and local communities, develops a land registry in Ghana. Last 17 years trials to solve this issue were unsuccessful due to corruption and nepotism (Aiken, 2016), but Bitland strives to overcome those problems, subsequently expanding to further African countries once it has proven its applicability.
Similar to property registries, the blockchain-based digital documents can improve people’s lives notably by creating a ledger for basic legal documents such as IDs, driver licenses, birthday certificates or marriage documents. The lack of IDs is a common problem in underdeveloped countries, limit the people’s ability to participate in several activities such as opening a bank account, voting in elections or using government services. In addition to all of the above mentioned activities, considered rights in developed countries, such digital documents would provide more security for firms, government agencies and organizations. The costly and time consuming process confirming the validity and originality of the currently accepted documents could be replaced by a blockchain-based solution which prevents deception, hence eliminating the current expensive verification practices.
As a supporting argument in favor of this technological innovation, the birth registration based on blockchain could have multiple benefits such as provide access to health care and education as well as protection against abuse and inheritance claims. The usability of this solution outpace the traditional approach by providing a way of easily register infants via a smartphone instead of relying on agencies, which are often expensive and time consuming. Moreover, rural areas where even traditional agencies do not exist could be reached by this solution, would have interoperability with an accurate and up-to-date database which can in turn provide a useful information to properly compile poverty solutions and monitor developments such as better educational or epidemic prevention programs.
As of February 2017, several projects developed identity management systems on the blockchain. ShoCard is an example of such a service where IDs, driving licenses or passport can be embedded into such as system. Although this project is based in California[4], the system could be adapted and transferred to underdeveloped countries. If the blockchain advantages would be paired with existing solutions such as Orange’s mobile birth registration in Senegal or Uganda’s Telecom mobile platform, the implementation would be feasible. Orange provides a solution in which representatives or hospitals are equipped with mobile devices and are tasked with recording data of the newborn babies to the central registration. Combining this with ShoCard’s technology, villages and hospitals could document newborn babies directly into the blockchain, where they could record general data such as height, weight and names of the parents and additionally register adults, thus alleviating the barriers to establishing local agencies.
Another useful application in the underdeveloped countries would be a trusted budget-tracking mechanism. Such a mechanism would impact the people’s trust by rising the difficulty of corruption and embezzlement as the public would be able to oversee officials. A blockchain-based implementation saves all transactions and allows expenditure tracking contrasting with existing control process which can often be corrupted by tampering with the book entries to redirect money. With a blockchain-based solution, it would be impossible to forge expenditures since the transaction data (account numbers, timestamp, amount, recipient) are recorded and can be verified. It is worth mentioning, that it is still possible to redirect money, but people are discouraged as their actions are listed and can be monitored.
Moreover, blockchain-based budget-tracking could become a valuable source of information. As yet, underdeveloped countries lack the capabilities to analyze their expenditures not only on national but also local levels. Arguing the fact that blockchain maintains a transaction history, governments would be able to track their expenditures and analyze their budgets for systematic improvements. Budget tracking could also prove useful for international aid organizations, which although robust against corruption by usage of tracking systems, could now reduce costs and provide more accurate data.
The adoption of the budget tracking is strongly correlated with the government’s willingness to bring transparency and accountability into their own actions and since parts of the governments are corrupt unrightfully benefiting from the current system, they are not incentivized to launch a budget-tracking system. A possible elusion of this issue might come from foreign governments or international organizations by linking aid payments to implementation programs.
Broadly, the implementation of a budget-tracking system based on the blockchain is feasible, already existing projects such as MayorsChain[5] from London, aiming to bring transparency to governmental expenditures. The only barrier seems to be the governments and their conflicts of interests discouraging companies to build a solution.
In this essay, the potential impact of blockchain-based applications on people in underdeveloped countries is highlighted. All three application addresses problems of weak institutions. Specifically, a property registration and an identity registry bring not only legality into people’s lives, but moreover, provide reliable data and improve government programs and development instruments. Additionally, budget-tracking mechanisms capture information about government expenditures, which contest corruption and improves overall governance. In this area, NGOs in cooperation with local governments are the main players likely to advance development.
References
[1]:http://explore-ip.com/2017_Solving-Challenges-in-Developing-Countries-with-Blockchain-Technology.pdf , Solving Challenges in Developing Countries with Blockchain Technology, K.Schmidt, P.Sandner, October 2017, Frankfurt School Blockchain Center
[2]: https://openknowledge.worldbank.org/bitstream/handle/10986/25078/9781464809583.pdf , Taking on Inequality, 2016 International Bank for Reconstruction and Development
[3]: https://www.forbes.com/sites/rogeraitken/2016/04/05/bitlands-african-blockchain-initiative-putting-land-on-the-ledger/#7b74499e7537 , Bitland's African Blockchain Initiative Putting Land On The Ledger, Roger Aitken, April 2016
[4]: https://shocard.com/how-it-works/ , Online, Accessed [15-05-2018]
[5]: https://cointelegraph.com/news/london-candidate-proposes-mayorschain-a-blockchain-created-to-throw-city-halls-books-wide-open , London Candidate Proposes MayorsChain, a Blockchain Created to ‘Throw City Hall’s Books Wide Open’, Joseph Young, July 2015